Fueled by rising awareness of net-zero emission and energy security, the world is increasingly committed to diversifying energy sources. With abundant sunlight, enormous land, and a sparse population, Middle Eastern countries began developing solar energy, with Turkey, Saudi Arabia, and the UAE being the major markets. However, recent conflicts between Israel and Palestine have changed the landscape. In the following paragraph, InfoLink combs through current developments and future trends of the PV industry in the Middle East.
The Middle East has 20.5-23.6 GW of PV demand in 2023, according to statistics compiled by InfoLink. Demand in some countries will decline next year, while utility-scale projects continue in Saudi Arabia, the UAE, and other large markets, and the governments keep issuing tenders. Therefore, the long-term outlook remains promising.
Major PV markets in the Middle East
As one of the leading markets in the Middle East, Turkey has posted stellar performance in developing the PV industry in recent years. It imports cells and produces modules locally, selling some to the U.S. and Europe, thus benefitting from the recent “de-Chinaization” trend of the global PV supply chain.
Currently, Turkey still uses imported energy more than PV energy. The government keeps introducing new policies to support the PV industry to reduce the cost of importing energy and ease inflation, such as the feed-in tariffs (FITs), tenders for utility-scale projects, and the net-metering mechanism. The latest FITs provide a 10-year fixed rate of TRY 1.06/kWh for projects installed between July 1, 2021 and December 31, 2030. For those using locally produced modules, there is an additional five-year tariff rate of TRY 0.288/kWh. This measure is an effective incentive for local residents and manufacturers.
In addition to supportive policies, the Turkish government has initiated five rounds of large-scale renewable energy resource areas (YEKA) tenders. In May 2023, Turkey officially completed the 1-GW Karapinar project of the Round 1 (YEKA GES-1) tender issued in 2017. The project is the largest PV facility in Turkey, pushing PV’s share in the country’s energy mix to 20%. Turkey has yet to issue any tender this year, but the construction of previous projects ensures a promising outlook for the country’s PV industry. Turkey is likely to attain its goal of accumulating 59.9 GW of installed PV capacity by 2035.
2. Saudi Arabia
Saudi Arabia's PV market is experiencing rapid growth, with the estimated demand reaching 5.5-6.5 GW this year. As of 2022, the country's energy mix comprised 67% of natural gas, 33% of oil, and less than 1% of PV. Despite the dominance of fossil fuels, the Saudi government is proactively formulating a series of policies for the renewable energy industry and is attempting to replace oil and natural gas with solar energy in response to decreasing oil demand across the globe, indicating the country's urgent need for energy diversification.
The Public Investment Fund (PIF) under the National Renewable Energy Program (NREP) is the major financial support for Saudi Arabia, playing a crucial role in the country’s energy transition. The PIF aims to accumulate 40 GW of installed PV capacity by 2030 as outlined in Saudi Vision 2030. Since 2017, Saudi Arabia has conducted four rounds of utility-scale PV tenders under the NERP, totaling 4,470 MW of capacity. Currently, many projects are still underway. With regular tenders planned to support overall PV demand in the Middle East in the future, Saudi Arabia is expected to achieve the target of 34% installed PV capacity by 2030.
As a nation with considerable energy potential, Saudi Arabia has drawn attention of manufacturers from overseas. For instance, Zhonghuan recently partnered with Saudi Vision Industries to build a solar wafer fab, while GCL TECH plans to establish a polysilicon factory in Saudi Arabia. All of the collaboration will accelerate the PV development in Saudi Arabia and energy transition of the Middle East.
3. The UAE
The UAE's PV market is also thriving, with annual demand expected to reach 3.7-4 GW this year, dominated by large-scale ground-mounted projects. With the government's active promotion and support for PV projects, an increasing number of enterprises and investors are targeting the Middle East region.
The Emirates Water and Electricity Company (EWEC) has officially launched the bidding process for the 1.5 GW AI Khazna PV project. Once fully commissioned, the project is expected to power approximately 160,000 households. Furthermore, EWEC will propose at least two more 1.5 GW PV projects and aims to increase the number of PV plants by an average of 1 GW per year within the next decade to fulfill the country's electricity demand.
In addition to large-scale projects, the UAE government has introduced a net metering policy and a feed-in tariff (FIT) scheme. The government also passed a new federal law in November 2022 that aims to regulate the grid connection of distributed generation projects across seven emirates, allowing distributed generation project owners to connect electricity directly to the local grid with government approval, enhancing power dispatching and reducing electricity demand during peak hours. Policy frameworks, coupled with declining module prices, will boost the country’s demand for distributed generation projects.
War leads to slump in PV demand
Except for the three major sources of demand, some parts of the Middle East have seen demand decline due to the recent Israeli-Palestinian conflict. Particularly in Israel, many residential PV installations have suffered severe damage from the conflict. The Israeli Prime Minister announced in May that new regulations would be enacted within 180 days to mandate all new non-residential buildings to install PV modules and residential buildings to be roofed in preparation for future PV installation. However, the installation plan was put on hold due to the war, creating uncertainty and challenges for the Israeli PV market. Additionally, the small land area of the country is not conducive to the development of large-scale ground-mounted projects, making it difficult to achieve the goal of accumulating 9.8 GW of installed PV capacity by 2025. In the Gaza Strip, power operations have been halted due to Israeli control. The ongoing conflict may pose challenges for future PV development, with concern about whether Israel will impede the import of PV-related technology.
In war-affected regions, the demand for PV is bound to face limitations. Considering the necessary time for planning and executing PV projects, coupled with the pressing need for electricity, the regions will remain reliant on imported energy. PV demand will stagnate in the short term.
Demand outlook for Middle East market
Overall, the Middle Eastern PV market will see steady growth in the future, with demand potentially reaching 29-35 GW by 2027. Turkey, Saudi Arabia, and UAE will remain the major sources of demand, while a few countries experience slower development due to recent warfare.
In the short term, PV demand will taper off in Israel and other war-torn regions, while geographical uncertainties deter foreign PV investments. This underscores the need for enhanced collaboration between the Middle East and the international community to ensure a stable energy supply. Nevertheless, the conflict may push Middle Eastern governments to recognize the importance of energy security and further propel the development of renewable energy, which could boost long-term PV demand in the region.