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Despite the devastating impact of the Covid-19 pandemic on the Middle East, the outlook for investment in the renewable energy sector is bright.

The long-term rise in demand for energy in the region remains undimmed by the health crisis, while the need to diversify energy sources and to decarbonise the economy has put renewables at the top of the energy policy agenda.

At the same time, new technologies, such as green hydrogen, are catching the eye of investors.

While the Middle East lags behind China, Europe and the US in the scale of renewables investment, the world’s largest and cheapest solar projects are now found in Saudi Arabia, Abu Dhabi and Dubai. The region’s ambition is to be a hub for the development of renewable energy and alternative fuels.

New capacity

With about 28GW of renewable energy production capacity installed across the Middle East and North Africa (Mena), of which by far the biggest component is hydropower with 21GW, renewable energy represents only 7 per cent of the region’s power generation capacity.

But with electricity demand rising at about 5 per cent a year, and with a shortage of readily available natural gas supplies, expanding renewables capacity is one of the top policy priorities. Across the region, governments have set ambitious clean energy targets, with Dubai the most aggressive, aiming for 75 per cent of its energy to come from clean sources by 2050.

Sustainably producing green hydrogen from water is generating huge interest from investors

At the start of 2021, about 98GW of new renewable energy generation capacity was planned, with 39GW of additional capacity due to come on stream by 2025.

Over the past 12 months, the desire for a ‘green’ recovery from the pandemic has provided impetus for a wave of projects to produce hydrogen fuel in the Middle East. Tapping the region’s abundant supply of low-cost solar energy to sustainably produce ‘green’ hydrogen from water is generating huge interest from governments.

Solar energy production costs have tumbled over the past decade, while regulatory changes have reduced the commercial risk of investing in renewables. It is a trend that will continue, and which is supporting the region’s energy diversification as new technology emerges, making clean fuels commercially and technologically viable.