Central Asia Relies on Gulf as it Targets Energy Transition

Since gaining independence in 1991, states in Central Asia and the Caucasus have historically had the strongest energy ties with Russia and China. Yet in the past 5 years, they have significantly expanded their energy cooperation with the member states of the Gulf Cooperation Council (GCC). This cooperation is unidirectional: Gulf companies and institutions are investing substantial capital in energy assets and infrastructure across Central Asia and the Caucasus, but not vice versa.

The GCC and Central Asia have a history of ties in the traditional energy sectors of oil and gas, but the new interregional cooperation prioritizes alternative energy sources—including solar, wind, hydropower, and hydrogen. This shift reflects a change in the GCC’s wider energy diplomacy agenda: to transition from being the world’s leading fossil energy center to being the world’s leading energy center more broadly. Recent Gulf investments in Central Asia and the Caucasus are the active edge in this effort.  

To explain why these new Gulf-Central Asia energy connections are being developed, it is necessary to understand who is involved in bringing them to life. In both regions, the energy sector is defined by blurred lines between private and government-owned companies. The result is that the distinction between private and public interests at stake in strategic energy decisions can also be blurry in both regions. Nonetheless, the new Gulf investments in Central Asia’s energy landscape are typically led by a GCC company or a GCC government, though their specific project is routinely supported by the other.  

Today, the two largest Gulf companies involved in developing new energy assets in Central Asia and the Caucasus include the UAE-based Masdar, and Saudi-based ACWA Power. Masdar, once a wholly-owned subsidiary of the UAE’s Mubadala sovereign wealth fund, is now jointly owned by Mubadala, the Abu Dhabi National Oil Company (ADNOC), and Abu Dhabi National Energy Company (TAQA) since December 2022. ACWA is 44 percent owned by Saudi Arabia’s PIF sovereign wealth fund, alongside a number of wealthy individuals and institutional investors. In both cases, Masdar and ACWA cannot be considered solely private or solely governmental companies. While they are inarguably driven by basic financial motives, they also remain accountable to the political elites in the UAE and Saudi Arabia, who are well represented on their boards and among their shareholders.

If Masdar and ACWA are the largest Gulf companies active in Central Asia and the Caucasus, their projects vary significantly across the region. Masdar currently has the broadest range of projects. In Uzbekistan, this includes five solar parks (ranging from 100-457 MW), two wind projects (one 500 MW project already underway, plus a new 1GW park announced at COP29), as well as plans to explore pumped hydropower. In Azerbaijan, Masdar already operates three solar parks (ranging from 230-445 MW) and one 240 MW onshore wind park. Next door in Armenia, Masdar also has a 200 MW solar park. In Kazakhstan, Masdar does not have any completed projects, but at COP29, the company signed an agreement to develop 1 GW solar park, including 600 MW of battery storage. Likewise, in Kyrgyzstan, Masdar only has a set of agreements,  including a vague promise offered in January 2023 to develop 1 GW of renewables, followed by, in December 2023, a commitment “to explore” 3.6 GW of hydropower and  renewables alongside the British EDF energy provider. Notably missing here are investments in Turkmenistan, Tajikistan, and Georgia. 

ACWA Power’s regional assets currently include a 240 MW wind park in Azerbaijan, and in Uzbekistan, four wind parks (ranging from 100-1500 MW) already completed or soon to be finished. They also have several utility-scale solar parks in Uzbekistan’s Samarkand region, which include large battery energy storage systems (BESS), and a new project underway for a 1500 MW Combined Cycle Gas-Turbine (CCGT) facility in the Sirdarya region. In each of these cases, the National Electric Grid of Uzbekistan is listed as the sole off-taker, and each facility is described on the company’s website as being a “Build, Own, Operate, Transfer” project, in which ACWA Power has claimed it ‘will take the lead in the construction, engineering, operation and maintenance the plant.’ What, when, or how the “transfer” phase will take shape remains unclear, however.

The COP29 United Nations climate talks in Azerbaijan in November 2024 saw a wide range of new energy cooperation agreements between the regions, with Saudi Arabia showing the most ambitious outlook to the developing energy landscape of Central Asia and the Caucasus. At COP, the Saudi Minister of Energy signed an agreement with three of the region’s presidents—Azerbaijan’s Ilham Aliyev, Kazakhstan’s Kassym-Jomart Tokayev, and Uzbekistan’s Shavkat Mirziyoyev—to enhance cooperation in renewable energy development and transmission and to push forward a long-elusive goal of regional power grid interconnection. The Saudi renewable energy champion ACWA was also involved in these agreements, being named as the company responsible for the renewable energy projects in the three countries. 

At COP29, the Saudi Electricity Co. also signed an MoU to develop regional interconnection projects with its counterparts in Azerbaijan, Kazakhstan, and Uzbekistan. COP29 also yielded a new bilateral energy “roadmap” between Saudi Arabia and Azerbaijan, but the larger 4-country agreements that Saudi officials take interest in include extending their bilateral energy diplomacy to regional energy diplomacy. This symbolizes a move beyond the more limited series of bilateral energy agreements they have been signing with the other state’s leaders since 2022.

