The Gulf countries are deploying growing solar capacities. Member states of the Gulf Cooperation Council (GCC) are deploying growing renewable capacities, but only Oman has a national spot market; regional exchanges occur via bilateral contracts and scheduled transfers organized by the Regional Interconnection Authority. The absence of a common regional spot-price trading mechanism affects the formation of a unified regional market, although contractual regional exchanges already exist via the Regional Interconnection Authority.
The essentials
- The Gulf is deploying growing renewable capacities, according to Gulf Business and the International Energy Agency.
- Interconnections between GCC countries are strengthening, but only Oman has established a spot-price mechanism, which affects the formation of a unified regional market.
- Without a common spot market, solar surpluses lack transparent market valuation, although regional contractual mechanisms enable exchanges.
- Storage shifts production and can create value by covering peaks, providing flexibility, or via capacity contracts.
- Interconnection cables exist; the obstacle is political: member states retain direct control over the pricing of their electricity.
34 GW in two years: deployment with no regional equivalent
The Gulf is accelerating the deployment of solar and wind capacities, with several large-scale projects. For comparison, France had 31.3 GW of photovoltaic solar connected to the grid as of December 31, 2025, after fifteen years of effort.
Behind these figures, three countries bear the brunt of the effort: the United Arab Emirates with the Al Dhafra project (2.1 GW), now among the world’s largest solar plants; Saudi Arabia with NEOM and the Sudair complex; and Oman, which is deploying both solar and beginning to build a green hydrogen sector backed by these capacities. Kuwait and Qatar are advancing more slowly, constrained by fossil energy subsidies that remain deeply embedded in their social fabric.
The motivation is twofold. First, economic: solar in the Gulf offers production costs among the lowest in the world. Sunshine exceeds 2,500 hours per year in most deployment zones. Second, strategic: every kilowatt-hour produced locally frees up a barrel of oil or an MMBtu of gas for export. Saudi Arabia consumes oil for electricity production, a quantity that varies with seasons and years.
Reducing this figure means that much additional export capacity at a time when prices remain high.
Storage accompanies this deployment with growing capacity in the region. These batteries shift afternoon solar production toward evening consumption peaks. They delay by a few hours the commercial valuation of surpluses without resolving it.
Cables that connect without linking
The GCC Interconnection Authority, the regional body responsible for high-voltage lines between the six member countries, manages a network that is strengthening, with an expansion toward 3.5 GW of capacity with the Emirates. This is physically significant. In Europe, interconnections between France and its neighbors represent approximately 15 GW, for a national consumption of around 500 TWh per year. The Gulf, with lower consumption and systems still largely national, has exchange capacity that is not negligible.
But physical transport capacity and commercial exchange capacity are two distinct things. A cable carries electrons. A market sets a price, assigns a buyer, guarantees payment. Without a common spot-price mechanism, current can flow between Riyadh and Abu Dhabi in case of emergency or exceptional peak consumption. Continuous sales rely on bilateral contracts and scheduled transfers organized by the Regional Interconnection Authority.
This is precisely the mechanism Oman has put in place. The sultanate has an electricity spot market: producers submit bids and Nama PWP purchases on a day-ahead market where prices are set every half hour. The spot market allows transparent price formation that guides future investments. Price variations signal where storage or flexibility would be profitable.
Other Gulf countries produce their electricity in administered systems: the state sets the tariff and a public operator manages network balance. These systems maintain low prices through regulation and subsidies. Their centralized architecture makes it difficult to achieve transparent valuation of variable renewable surpluses and to steer future investment in storage or flexibility.
Oman as test bed, the Gulf as an open question
The Omani case deserves attention. Oman has established a wholesale spot market while maintaining regulated retail tariffs. Producers under long-term purchase contracts retain their contractual compensation, while capacity not covered by these contracts can participate in the spot market. Spot price variations signal where storage or flexibility would be profitable. Batteries shift afternoon solar production toward evening consumption peaks.
This mechanism attracts investors who can calculate their return on investment because they know the price at which they will sell. It also attracts high-electricity-consuming industries—aluminum production, desalination plants, future hydrogen electrolyzers—that can match their consumption to moments of low prices. This is exactly the ecosystem the Gulf as a whole would seek to build if it wanted to transform its solar capacities into a sustainable industrial advantage.
