The Middle East region has huge solar potential and is likely to become a major global solar market in the future, with a market size of up to trillion dollars, according to the report of industry consultancy InfoLink.
In 2022, the ME region has installed 11.4 GW of solar, up 78% from the same period in 2021. Countries like Pakistan and Israel were the main solar demand countries in the region, while the module imports of Saudi Arabia and the United Arab Emirates from China have increased by multiple in recent years.
The ME is undoubtedly one of the regions with better conditions in the world in terms of the lighting time, which is the necessary condition for solar development. However, the region is also the world’s most important oil base, accounting for 61% of the world’s reserves, which leads to the slow development of the new energy industry. From 2012 to 2021, the growth rate of the total installed capacity of renewable energy in the region was 76%, far below the world average of 112%.
The core reason for countries in the ME to turn to new energy is that the global energy structure and system are rapidly transforming from traditional energy to new energy. Many countries in Europe, Asia and other continents have put forward a clear timetable for stopping production of fuel vehicles, making it an inevitable question for traditional fossil energy manufacturers.
As the world is transforming towards new energy, it has also directly spawned a number of emerging industries of hundreds of billions and trillions. Solar, wind power, hydrogen energy, new energy vehicles, etc., have all been placed in the core strategic level of countries. In this case, the ME, as the world’s major oil-producing region, has to accelerate the pace of developing new energy.
The “Energy Investment Outlook for MENA from 2022-2026” released by Arab Petroleum Investment Corporation, shows that the total amount of plans and commitments for energy investment in MENA region is expected to increase by 9% in the next five years, with the investment of more than USD 879 billion. In short, a market worth one trillion has been opened.
There are few new energy projects contracted by Chinese enterprises alone in this region for some specific reasons. For instance, Jordan stipulates that 20% of renewable energy manufacturing should be made locally, and this proportion may rise to 35%. Therefore, foreign new energy developers may stumble in front of local policy first.
Moreover, enterprises need to work hard on branding, since Saudi Arabia, the United Arab Emirates and other Gulf countries still rely more on partners from Spain, Germany, France and other western countries in the construction of large-scale solar power generation projects.
China’s solar industry has burst into strong vitality and creativity after encountering some pressure from the outside. Some 86% of the world’s solar panels are made in China, which also owns 64% of the patented technology. Data also shows that with the continuous innovation and iteration of solar technology, the cost of kilowatt-hour of solar power generation in China has dropped by more than 80% in the past 10 years.
Under the unprecedented changes in the international environment, the ME market attracts players from all over the world, which means there would be a more brutal price war, especially when more Chinese peers join in.
In addition, the risk of trade friction and international geopolitical conflicts, logistics and settlement risks, as well as the increasingly high carbon tariff threshold, the price rise of the supply chain and the shortage of raw materials will be inevitable.