Three big changes over the past two years are reshaping Gulf electricity and present a major economic, environmental, and political opportunity. First is the rise of renewable energy in combination with batteries. Second is the surge in domestic electricity demand. And third is the interconnection with neighbors and, in particular, the difficult situation into which Iraq has stumbled, or been pushed. But so far, while some Gulf Cooperation Council states forge ahead, a lack of bigger cooperation and vision inhibits a breakthrough.

At January’s Abu Dhabi Sustainability Week, the Emirates Water and Electricity Company, the utility serving Abu Dhabi and the biggest in the United Arab Emirates, announced it will build a 5.2 gigawatt solar farm, coupled with 19 gigawatt hours of batteries, that will be able to output a steady 1 GW, day and night, summer and winter. From the figures given, the cost can be estimated at around 6 cents per kilowatt hour – much cheaper than nuclear and comparable to natural gas-fired power even in the UAE, which enjoys quite low gas prices. In the Middle East, at least, solar power has broken free of the usual complaint that it is intermittent and reliant on clear daytime conditions.

On February 18, Dubai Electricity and Water Authority announced progress on Phase 7 of its Mohammed bin Rashid Solar Park. With current and under-construction capacity at 4.66 GW, Phase 7 will add another 1.6 GW, taking the park well beyond the original planned 5 GW by 2030. Most interesting, like the Emirates Water and Electricity Company’s project, Phase 7 features a big battery storage component – 1 GW power with six hours of storage.

Dubai Electricity and Water Authority should also complete its pumped hydroelectric plant with 250 megawatts of capacity in Dubai’s mountainous Hatta exclave by the middle of 2025, providing long-duration storage. And in November 2024, France’s EDF revealed that it was in discussions to build a 5 GW pumped hydroelectric facility in the northern emirate of Ras Al Khaimah.

The Emirates Water and Electricy Company anticipates that by 2029 it will have its first “zero hour” when it needs no natural gas consumption to meet demand. This will probably occur in early spring when the air conditioning load is low and solar output is strong, so that its existing nuclear power, running nearly all the time, will satisfy the remaining demand. This will require an upgrade to its grids and control systems and a complete decoupling of water production from electricity. Currently, a large part of the UAE’s desalination still relies on cogeneration using thermal energy from burning gas.

Installation of supporting batteries is becoming increasingly common across the Middle East, particularly in the region’s other renewable leaders: Saudi Arabia, Oman, Jordan, Israel, and Egypt. In February, Oman introduced a new policy allowing independent use of electricity storage. This is important as renewable shares rise: Saudi renewable capacity should double this year, to 12.7 GW from 6.6 GW, on its way to an intended 130 GW, or half of its electricity generation, by 2030.

The breakthrough in solar power is important, as the GCC’s power demand has leapt ahead after a few quite restrained years. Oman with 7.5% growth in 2024, Saudi Arabia at 6.1%, and Dubai at 5.4% stand out. This demand surge is mostly due to robust economic and population growth, exacerbated by a hotter climate. In keeping with a worldwide theme, data centers will be a rapidly growing source of electricity needs. Electric vehicles, a small share today, might eventually contribute a few GW of demand too.

Capacity installations are keeping pace with demand, but the rapid rise in consumption will make it more challenging to hit decarbonization and renewable targets. The one struggling GCC country is Kuwait: Peak electricity demand rose 4.1% in 2024, a more moderate rate than in neighboring countries, but capacity has not kept up. Renewable installations are tiny and have not been helped by a fire at the Shagaya solar thermal plant in November 2024. In 2024 there were repeated power cuts, and 2025 is shaping up to be worse.

The GCC Interconnection Authority, which links the six GCC countries’ electricity grids and allows trade and sharing among them, is constructing a boost to its capacity to Kuwait to 3,000 MW. It is also planning two significant projects: one to boost capacity to the UAE from 2,400 MW to 3,500 MW, expected to be completed by the first quarter of 2027 and the other to install a direct connection with Oman at 400 kilovolts, supplementing the existing link via the UAE network at 220 kV. This should boost overall capacity and reduce electrical losses.

