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

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.