Oil for others: why China helped Saudi Arabia transition to green energy

Saudi Arabia is one of the world's largest oil producers, and China is its largest consumer and the Saudis' main customer. But in the energy sector, the two countries have found another area of cooperation. China is a world leader in the development of renewable energy. And now Saudi Arabia, using its technology, has engaged in the rapid development of solar generation.

Some of the world's largest solar power plants and giant battery complexes for energy storage are being built in the kingdom, according to The Wall Street Journal. The main reasons for such a radical turn of the oil state to green energy are two.

The sun is freeing up more oil for exports, which Saudi Arabia is now rapidly ramping up to regain its share of the global market. For the same reason, the country is forcing its OPEC+ partners to increase oil production quotas at an accelerated pace. In addition, solar generation is helping to meet skyrocketing demand for electricity. Saudi Arabia is now implementing a program of economic diversification, which includes numerous new projects in tourism, industrial production, artificial intelligence and data centers.

While in 2022, Rystad Energy estimates that Saudi Arabia gets 41.4% of its electricity from burning oil and petroleum products such as diesel (the rest is gas), by 2030 this share will almost disappear. But right now, Citigroup estimates that a volume of oil equivalent to about $20 billion in lost export revenues per year is being wasted for this purpose. "It's monstrously inefficient," says Oliver Connor, an analyst at the bank (quoted in WSJ).

According to the IMF, Saudi Arabia has a deficit-free budget when the oil price exceeds $90 per barrel, but since April this year it has been trading below $70 (except for two short spikes). Since April, under pressure from Riyadh, OPEC+ countries have started to rapidly increase oil production.

In the period through September 2025, they returned about 2.2 million barrels per day to the market - a year faster than originally planned. But they did not stop there and decided to add another 137,000 bpd from October.

Saudi Arabia still has spare production capacity: currently, its average daily production is about 9.7 million with a capacity of 12 million. But the changing energy mix is also helping to redirect barrels to exports. While the share of oil used to generate electricity was 35.7% in 2024, it should fall to 29.8% this year, Rystad Energy estimates. At the same time, the share of solar energy will grow from 2% to 5%.

A key player in the transformation of the national grid is ACWA Power, whose largest shareholder is the Saudi sovereign wealth fund.

"Today, solar is the cheapest, fastest, easiest and most reliable source of electricity you can install," CEO Mark Arcelli told WSJ. In recent tenders, ACWA has sold electricity for less than $0.013/kWh - three times lower than the minimum price in Europe.

By 2030, Saudi Arabia plans to generate half of its electricity from renewable energy sources (RES). Analysts doubted that this would be possible, but the pace of new construction has been so fast that forecasts are being revised. Rystad Energy believes renewables could make up a third or more of the country's energy mix by the end of the decade, although they accounted for just 2% last year. This would put it among the world's top 5 leaders in terms of solar capacity commissioning.

One of the main factors behind Saudi Arabia's success in developing renewable energy lies beyond its borders - in China, which is the largest buyer of its raw materials. In an effort to reduce oil imports for energy security purposes, Chinese authorities have actively supported the development of green energy. The country has become the world's largest investor in clean energy, investing $625 billion in 2024 - 31% of the global total of $2.033 trillion.

As a result of fierce competition, innovation and price wars, the cost of solar panels, wind turbines and batteries has fallen 60-90% since 2010, according to a report by Ember, a think tank specializing in green technology.

"If a country like Saudi Arabia is finally getting serious about renewable energy, that means solar panels have gotten so cheap that it's a real game changer," Ana Missirliou of Climate Action Tracker told the WSJ.

Thanks largely to Chinese technology, 91% of renewable energy projects commissioned globally in 2024 produce electricity at lower prices than the cheapest fossil fuel alternative, according to calculations by the International Renewable Energy Agency (IRENA). Solar PV plants produce electricity 41% cheaper on average ($0.043/kWh) and wind plants 53% cheaper ($0.034/kWh).

China has become a key supplier of equipment for the energy transition of both Saudi Arabia and many other countries, as it accounts for about 80% of global production of solar panels and 60% of wind turbines. "China is an engine of change, reshaping the energy industry not only domestically but globally," emphasizes Richard Black, one of the authors of the Ember report.

He echoed former Thai Deputy Prime Minister Suwit Hunkitti. For too long, developing countries have had to choose between rapid economic growth and sustainable development, but that is changing, he told The New York Times.

According to the International Energy Agency (IEA), renewables accounted for 38% of global energy supply growth in 2024, compared to 28% for gas, 15% for coal, 11% for oil, and 8% for nuclear power.

China itself still burns more coal than the rest of the world. Coal-fired power plants continue to be built, but they now have the additional function of supplying electricity during periods of decline in renewable energy generation. Meanwhile, in 2024, an 84% increase in electricity demand was met by solar and wind farms, reducing fossil fuel use by 2% even as electricity demand increased, Ember notes. In the previous decade, fossil fuels accounted for more than half of demand growth.

Solar and wind power provided nearly 20% of generation in China, according to the IEA.

The role of clean energy is also growing for the Chinese economy as a whole. Last year, investment and production in the sector totaled nearly $2 trillion, or about 10% of GDP. At the same time, the sector grew three times faster than GDP.

This article was AI-translated and verified by a human editor