Not much yet, but that is set to change. Across the Middle East, only about 20 cents goes into clean energy for every dollar spent on oil and gas. The International Energy Agency, the body that tracks global energy, expects clean-energy spending in the region to roughly double by 2030 as countries act on their climate promises. The United Arab Emirates has promised to reach net zero by 2050 and plans to invest more than 163 billion United States dollars in clean energy along the way.
Figure 1: Past and future energy investment in the Middle East, in billions of United States dollars, under two scenarios (Announced Pledges and Net Zero Emissions).
Source: International Energy Agency, World Energy Investment 2024.
Because the government pays part of everyone’s electricity bill, so the price people see is far below what the power really costs, and that leaves little reason to switch to solar. Solar is cheap to run, about 12 fils a unit. But a household getting the most help already pays only 7 fils, and a farm pays 5. When your electricity is that cheap, putting solar on your roof barely lowers your bill, even though solar itself is a bargain.
Behind the scenes, the real cost of grid electricity is much higher than the price people pay. MCC Economics estimates the true cost at 36 to 41 fils a unit, worked out from official price documents published by the Abu Dhabi Department of Energy and the 2023 accounts of the emirate’s main electricity company, TAQA. The government covers the gap. Redirecting some of that subsidy money into solar or efficiency would help the government, households and the environment at the same time.
Figure 2: Stylised breakdown of the economic cost of electricity and the tariff, not to scale, as in the source diagram.
Figure 3: Residential electricity prices across the Gulf, in United States cents per kilowatt-hour, by consumer group and monthly consumption band.
Source: Abuzaid, Al Moeilak and Alzaatreh (2022), Energy Strategy Reviews.
Table 1: Abu Dhabi electricity, what each consumer group pays and the subsidy that fills the gap up to the real cost of about 0.39 dirhams a unit.
Source: MCC analysis of the distribution company’s 2024 tariffs, the Department of Energy price documents and the generation company’s 2023 accounts.
Figure 4: The economic cost of electricity against what each Abu Dhabi consumer group pays and the subsidy that fills the gap, in dirhams per unit.
Source: MCC analysis of the distribution company’s 2024 tariffs, the Department of Energy price documents and the generation company’s 2023 accounts.
For most homes and businesses, yes, and the biggest savings go to those who pay the normal rate for electricity rather than a heavily discounted one. MCC worked out the costs and savings for each type of customer using a financial model. A typical household on the standard rate gets its money back in about three to three and a half years, then keeps saving for the life of the panels, usually around twenty-five years. Shops and offices get their money back in about four to five years, and larger industrial sites in about the same. The exception is households on the discount rate, where the cheap electricity means solar takes up to about twenty years to pay for itself.
Table 2: Distributed solar by customer group in Abu Dhabi, showing system type, install cost, years to pay back and yearly return over 25 years. Payback is the time before savings cover the cost; return is the yearly gain on the money.
A typical home system costs roughly 9,800 to 10,600 dirhams to install, with only about 100 dirhams of upkeep in the first year. There is an important catch, though. The report notes that homes in Abu Dhabi are reportedly not yet allowed to install their own solar, so while the savings would work for a household, the option may not be open to you right now. Commercial and industrial sites face fewer restrictions, and their savings are strong, which is where most of the near-term opportunity sits. Anyone weighing a specific installation should check the current rules first, since they are still changing.
A large solar farm makes electricity more cheaply than rooftop panels, but that is not the whole story, because it leaves out the cost of getting the electricity to you. Big projects in the region are impressively cheap to run. The Al Dhafra solar farm produces at about 0.05 dirhams a unit. But a big farm’s low price only counts the cost of making the electricity, not the poles, wires and stations needed to carry it to homes, which is a large part of what you actually pay. Rooftop panels sit where the electricity is used, so they skip most of that delivery cost, and they add benefits a distant farm cannot, like charging an electric car at home and easing pressure on the grid at busy times. Both kinds are useful, and both are needed.
Table 3: Cost to make electricity at large solar farms in the Gulf region, in dirhams per unit, lowest to highest.
Source: MCC compilation; Al Dhafra figure from the Emirates Water and Electricity Company.
Figure 5: What large Gulf solar farms charge for their electricity, in dirhams per unit, highest to lowest.
Source: MCC compilation; Al Dhafra figure from the Emirates Water and Electricity Company.
Figure 6: Solar generation costs against the economic cost of electricity and tariffs in Abu Dhabi, in dirhams per unit.
Figure 7: Historical and forecast solar capacity in Abu Dhabi, centralised against three distributed scenarios, in gigawatts.
Table 4: Three distributed-solar growth scenarios for Abu Dhabi to 2030, with the subsidy saved and carbon avoided under each, alongside large solar farms for comparison.
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