Arab Power and Energy Market: Current Status and Development Opportunities

• Gas-fired generation remains the baseload anchor in most Arab power markets, while solar PV and battery storage drive new capacity growth. Grid upgrades and regional interconnection remain a strong and sustained need, and the independent power producer (IPP) model, supported by long-term power purchase agreements (PPAs), is widely used for large-scale generation projects.
• The Arab power market falls broadly into three segments: the high-income Gulf countries (Saudi Arabia, the UAE, Oman, Qatar, Kuwait and Bahrain), the North African Arab markets (Egypt, Morocco, Algeria and Tunisia), and conflict-affected markets or markets facing electricity shortages (Iraq, Yemen and Lebanon).

I. Overview of Supply, Demand and Installed Capacity

Power demand continues to grow rapidly

• Population growth, industrial development, seawater desalination, data centres and green hydrogen production are driving electricity consumption. The Gulf countries rank among the highest globally in per capita electricity consumption. Markets such as Egypt and Iraq have experienced electricity supply shortages, while ageing networks and high losses remain challenges in parts of the region, with reported grid losses in some areas of Egypt approaching 20%.
• Reported installed generation capacity stands at approximately 121.4 GW in Saudi Arabia, 63.5 GW in Egypt and 45.5 GW in the UAE, although figures vary by reporting year and statistical coverage.
• Conventional generation relies heavily on combined-cycle gas turbine (CCGT) plants in many markets, alongside oil-fired generation. Oil- and gas-producing countries continue to use natural gas for baseload generation, peaking capacity and balancing services, and are unlikely to phase it out rapidly.

Renewable energy has become a key growth driver

• Solar PV leads renewable capacity growth. High levels of solar irradiation and competitive project procurement support levelised costs of electricity (LCOE) that are among the lowest globally for favourable utility-scale projects. Numerous gigawatt-scale solar PV projects are being tendered.
• In 2025, the Middle East and North Africa (MENA) region reportedly added approximately 16 GW of wind and solar capacity. Forecasts for 2026 indicate additions of around 18 GW of solar PV and 4 GW/16 GWh of energy storage. These figures cover the wider MENA region, rather than Arab countries alone.
• Wind power development is concentrated in Egypt, Morocco, Oman and Saudi Arabia. Concentrated solar power (CSP) also has flagship projects in Morocco and the UAE.
• Battery energy storage system (BESS) deployment is expanding beyond installations co-located with solar PV plants to include standalone projects procured through competitive tenders. Saudi Arabia is pursuing large-scale standalone battery storage procurement, with a reported cumulative target of 48 GWh by 2030. Abu Dhabi is developing a project combining 5.2 GW DC of solar PV with 19 GWh of battery storage, designed to deliver up to 1 GW of round-the-clock renewable power.
• These developments are expanding demand for protection relays, prefabricated substations, online partial discharge monitoring and high-voltage primary equipment.
• The long-term outlook points to continued growth. BloombergNEF forecasts that total installed wind and solar capacity across MENA could rise from approximately 49 GW in its baseline estimate to 404 GW by 2035.

II. Market Mechanisms and Investment Models

Project development: IPPs supported by long-term PPAs

• Power procurers and offtakers, including Saudi Arabia’s SPPC, Dubai’s DEWA and Abu Dhabi’s EWEC, use long-term PPAs to attract domestic and international investment. Leading developers include ACWA Power, Masdar and TAQA.
• Domestic capital plays a major role in renewable energy financing, with some estimates placing its share at approximately 85%. Sovereign investment funds, including Saudi Arabia’s Public Investment Fund (PIF), are important contributors.

Electricity pricing reform

• Residential electricity subsidies are being reduced in some markets, while market-oriented electricity pricing reform is progressing gradually. Subsidy reform can improve the commercial attractiveness of renewable energy and energy efficiency investments, although tariff increases may face short-term public resistance.

Regional grid interconnection

• Major regional interconnection systems include the Gulf interconnection network, the Maghreb interconnection network and the Eight-Country Interconnection project. Frameworks for a pan-Arab electricity market have been developed, but cross-border electricity trading remains limited by differences in national policies, technical requirements and geopolitical conditions.
• These initiatives point to potential demand for cross-border transmission infrastructure, substations, protection, monitoring and control systems, and communication gateways. However, project development and implementation timelines are often long.

III. Brief Characteristics of Major Countries

Saudi Arabia

• Saudi Arabia is the region’s largest power market. Its National Renewable Energy Program (NREP) supports large-scale wind and solar procurement, alongside separate energy storage tenders. New CCGT plants also support electricity supply and system flexibility.
• Saudi Arabia aims for renewable energy to account for 50% of electricity generation by 2030. Potential opportunities include standalone battery storage, high-voltage transmission network upgrades and substation expansion.

