Middle East accelerates solar and manufacturing in its pathway to decarbonisation amid ongoing fossil fuel investments

The Middle East’s pathway to decarbonisation is gathering momentum in its power systems and manufacturing base, even as broader economic incentives and ongoing fossil fuel investment leave the region far from the emission trajectories implied by many national pledges. According to Wood Mackenzie’s Energy Transition Outlook, closing that gap would demand roughly US$5.3 trillion of cumulative spending to hit net zero by 2060; under the consultancy’s central projection the region’s policies and investments instead point to a world warming by about 2.6°C.

The most tangible progress is occurring in electricity. Wood Mackenzie anticipates installed solar capacity swelling from roughly 30 GW in 2025 to near 97 GW by 2030 and continuing to expand to several hundred gigawatts by mid‑century. Independent industry tallies show the Middle East and North Africa added a rapid 12.2 GW of new solar in 2025 alone, bringing cumulative regional PV to more than 34 GW by November 2025, with Saudi Arabia and the United Arab Emirates leading deployments. That build‑out, combined with growing wind and storage roll‑outs, lifts the share of variable renewables in regional generation substantially and is already reshaping power system planning.

This domestic deployment is catalysing a manufacturing push. Wood Mackenzie projects MENA solar module production capacity will reach about 44 GW by the late 2020s, positioning the region as a global supply‑chain node. Market analysis highlights policy and trade dynamics underpinning the shift: local content rules and preferential tariff treatment in important export markets are attracting investment, while strategic partnerships with Chinese manufacturers, expected to supply the large majority of planned capacity, are accelerating factory development. Industry reporting also flags a potential advantage for MENA producers into the US market relative to Asian competitors subject to higher import duties.

Yet despite rapid electricity‑sector change, hydrocarbons remain central to the region’s political economy and investment decisions. Oil and gas continued to expand in 2025, with the Middle East supplying a substantial share of global energy exports. National oil companies are pursuing upstream and LNG expansions and investors are still committing capital to fossil infrastructure, decisions that risk long‑lived emissions and “lock‑in” of carbon‑intensive assets unless paired with stronger mitigation measures.

Country strategies reflect resource endowments and economic priorities. Oman, with more limited proven reserves at current production rates, is among the most assertive adopters of low‑carbon pathways, aiming to overshoot a 30% renewables target for 2030 and to electrify and diversify industry through clean power. Qatar’s extensive gas resource base is driving an expansion of LNG export capacity, reflecting a view that gas will remain a global market pillar for decades. Saudi Arabia is pursuing a dual approach: accelerating renewables to reduce domestic oil consumption while also maintaining upstream growth to preserve export revenues; Wood Mackenzie’s modelling suggests that the kingdom’s clean‑power ambition will face headwinds that could see actual clean generation materially below stated targets. The UAE is combining significant clean‑power rollout with continuing hydrocarbon production growth, creating a similar tension between ambitions and near‑term energy policy.

For industrial decarbonisation practitioners the implications are clear. Rapid scale‑up of cheap solar and accompanying storage creates new opportunities to electrify energy‑intensive processes, cut process emissions where electrification is feasible, and develop low‑carbon feedstocks for industry and desalination. But realising those opportunities will rely on stable policy frameworks, market signals that value low‑carbon products, and technologies for hard‑to‑abate sectors. Wood Mackenzie emphasises that economy‑wide transformation requires not only generation investment but also breakthroughs and demand from buyers willing to pay for lower‑emissions materials and fuels.

The report underlines a policy-practice disconnect: headline climate targets are not yet matched by the level or direction of investment needed to meet them. Economic reliance on hydrocarbon rents, decisions to expand LNG and oil capacity, and the absence of sufficiently strong price or regulatory levers for low‑carbon industrial inputs are cited as the main constraints. On the other hand, the rapid maturation of regional solar supply chains, combined with falling costs and growing deployment, offers a practical lever to cut domestic emissions and to create exportable low‑carbon industrial capacity, if governments and industry align incentives accordingly.

For companies and policymakers engaged in industrial decarbonisation, the region presents both risk and opportunity. The near‑term outlook suggests continued demand for hydrocarbons and potential asset‑base risk for late‑stage fossil projects, while simultaneously opening sizeable markets for electrification solutions, green hydrogen pathways that use abundant renewables, and localisation of clean energy manufacturing. The scale and pace of transition will ultimately depend on whether trade partners, corporate buyers and domestic policy can convert renewable supply‑side momentum into sustained demand for low‑carbon industrial output.