Saudi Arabia’s business sector is rapidly adopting solar power as companies seek to reduce their energy costs following the government’s removal of electricity subsidies in the world’s largest oil exporter. This shift toward renewable energy is also driven by the kingdom’s sustainability targets and the declining cost of photovoltaic (PV) panels, which have made solar energy more economically viable for many businesses.
The Saudi government’s ambitious plans for renewable energy include a goal to generate half of the kingdom’s power from renewable sources by 2030 and achieve net-zero emissions by 2060. To meet these targets, the government has been phasing out energy subsidies since 2018 as part of broader economic reforms aimed at diversifying the economy and reducing its dependence on oil.
“We invested in solar and actually it’s paying back,” said Mazen Fakeeh, president of Fakeeh Care Group, a company that has already installed solar panels on the roof of its multistorey car park in Jeddah. The system has helped the group save more than SR170,000 ($45,000) on electricity bills in 2024. Despite the high upfront costs, Fakeeh sees the investment as a long-term commitment, with the full return expected in two to three decades.
The subsidy cuts have had a significant impact on the cost of electricity in Saudi Arabia, prompting businesses to explore alternatives. Faris al-Sulayman, co-founder of Haala Energy, a local start-up that helps companies build solar power systems, noted that commercial clients, who pay higher electricity tariffs, are much more receptive to the business case for rooftop solar. On the other hand, industrial clients, who benefit from lower electricity rates, have shown less interest in making the switch.
Large multinational companies operating in Saudi Arabia, including Ikea and GSK, have also embraced solar power to meet their parent companies’ sustainability goals. This trend is not limited to international firms, with local companies like the Tamer Group also moving toward renewable energy. Amr Elmansoury, the chief supply chain officer at Tamer Group, highlighted that sustainability is now a critical factor for businesses seeking to align with the global green movement. His company has saved more than SR440,000 by installing solar panels on its logistics hubs in Jeddah and Riyadh, with plans to extend the use of solar energy to all major distribution centers in the next two years.
The growing demand for solar power in Saudi Arabia has been bolstered by cheaper Chinese-made PV modules. Foreign direct investment from China into the kingdom reached $21.6 billion in 2021 to October 2024, with a significant portion directed toward clean technologies such as solar, batteries, and wind energy.
While the declining cost of renewable energy has certainly played a role in this shift, experts agree that the government’s fiscal reforms, including the reduction of subsidies and the rise in diesel prices, have been key drivers in encouraging companies to look beyond fossil fuels. Shigeto Kondo, senior researcher at the Institute of Energy Economics in Japan, emphasized the significance of these reforms in shaping Saudi businesses’ decisions to invest in solar power and diversify their energy sources.
As Saudi Arabia continues to move toward a more sustainable energy future, the adoption of solar power by businesses marks a pivotal shift in the kingdom’s approach to energy use. With both cost savings and environmental considerations driving this change, the shift to renewables could soon become the new standard across Saudi Arabia’s industrial landscape.