Another notable development at COP29 was the joint agreement between Masdar, ACWA, and SOCAR Green—a branch of the State Oil Company of Azerbaijan established to implement “renewable energy projects, green hydrogen production, [and] carbon capture, utilization, and storage.” This three-country initiative is focused on exploring a 3.5 GW offshore wind project within Azerbaijan’s Caspian domain, as well as a green hydrogen and water desalination plant. The new energy projects discussed in the MoU are not surprising in and of themselves, but the fact that Masdar and ACWA are working together is notable as GCC actors are often assumed to be in competition. Rather, this project may demonstrate the possibilities for cooperation between the Gulf’s two green energy pioneers– both across the GCC borders, as well as with the Central Asia and Caucasus states hosting their investments. 

By working with SOCAR Green, Masdar and ACWA are well positioned to teach Azerbaijanis about the Gulf model of “greening” oil money by funneling it into the alternative energy sector. Regardless of whether energy watchers deem this model to be good or bad, it is expanding at a rapid pace in the Gulf. As the GCC governments and companies continue to promote non-fossil energy projects abroad, including in Central Asia and the Caucasus, they are laying the groundwork for a cooperation model that puts the GCC at the center of the post-oil energy future. In this role, the Gulf’s political and business leaders aspire to do more than offer capital to undercapitalized regions; they also aim to reap the most profits possible from controlling the vast networks of technology, infrastructure, knowhow, and resources that are needed to realize the transition to alternative energy sources. 

The Gulf’s investments in Central Asia and the Caucasus thus reflect a broader energy diplomacy agenda: to leverage their role as the world’s leading fossil fuel producers in order to remain an energy epicenter, whatever the fuel system. In this respect, the GCC’s interregional cooperation with Central Asia and the Caucasus is already a success. But whether these high-level agreements and large-scale projects will yield the kinds of financial and political returns that their Gulf proponents hope for remains an open question.

Photo: Dunyo

Solar Power’s Water Problem in the Gulf

This article is part of a series exploring regional energy cooperation in the Gulf and is published in cooperation with Istituto Affari Internazionali.

Since the inauguration of the Mohammed Bin Rashid Al Maktoum Solar Park in Dubai in 2013, the Gulf Cooperation Council (GCC) has become home to an increasing number of solar power installations. Emirati leaders have so far invested the most in large utility-scale solar in the region, but their peers in Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain have also begun to set up new solar parks in recent years.

The Arabian Peninsula’s desert landscapes might seem to be perfect for large solar power facilities like those being developed in the GCC states. Vast and largely uninhabited, the Arabian Desert gets plentiful sunshine: it receives around 3400 hours of sunshine per year, compared with averages of around 1600 hours in Germany or 2900 hours in Spain.

But solar power needs much more than desert sunshine to work. Arid landscapes present various infrastructure challenges, including high temperatures that can damage solar arrays and remoteness from established energy transmission lines. And where sunshine is most abundant, water is not.

Indeed, water scarcity is the most important limit on the grand promises of GCC governments to overhaul and decarbonise the region’s energy system. The Arabian Desert is one of the most arid places on earth, typically receiving under 4 inches (100 mm) of rain per year, and already facing near total depletion of its groundwater.

Unfortunately, today’s solar technology requires substantial amounts of water. Celebratory discussions about solar power are often illustrated with photographs of sparkling PV arrays. These solar panels are always pristine, recently cleaned arrays. Unfortunately, such a scene is a rare encounter in the Arabian Desert, where dust and blowing sand is quick to cover the solar panels and mirrors of both PV (photovoltaic) systems and CSP (concentrated solar power) systems.

Aware of desert solar’s dust problem, companies like Arizona’s First Solar and Luxembourg’s SolarCleano have promoted waterless cleaning systems. Yet these technologies are still not advanced enough to employ on a large, industrial scale. Solar technology companies based in the Gulf are also aware of this problem and have tried to engineer their own solutions. For example, Saudi Arabia’s NOMADD has designed its namesake “NO Water ​Mechanical ​Automated Dusting Device” to address the challenge of cleaning of solar panels in the Arabian Peninsula.

While robotic PV-cleaning systems are deployed in some sites today, waterless cleaning technologies are expensive and have failed to scale up beyond small, pilot projects. As a result, the GCC’s small-scale solar installations and the large-scale solar parks continue to use water to clear dust and debris from their panels. Most of that water is desalinated sea water, which is produced with a huge energy cost and substantial CO2 emissions. In this case, then, solar energy produced in the Arabian Peninsula’s desert parks is far from green—it is actually incredibly wasteful.