But these are quite incremental steps. Saudi peak demand in 2024 was 72.9 GW, the UAE’s about 34 GW, Kuwait’s 17.64 GW, and Oman’s 8.4 GW. Qatar’s was 9.81 GW and Bahrain’s 3.8 GW in 2023. In the context of a GCC market with peak demand approaching 150 GW, the GCC Interconnection Authority interconnection is barely 2% of that. It serves to meet short-term emergencies and to reduce the amount of reserve power countries need to hold individually, but it does not systematically move large quantities of electricity from a lower-cost producer to a consumer willing to pay more. GCC electricity trade in 2021 amounted to only about 0.15% of the total generation, while in the much more integrated European Union market, it is about 5%.

The GCC Interconnection Authority interconnection also does not run on a market basis. Only one GCC country to date, Oman, has a domestic power market that allows trading. So, unlike the closely integrated power market in Europe, for instance, there are no real-time price signals for electricity to flow from one country to another. Rather than being settled financially, most GCC Interconnection Authority interconnection transactions are settled on a quantity basis, i.e., by offsetting a certain number of megawatt hours flowing one way with an equivalent amount in the other direction. As the net imports by Kuwait, in particular, increase, this will require more financial settlement.

The GCC states all rely on gas-fired power generation, with some oil in Kuwait and Saudi Arabia – which is mostly being phased out – and a growing, if variable, share of solar. The only significant exceptions are growth in wind power in Saudi Arabia and Oman (and, to a small extent, the UAE, with some plans for offshore wind installations in Bahrain), and the UAE’s nuclear capacity, perhaps to be joined by Saudi Arabia in the 2030s. Weather conditions, seasonality, and time zones across the GCC are similar. These factors all limit the gains from trading.

But wider connections would unlock more value. For instance, sunset in Egypt is nearly two hours later than in the UAE. This would allow solar plants located further west to supply the early-evening peak in summer consumption, when people return home from work and turn up air conditioning, turn on lights and the television, and start cooking. In return, the UAE’s nuclear plants could meet Egypt’s evening demand while consumption ebbs in the later hours.

A long-awaited 3 GW electricity cable between Saudi Arabia and Egypt is now expected to be operational by June 2025, while the GCC Interconnection Authority is considering links to Egypt and Jordan. Planned electricity cables running Egypt-Cyprus-Greece and Israel-Cyprus-Greece would forge links between the systems of the GCC, Eastern Mediterranean, and EU.

The GCC Interconnection Authority’s most high-profile interconnection project, though, is with Iraq. On March 8, the administration of President Donald J. Trump declined to renew a waiver for Iraq to buy electricity from Iran. Iraq can still receive gas from Iran but has practical problems in making payment for it given banking sanctions. Iran’s gas and power exports have become increasingly limited and unreliable as the country struggles with its own domestic needs. From an annual average of almost 900 MW sent to Iraq in 2020, supplies fell to about 350 MW in 2023.

Iraq was already short of electricity, facing a deficit estimated from 5,000 MW to 12,000 MW in summer. While gas capture from oil operations has improved, and construction of a liquefied natural gas import terminal is underway, likely to be fed by Qatar, fuel supply remains a problem. Construction of the country’s first large-scale solar power plant has begun. But even if pursued effectively, these initiatives will take years to make a dent in the problem.

Baghdad has pursued electricity interconnections with Jordan, Turkey, and the semiautonomous Kurdistan region, but these provide only a few hundred megawatts each. The GCC offers Iraq’s best prospect for significant power imports. On October 9, 2024, Baghdad finally signed an agreement to purchase 3.94 terawatt hours of electricity annually from the GCC Interconnection Authority, about 450 MW on an average basis.

The 400 kV interconnection, with an initial capacity of 500 MW, will comprise two lines running from al-Wafra station in Kuwait to Al-Faw station in Basra, Iraq. After numerous delays, the project is now expected to be operational by May. Capacity could later be increased to up to 1,800 MW. There are also plans for a 1,000 MW direct connection with Saudi Arabia.

Still, these schemes are small relative to Iraq’s needs or to the shortfall from Iranian supplies. For one thing, the need to move electricity also to cover Kuwait’s summer demand limits the amount that can go to Iraq. The extra supplies will not elevate the GCC’s political influence in Baghdad much relative to Iran’s, which is multifaceted beyond just its gas and electricity provisions.

The current outlook for electricity trade within the GCC Interconnection Authority and with Iraq, Egypt, and Jordan falls far short of potential. Exports of power from the Gulf’s booming renewables and battery sector could become a key driver of the economy and of sustainability. The GCC’s adoption of technological breakthroughs in solar and batteries now needs to migrate to the strategic realm.