The question is why other countries have not followed. The answer lies less in technology than in domestic politics. In the GCC, domestic tariffs are often heavily subsidized and regulated, though not necessarily nearly free. Liberalizing the wholesale market without touching retail prices is technically feasible, as Oman has demonstrated, but would require separating the price signal for producers from the tariff paid by consumers, which demands a complex regulatory architecture.
Regional interconnection stumbles on tariff sovereignty
Building an electricity market in the Gulf resembles in some respects the undertaking Europe conducted in the 1990s and 2000s. Europe took more than twenty years to build an internal energy market that works, with market couplings between countries, cross-border auction mechanisms, and coordinated national regulators. The result is not perfect, as the 2022 crisis demonstrated, but it enables continuous commercial exchanges that optimize the use of installed capacities.
For the Gulf, the additional challenge is that tariff sovereignties are deeply rooted. Each GCC country administers its own prices and subsidies, although regional exchanges exist via the GCCIA. Creating a regional wholesale price mechanism chiefly requires common market, access, and settlement rules.
Discussions within the GCC on harmonizing electricity markets exist, but progress is slow. The Interconnection Authority has expanded its transport capacity and improved the reliability of existing lines. The next step—creating common pricing and access rules—belongs to a political agenda that has not yet found its moment. On this point, it is worth noting that physical infrastructure has, in other energy contexts, often preceded commercial frameworks by several years before the latter catch up. On the question of energy infrastructure governance as a precondition for a market, debates around small modular reactors in Europe offer an instructive parallel.
A poor strategic placement if nothing changes
Here is the concrete risk. Current renewable investments in the Gulf represent several billion dollars at the regional scale. These investments are justified by record production costs and by the liberation of hydrocarbon export capacity. Regional commercial valuation and export outlets can improve the profitability and utilization of renewables.
Without a common spot market, a solar surplus produced at noon in the Arabian desert has no transparent market price, though it may have contractual value. It can be consumed locally, it can be stored if batteries are available, it can, in an emergency, transit to a neighbor via interconnections. A regional spot market is one way to produce a common instantaneous price, but it is not the only possible mechanism for organizing transparent regional sales. The consequence is that the investment signal becomes unclear: renewable producers build on the basis of long-term contracts guaranteed by states, not on the basis of a market price. This is secure in the short term; it is rigid in the medium term.
If the Gulf wants to attract electro-intensive industries—aluminum production, silicon, or electrolysis for green hydrogen—these industries need predictable and competitive prices. A regional market could improve efficiency and offer more contractual options to industries. Bilateral contracts can complement a day-ahead market; the latter optimizes hourly exchanges before delivery.
The coming years will be decisive
Two scenarios are taking shape. In the first, each Gulf country continues to optimize its own system: it installs renewables, it stores, it frees hydrocarbons for export. Interconnections serve as a safety net for emergencies. This model works, but it leaves significant regional optimization on the table.
In the second, the momentum of deployment and the stakes of valuing renewable investments could steer GCC countries toward progressive market harmonization. Oman plays the role of laboratory here: if its spot market proves that one can liberalize without touching social tariffs, others might follow. Saudi Arabia, with significant renewable deployment, could play a significant role. If Riyadh decides that a regional market serves its interests—and its consulted Vision 2030 documents mention commercial connectivity with Africa via Egypt—dynamics could shift rapidly.
The question that structures the next energy decade in the Gulf is this: will the region’s states treat their solar as a national resource to optimize locally, or as an asset to be valued in an open regional market? The answer will determine whether these renewable capacities constitute a sustainable industrial advantage or an underexploited asset.
Sources
- Gulf Business – “Energy security, AI drive surge in Middle East renewables” : https://gulfbusiness.com/en/2026/insights/energy-security-ai-drive-surge-in-middle-east-renewables-report/
- International Energy Agency (IEA) – Electricity Market Report, Middle East, 2026 (no guaranteed URL)
- GCC Interconnection Authority – regional interconnection reports 2026 (no guaranteed URL)
- Arab News – analyses of regional electrical infrastructure, 2026 (no guaranteed URL)