Renewable energy’s water footprint

The water footprint of solar power extends beyond just cleaning. Water is also used in extracting diverse minerals needed to manufacture PV cells and batteries, such as lithium, cobalt, tellurium, and gallium, as well as in the manufacturing process itself. Mining for the renewable energy sector largely takes place outside of the Arabian Peninsula, but Saudi Arabia’s new investments in mining, described as advancing global efforts to “decarbonize,” will invariably expand this water footprint in the region.

Water is integral to all modern forms of electricity generation, including fossil fuels, and nuclear, alongside renewables. Required water inputs vary by the source, in large part because the infrastructures needed to generate, store, and transmit energy all have different geographies. The solar water footprint contrasts to the water demands for coal, for example, where water is first used to extract coal from the earth, and then in power plant cooling operations like all thermoelectric power systems (coal, natural gas, and nuclear).

Proponents suggest that the water demands of renewables are a significantly lower than those of traditional fossil fuels. This is probably true. But even so, estimates from the IEA (International Energy Agency) use absolute numbers that reflect a limited proportion of renewables in the overall global energy supply mix. These estimates also tend to neglect the physical geography of renewable energy installations siting—like whether a proposed solar park is located in a desert where it is liable to dust problems that increase its water needs.

Overpromising solar to hype hydrogen

Encouraged by partners in Europe and Asia, Gulf fossil fuel producers are increasingly keen to promote hydrogen energy and state-backed efforts to develop hydrogen are now found in the UAE, Saudi Arabia, and Oman. In many cases, these projects are framed as key to transforming the region into future “green” hydrogen hubs. Creating hydrogen energy requires vast amounts of energy and for it to be “green,” this energy must come from renewables.

To date, the amount of renewable energy produced in the Arabian Peninsula is so limited that none of the impressive green hydrogen targets in the Gulf are realistic. Local programs that position the Arabian Peninsula as a new green hydrogen hub overpromise their future solar energy capacity. They overpromise solar both in the present, because the production capacity simply is not there, and also in the future, because the region’s water supplies are insufficient to deliver on local renewable energy promises. Instead, the new Gulf hydrogen programs are on track to locally lock in natural-gas generated hydrogen. Meanwhile, the water limits of solar power’s expansion are a fundamental obstacle to any future for “green” hydrogen in the region.

Just like the solar power parks that they depend on, new hydrogen energy schemes can only represent an improvement on the CO2 footprint of traditional fossil fuel energy sources if the production site decisions take water into account. If any renewable energy project’s water footprint is not carefully evaluated, then the most likely outcome will be that it turns into a big “green wash,” a convoluted mess of energy infrastructure that is built in the name of being green, but does not actually result in any CO2 reductions. And perhaps the most tragic outcome of this green theater would be if it only exacerbates local water shortfalls that then exacerbate the climate crisis, as they are met with yet more carbon-emitting desalinated seawater.

Water and energy futures

Although water is one of the most forgotten elements in today’s discussions about energy systems, the water-energy nexus has come into sharper focus recently and has been integrated in the climate talks under the UAE COP28 presidency’s Water4Climate initiative. Yet, similar to how mainstream climate change discussions are defined globally, water is often just reduced to an issue of “water security” for vulnerable populations. This is, of course, an important issue. But it is almost entirely divorced from the problem of water use and planning in the implementation of high-tech energy infrastructure around the world.

Regardless of whether oil and gas is “phased out” or “phased down,” fossil fuels are on their way out. Yet high-tech energy infrastructure, including renewables, will continue to be prioritised by political and economic leaders in the Arabian Peninsula. The question is where those infrastructures will be located.

Since the Gulf’s energy leaders want to remain central to the post-oil energy system, they are already investing in renewable energy abroad. For example, the UAE’s Masdar has stakes in solar parks, wind farms, and geothermal energy operations all across the world, including in neighbouring Gulf states like Iraq. Likewise, UAE-based AMEA Power was set up several years ago with the express purpose of investing in foreign renewable energy projects – and is growing at breakneck speed. Renewables have also been major targets for foreign investment from Saudi Arabia’s ACWA Power, which has also been the most aggressive actor in setting up hydrogen partnerships with foreign partners in Eurasia and the MENA region, including in Morocco, Uzbekistan, Kazakhstan, China, and beyond.

These future energy partnerships are already fostering regional cooperation and they will continue to do so. However, it is essential that water be at the centre of all considerations about how renewable energy infrastructures are located. In particular, if solar parks are located in places that strain water resources in a partner country—such as with growing water problems from Morocco’s Noor solar plant—then they are likely to provoke local opposition and accusations of “water grabbing” and neocolonialism.

No map can answer the question of how renewable energy landscapes should be ideally configured, because all geography is political. But decision-makers in the GCC, in neighbouring countries like Iraq and Iran, and in countries spearheading climate action, must think critically about where to locate renewable energy infrastructures. To take serious, coordinated action toward scaling renewable energy in a way that actually reduces carbon emissions, water usage must be the primary consideration.

Photo: Canva