UAE

• The UAE has a mature power sector with established IPP procurement mechanisms. Key organisations include DEWA, EWEC and Masdar, with distinct roles in utility operations, power procurement and project development.
• The updated UAE Energy Strategy 2050 targets a 32% contribution from clean energy generation by 2030. Large-scale solar PV and battery storage projects, together with renewable electricity supply for green hydrogen production, point to growing demand for equipment suppliers.
• Procurement requirements for protection relays, partial discharge monitoring systems and smart grid equipment are stringent, with equipment required to meet applicable IEC/IEEE standards and utility specifications.

Oman

• Oman has strong wind and solar resources and is developing renewable electricity supply for green hydrogen production. These projects open up opportunities for international engineering, procurement and construction (EPC) contractors and power equipment suppliers.

Egypt

• Egypt is a major North African power market, developing wind power and solar PV alongside conventional generation. Network refurbishment, loss reduction and financing constraints remain important considerations for project development.

Morocco

• Morocco is a leading renewable energy market in North Africa, developing CSP, solar PV and wind power. It aims for renewables to account for 52% of installed electricity generation capacity by 2030.

Iraq and Yemen

• Iraq and Yemen face significant electricity supply shortages and infrastructure rehabilitation needs. Market potential is substantial, but political instability, security conditions and payment risks can significantly affect project delivery. These markets are generally considered high-risk relative to the Gulf.

IV. Key Challenges and Opportunities for Power Equipment Suppliers

Key challenges

• Ageing grids require refurbishment, while some networks also face high prospective short-circuit levels. High penetration of renewable energy introduces challenges in system stability, protection coordination, islanding detection and power quality, increasing demand for advanced protection, monitoring and control equipment. Separately, ageing insulation creates demand for online partial discharge monitoring.
• Large-scale integration of wind, solar and battery storage places greater demands on grid communications, telecontrol, grid-connection protection, and protection and safety systems for containerised BESS.
• Protection functions are commonly identified using ANSI/IEEE device numbers, while equipment specifications may reference IEC and/or IEEE standards, depending on the utility and project requirements. Tender documents define the applicable standards and compliance requirements.
• Project investment requirements are substantial, but commercial risks vary considerably. Gulf markets generally offer more established procurement and financing arrangements, although payment security still depends on the buyer and contract. Projects in parts of North Africa and Iraq may face longer payment cycles and greater foreign exchange exposure.
• Local operation and maintenance capabilities vary, creating demand for after-sales support, technical training, country-specific certification and utility approval.

Market opportunities

• On the generation side, demand is expected to grow for prefabricated substations for solar PV plants and wind farms, grid-connection protection, BESS protection and safety systems, and partial discharge sensors and monitoring equipment.
• On the transmission and distribution side, demand is expected to grow for high-voltage substation refurbishment, protection relays, communication gateways and data concentrators, and online partial discharge monitoring systems.
• Cross-border interconnection projects can create demand for line differential protection, other transmission protection schemes, and system stability and control equipment, depending on the interconnection design.

V. Main Risks

Geopolitical risk

• Regional conflicts can affect project implementation, transport routes, equipment logistics and insurance costs.

Policy change risk

• Electricity subsidies, PPA terms and local-content requirements may change. Local-content requirements and procurement preferences vary by country, procuring entity and project.

Constraints on renewable energy integration

• Renewable generation capacity may expand faster than transmission infrastructure. Delays in network reinforcement and transmission corridor development can affect project connection schedules.

Competitive pressure

• Competition is strong among European, South Korean, Turkish, Chinese and local manufacturers. Chinese suppliers are often competitive on equipment pricing and EPC delivery, while market access depends on local partnerships, utility approvals, certification and reliable after-sales support.

VI. Future Trends

Power generation mix

• The combination of solar PV, battery storage and flexible gas-fired generation is expected to become increasingly important. Renewable electricity projects serving green hydrogen production are also expected to expand.

Grid digitalisation

• Demand for smart substations, online partial discharge monitoring, power system stability monitoring, protection and control, and communication gateways is expected to grow as networks become more complex.

Regional electricity trade

• The long-term objective of the pan-Arab electricity market is to expand cross-border electricity trading. Near-term progress will depend on regulatory coordination, infrastructure readiness and regional political conditions.

Localisation

• Countries are expected to place greater emphasis on local manufacturing, assembly, technical support and service delivery. Equipment exporters may increasingly need to consider local assembly, joint ventures and stronger service partnerships to remain competitive.