The Middle East's Next Energy Boom Has Nothing to Do With Oil
- The Middle East is emerging as a battery storage powerhouse, with regional capacity projected to grow nearly eightfold to 149 GWh by 2030.
- Green hydrogen and ammonia are lagging behind, as high costs, uncertain export demand, and regulatory barriers delay major investments.
- Ultra-cheap solar power and falling battery costs are transforming Gulf electricity markets, enabling projects capable of delivering reliable, round-the-clock renewable power.
A new Middle East energy system came into view at the Energy Trading Week Middle East conference in Dubai last month. The region’s world’s-lowest costs for solar energy appeared with enormous potential to transform how countries consume and export energy in low-carbon products.
“Renewable power is actually very competitive now, so the spotlight for this region when it comes to energy transition is around three low carbon products," said Saravanan Manivel, Director for Low Carbon Fuels at ENGIE Global Energy Management & Sales.
“Renewable power itself is actually a very interesting product," he said. “There are plans to add capacity, and I think it's going to grow to about one-third of the energy mix in Gulf countries by 2030, which brings a lot of challenges and opportunities as well.”
Low-cost renewable power is in turn the basis for green ammonia, in a region that is one of the largest producers of ammonia fuel with supply chains in place. Meanwhile, blue ammonia made with natural gas requires carbon capture and storage (CCS), for which the region has ample infrastructure and natural storage capacity.
“CCS has a lot of potential for the region, where Saudi Arabia, the UAE, and also Qatar are actually planning a lot of capacity in the next few years.
"This region is quite well placed for both green and blue ammonia, which are very relevant for the energy transition," he said.
And natural gas will play a critical role as a 'transition fuel' in a region that is a major LNG supplier. Exporting countries are compelled to lower their carbon footprint as they face upcoming EU regulations on methane leakage. They will be further incentivized to lessen the carbon footprint further with CCS, where again they enjoy cost advantages.
Tipping point in 2040
The huge potential of renewable power in the Middle East and North Africa is seen in the recent report Energy Transition Outlook 2026: Rise of Renewables in the Gulf Region, from risk management firm DNV.
The report foresees 860 GW of solar PV installed from now to 2040 and a further 2,200 GW of solar and wind power installed between 2040 and 2060. By 2060, 92% of MENA electricity generation will be non-fossil, up from 14% in 2024, while 35% of energy demand will be supplied by electricity, up from 17% today.
This robust outlook assumes significant population and economic growth in a region with intense energy demand for cooling, industry and new data centers. These needs will continue to push up power demand. Therefore, according to the authors, “'MENA has yet to reach the point of additionality: when growth in non-fossil electricity generation outpaces growth in electricity demand.”
While the analysts foresee dramatic growth in renewable power and electricity generation, only in 2040 do they expect to see a tipping point when renewable generation increases faster than growth of demand. At this point, fossil fuels in power generation will peak and an actual energy transition will begin.
Batteries booming
The build-up of renewables is leading to the development of supportive infrastructure as countries seek to maximize the advantages of solar power. This is enabled by steep declines in battery energy storage systems (BESS) costs, as these are co-located with utility-scale renewable energy.
Saudi Arabia, the UAE, and Oman are leaders. With their utility-scale solar projects now achieving lowest costs in the world to provide electricity, they are adding large amounts of batteries. The economics are indisputable as the falling cost of energy storage increasingly enables firm, dispatchable power supply from solar.
“The region has entered an exponential phase of growth,” says Fadi Maalouf, a Dubai-based energy technology consultant. He writes that BESS has moved from an experimental add-on to the backbone of the region’s grid infrastructure.
Tracking projects across 18 countries, he sees total capacity 166 GWh by 2030, more than six times current operational capacity. He cites the importance of plans such as Saudi Arabia's Vision2030, Oman’s Vision2040 and the UAE's Net Zero by 2050 strategic initiative.
“The Gulf region’s pipeline is dominated by GW/GWh-scale standalone assets as well as co-located with landmark renewable energy parks to deliver round-the-clock ‘firm’ renewable capacity,” writes Maalouf. He notes impressive growth also in countries such as Morocco, Egypt, and Jordan.
The progress is tracked in a new report from industry think tank Dii Desert Energy, The battery boom: Scaling giga-scale storage across Middle East and North Africa (MENA). The authors see the market for battery energy storage crossing an inflection point.
