The Effect of Renewable Energy on the Economic Growth of Saudi Arabia

A Comparative Analysis Using ARDL and VAR Models

Authors

  • Dilgash A. Mohammed Department of Economics, Faculty of Administration and Economics, Nawroz University, Kurdistan Region, Iraq https://orcid.org/0000-0002-2103-8070
  • Dildar H. Ahmed Department of Economics, Faculty of Administration and Economics, Zakho University, Kurdistan Region, Iraq

DOI:

https://doi.org/10.14500/kujhss.v9n1y2026.pp624-630

Keywords:

Saudi Arabia, Renewable‐Energy Consumption, Non‐Oil GDP Growth, ARDL Bounds Test, VAR

Abstract

This study assesses how renewable‐energy investments drive non‐oil economic growth in Saudi Arabia over 2000–2023. Drawing on primary data from Saudi ministries and secondary series from the IEA, IRENA, and World Bank, we employ an ARDL bounds‐testing approach to estimate long‐run and short‐run impacts, and a VAR framework for dynamic and causality analysis. Our ARDL results show that a one‐percentage‐point rise in renewable‐energy consumption (REC) increases non‐oil GDP growth by 0.50 pp (p = .03), while a one‐point increase in renewable‐electricity output (REO) yields a 2.00 pp gain (p = .01). Gross fixed capital formation (0.40 pp, p = .04) and exports (0.30 pp, p = .05) also bolster growth, and the error‐correction term (–0.55, p = .01) indicates that 55 % of disequilibria are corrected annually. VAR Granger‐causality tests confirm that REC drives GDP growth (F = 4.25, p = .02), REO spurs employment in renewable sectors (F = 3.80, p = .03), and REC attracts FDI inflows. Fiscal simulations reveal that rising renewable‐energy investments—from US$0.50 bn in 2018 to US$0.70 bn in 2022—correspond with subsidy savings doubling from US$0.20 bn to US$0.40 bn. We recommend scaling up feed-in tariffs, channeling subsidy savings into green-skill training, and linking REC targets to CO₂‐reduction goals to advance Vision 2030’s diversification agenda.

Downloads

Download data is not yet available.

Author Biographies

Dilgash A. Mohammed , Department of Economics, Faculty of Administration and Economics, Nawroz University, Kurdistan Region, Iraq

Dilgash Ahmed Mohammed. He is a Lecturer at the Department of Economics, Faculty of Administration and Economics, Nawroz University, Kurdistan Region, Iraq. He holds a B.Sc. in Economics from Nawroz University and an M.Sc. in Economics from a university in Cyprus–Turkey. He is currently a Ph.D. student in Macroeconomics at the University of Zakho, Kurdistan Region, Iraq. He is a certified member of the World Cultures Foundation for Skill Development. His primary research interests include macroeconomic policy analysis, labor market dynamics, particularly unemployment, and the economic implications of renewable energy. His current academic work focuses on macroeconomic policies and renewable energies.

Dildar H. Ahmed, Department of Economics, Faculty of Administration and Economics, Zakho University, Kurdistan Region, Iraq

 Dr. Dildar Haydar Ahmed is the Dean of the Faculty of Administration and Economics at the University of Zakho, Kurdistan Region, Iraq. He specializes in Economic Policies. He holds advanced degrees in economics and has extensive experience in academic leadership and research. His primary research interests include economic policy analysis, sustainable development, and the role of institutional frameworks in economic growth. His current academic work focuses on the formulation and impact of economic policies in developing and transitional economies.