According to their tracking, there are 33 operational utility-scale battery energy storage projects totaling 20,785 MWh (5,477 MW) across the region (as of August 2026). The pipeline to 2030 adds 84 projects and 128,573 MWh (37,585 MW). Total installed capacity will rise to an estimated 149,358 MWh (43,062 MW), representing a nearly 8-fold increase from 2026 to 2030.
Saudi Arabia, which had very little investment in battery storage just five years ago, now accounts for the bulk of operational capacity in the region, with the UAE, Egypt, Oman and Morocco also with large shares of planned projects.
“The drivers are national decarbonization and energy security targets, plunging technology costs, and record renewable energy capacity additions,” write the report authors.
They cite concern that the technology is advancing more quickly than the regulatory regimes of the countries, with Saudi Arabia being a notable exception with its independent storage provider framework.
Baseload solar
A remarkable project in Abu Dhabi shows how solar power and batteries are changing the energy dynamics of the region. Engineers can now produce clean power that integrates BESS to overcome the intermittency of renewables.
The first ‘round-the-clock’ 24-hour solar power and storage project is currently being developed by the Abu Dhabi Future Energy Company (Masdar) in partnership with Emirates Water and Electricity Company (EWEC).
The $6 bn project, slated to start operation next year, will have sufficient solar and storage capacity to supply 1 GW of continuous, reliable electricity. Many more such projects are expected.
New fuels fall behind
While carbon-free electrons rapidly gain scale, their necessary counterpart – low-carbon molecules – are barely produced. Most announced projects remain in early stages of development.
A landmark moment was reached this year with the commissioning of the NEOM Green Hydrogen project in Saudi Arabia. Beginning next year, the $8 bn project will deploy 4 GW of renewable power capacity to produce 600 Mt per day, representing some 3% of global hydrogen demand. This will produce ammonia (1.2 Mtpa ‘green’ ammonia) to be shipped worldwide.
According to the Hydrogen Council’s recent Compass Report (2026), the region ranks fourth in committed investment, after China, Europe, and North America. It will host some of the largest individual hydrogen projects in the world, with approximately $11 billion committed across just 15 projects with total capacity of approximately 500 Ktpa. However, its momentum has been flagging as projects await the rise of an export-oriented offtake market.
Hydrogen needs leaders
Frank Wouters, Chairman of MENA Hydrogen Alliance, authors an insightful essay, Hydrogen is a stupid idea, in which he argues that new hydrogen fuels will follow a path similar to solar PV energy (which seemed senseless until it suddenly gained scale at low-cost), but different in critical ways.
The transmission, distribution and storage infrastructure doesn't yet exist for carbon-free hydrogen and it remains expensive. Meanwhile, potential exporters are waiting for Europe, Japan and Korea to issue clear and specific regulations. The nascent industry in the Middle East remains hampered.
“Like solar energy in the past, because we are not yet producing hydrogen at scale, it is mostly more expensive than conventional alternatives,” writes Wouters.
Yet he argues that it will be needed.
“Hydrogen is not a nice-to-have but an indispensable part of a future clean energy system,” he writes. “Molecules dominate energy storage, for example, which is essential to guarantee a functional, affordable and secure energy system.”
He suggests creating an office of ‘hydrogen czar’ in Europe, to unify and guide policy at the level of the European Commission. This office would work on all critical aspects, such as setting up a hydrogen reserve system (similar to petroleum and gas reserves) to create initial demand, and establishing ‘book and claim’ trade of ‘green’ certificates linked to low-carbon hydrogen.
Such a high-level position might work as well in a country such as Saudi Arabia, where a large domestic market for hydrogen in refining, chemicals and other sectors already exists. An international ‘book and claim’ system could be very helpful in reorienting Saudi hydrogen production from distant export markets toward its large domestic market.
“There is demand for green ammonia in Europe,” says Wouters.
“But the regulatory regime in Europe at the moment doesn't allow for book and claim, so it needs mass balance with physical transport of the molecule from, let's say, Saudi Arabia to Europe.
“If they could keep the hydrogen inside the Kingdom, for their own industry, and sell the certificate to Europe, that would let them engage with a big potential market while they build the industry.”
This kind of flexible policy adaptation would require high-level agreement in a realm where the ‘hydrogen czar’ could be effective. Wouters thinks it’s feasible, as he is already working with stakeholders in an international context to develop eSAF (synthetic sustainable aviation fuel from hydrogen and carbon precursors) production in MENA countries.
For now, Wouters takes a long view. He sees clean hydrogen as inevitable but realizes it is complex in an energy-exporting region with large subsidies in place for oil, gas, and electricity.
‘It needs more leadership,” he says.