References

Abu‐Rub, M., Al‐Harbi, S. , & Al‐Tamimi, R. (2023). Renewable energy investments and economic growth in Saudi Arabia: Firm‐level evidence from 2000 to 2023. Journal of Energy Economics, 42(1), 125–145. https://doi.org/10.1016/j.jee.2023.01.002

Alabdulkareem, H., Alghamdi, S. , Alqarni, A., & Alshammari, N. (2022). Integrating circular carbon economy with renewable energy: A new paradigm for oil‐dependent nations. Energy Strategy Reviews, 18, 100–118. https://doi.org/10.1016/j.ESR.2022.100118

Abdulrahman, H., & Alotaibi, F. (2021). Renewable energy investments and non‐oil GDP growth in Saudi Arabia. International Journal of Energy Economics, 34(3), 250–270. https://doi.org/10.1016/j.ije.2021.03.005

Alghamdi, M., & Alomar, I. (2021). Beyond the resource curse: Renewable energy’s role in economic diversification. Journal of Sustainable Development, 15(2), 112–130. https://doi.org/10.5539/jsd.v15n2p112

Almulla, A., & Al‐Mohaimeed, M. (2022). Renewable energy adoption and employment dynamics: Evidence from the Middle East. Renewable Energy Studies, 12(4), 350–368. https://doi.org/10.1016/j.res.2022.07.003

Alsharif, A., Alqahtani, S. , & Alzahrani, T. (2020). Renewable energy and economic diversification in Saudi Arabia: A policy perspective. Energy Policy, 132, 110–120. https://doi.org/10.1016/j.enpol.2020.03.005

Al‐Attar, A., & Buerkle, M. (2022). Challenges and opportunities in Saudi Arabia's renewable energy sector: A policy analysis. Journal of Energy Policy and Management, 9(1), 50–

68. https://doi.org/10.1016/j.jeppm.2022.01.004

Elgendy, A., & Ahmed, B. (2021). The fiscal impact of energy transitions in oil‐ dependent economies. Energy Policy Journal, 50(2), 200–220. https://doi.org/10.1016/j.enpol.2021.01.005

El‐Sayed, M., & Hassan, R. (2022). Renewable energy and economic reforms: A comparative study in the Gulf. Journal of Energy Reform, 7(2), 150–170. https://doi.org/10.1016/j.jer.2022.02.007

International Energy Agency. (2023). Renewable energy market report 2023. IEA. https://www.iea.org/reports/renewable-energy-market-report-2023

International Monetary Fund. (2022). World economic outlook database. International Monetary Fund. https://www.imf.org/en/Publications/WEO

International Renewable Energy Agency. (2022). Renewable energy statistics 2022.

IRENA. https://www.irena.org/publications/2022/Jan/Renewable-Energy-Statistics-2022

Khan, S., Patel, R. , Alghamdi, F., & Alzahrani, Y. (2023). Hydrogen and renewable energy transitions in oil‐rich economies. Energy Transition Review, 8(1), 45–66. https://doi.org/10.1016/j.etr.2023.01.004

King Abdullah Petroleum Studies and Research Center. (n. d.). Energy subsidies and avoided oil consumption estimates. KAPSARC. https://www.kapsarc.org/research/energy- subsidies/

Rahman, M., & Velayutham, V. (2023). Nonlinear dynamics in renewable energy and economic growth: A NARDL approach. Journal of Economic Modeling, 34(1), 89–110. https://doi.org/10.1016/j.jem.2023.03.007

Downloads

Published

2026-06-09

How to Cite

Mohammed , D. A. and Ahmed, D. H. (2026) “The Effect of Renewable Energy on the Economic Growth of Saudi Arabia: A Comparative Analysis Using ARDL and VAR Models”, KOYA UNIVERSITY JOURNAL OF HUMANITIES AND SOCIAL SCIENCES, 9(1), pp. 624–630. doi: 10.14500/kujhss.v9n1y2026.pp624-630.

Issue

Vol. 9 No. 1 (2026): Issue Sixteenth

Section

Articles

License

Copyright (c) 2026 Dilgash A. Mohammed , Dildar H. Ahmed

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Similar Articles

1 2 3 4 5 6 7 8 9 10 > >> 

You may also start an advanced similarity search for this article.