Not many people know that the world’s largest off-grid site powered by solar energy sits on the scenic west coast of Saudi Arabia, the world’s third largest oil producer.

The system, a combination of a 340 MW solar PV farm and a 1.2 GWh battery energy storage system without connection to the Saudi national grid, came online in early September, powering the high-end Red Sea Global resorts spread across multiple islands, a domestic airport, a water desalination plant and waste treatment facility.

The project showcases Saudi Arabia’s energy transition and economic diversification agenda, and the billion-dollar opportunities it could offer renewable energy investors going forward.

Despite its size, however, the Red Sea Global solar PV farm is relatively small compared to the gigawatt-sized and grid-connected solar PV schemes that have dominated the GCC renewable energy landscape since 2019-20.

These “utility-scale” renewable farms can range from several hundred megawatts to up to 5 GW each, backed by long-term offtake agreements with single buyers, mainly state-owned utility providers.

The utility infrastructure in the Red Sea Global resorts was developed and is owned by ACWA, which along with global heavyweights including Masdar, EDF Power Solutions, Marubeni and Engie have also dominated the utility-scale market in the Gulf.

While these companies have also developed smaller-scale solar farms catering to commercial and industrial (C&I) clients, most of them are now seeking to exit the C&I sector altogether to concentrate on larger investments.

For example, Masdar launched the sale of its 50% stake in Emerge Energy, which it co-owns with EDF, in 2025, while Engie is nearing a deal to sell its C&I assets in Saudi Arabia. Even TotalEnergies Renewables has decided to forego the Gulf’s C&I sector, with the UAE-based energy services firm Positive Zero set to take over its C&I assets in Oman and the UAE.

This has opened doors for infrastructure funds that have been keen to catch a piece of action in the region’s rapidly expanding renewables market.

Daunted by limited entry points in mega solar projects that feature some of the world’s cheapest tariffs – ACWA offered US 10.4/MWh to develop a 600 MW solar PV farm in Saudi Arabia in 2021, for example, which is less than a quarter of today’s average global solar tariff – infrastructure funds have been focusing their investments on C&I platforms across the GCC region.

For example, in 2022, Actis acquired a controlling stake in Yellow Door Energy, the Dubai-based distributed solar pioneer, which counts International Finance Corporation (IFC), Mitsui and The Arab Energy Fund (TAEF) among its shareholders.

Not to be outdone, BlackRock announced a plan to plough USD 400m in UAE-based energy firm, Positive Zero, the following year, while I Squared Capital acquired a majority stake in Saudi Arabia’s FAS Renewables earlier this year, rebranding the company into Radiant Energy Solutions and setting out plans to invest USD 150m to expand it.

Breaking the norm among its peers was Stonepeak, which launched renewable energy platform WahajPeak last year to target utility-scale projects.

Premium risk and returns

“Premium risk equals higher returns,” is how a Saudi-based senior executive with a C&I platform sums up the appeal of regional C&I assets for international infrastructure funds.

C&I developers take on the risk of developing, financing and operating these solar assets, and selling power to private offtakers, which often do not have the same level of creditworthiness as the state offtakers of utility-scale projects such as Emirates Water and Electricity Company (EWEC) in Abu Dhabi, Dubai Electricity and Water Authority (DEWA), and the Saudi Power Procurement Company (SPPC), he noted.

“Every C&I project requires rigorous due diligence to ensure that the private offtaker, whose core business is not utilities, can sustain the power purchase agreement (PPA), which usually extends between 22 and 25 years,” the executive told Infralogic.

This risk is suitably priced, offering an average IRR of around 11% to 12%, which is more in sync with the target IRRs of many infrastructure funds, compared to the typical single-digit IRRs offered by large-scale projects in the region, he explained.

A UAE-based executive with another C&I developer says this statistic is “broadly correct” but disputes the assumption that C&I projects are inherently riskier than their megaproject counterparts.

The IRR gap between the utility-scale and C&I assets in the region is more a function of how they are awarded, not the type of risk they offer, he noted.

“Every big tender pulls in a lot of bidders chasing the same project and they bid the price down until there is very little left. The single digit return is a result of that competition, not a sign that the project is unusually safe,” the UAE-based executive told Infralogic.

C&I projects on the other hand are often directly negotiated. “Without an auction, you negotiate and win one customer at a time, and nobody is bidding you down on price the same way. The [C&I] return reflects how hard the work is to originate, not a reward for taking more risk,” he explained.

C&I and utility developers also use different pricing points, which contributes to the differences. C&I developers price their power against what the customer pays their utility, which is a retail price, while utility-scale projects sell wholesale. “Very different starting points, so there is simply more room in the margin on the C&I side,” the UAE-based executive noted.

Regardless of which factors contribute to enhance the IRRs of small-scale, distributed solar PV developers, these platforms are now emerging as the new darling of infrastructure funds and their portfolios are booming as a result.

Brisk growth

The Middle East Solar Industry Association (MESIA) said C&I installations across the GCC states rose by over 20% in 2024 and its latest outlook indicates accelerating growth.

The region’s leading C&I platforms, each with a few hundred megawatts of installed and under construction schemes, are aiming to reach 1 GW of capacity by 2030.

French lender Natixis and Saudi Arabia’s TAEF recently arranged a non-recourse USD 375m  facility for Positive Zero, underscoring the appeal of the region’s decentralised energy for infrastructure lenders too.

Evolving regulations in major jurisdictions, led by Dubai, is driving this growth. The emirate’s Shams Dubai net metering programme encourages residents and businesses to install solar PVs for self-consumption. Any surplus is sent to the grid operated by DEWA, for which the consumer receives credits commensurate to the kWh rate they normally pay to buy electricity, which is then rolled over in subsequent billing cycle to reduce costs.

And despite a 1 MW cap for each individual site or rooftop installations, the solar PV systems connected to DEWA’s distribution network under Shams Dubai, which began in 2015, have clocked a collective capacity of 725 MW across more than 8,430 buildings in Dubai, the utility said in June.

“Dubai shows that the single buyer and the distributed solar model can co-exist,” noted the Saudi-based C&I executive, who said that the net metering policy has reduced the need for C&I developers to make additional investments in energy storage infrastructure.

Saudi Arabia’s net billing model is less attractive. Any surplus capacity that is sent to the grid is sold at a significantly lower price than the retail rate, roughly SAR 0.05 – 0.07 /kWh (USD 0.01)/kWh depending on the consumer sector, against the retail rate of around SAR 0.18 – 0.32 /kWh.

Unlike net metering, the net billing model tends to disincentivise maximising capacity because any excess produced is considered a loss, according to the Saudi-based executive, which oversees multiple C&I assets in Saudi Arabia.

To its credit, however, the Kingdom’s regulator, Saudi Electricity Regulatory Authority (SERA), provides a more generous cap of up to 2 MW for individual generation, and between 2 MW and 30 MW for commercial and industrial consumers that are willing to apply for a generation license.

Crucially and curiously, SERA also set a national cap of around 1.8 GW, designed to “preserve grid stability”.

Top C&I platforms in the GCC

Distributed solar platform	Shareholders	Current installed capacity (MW)	Contracted or under construction capacity (MW)	2030 Capacity target (MW)
Emerge Energy	Masdar, EDF	100	300	1,000
Positive Zero	BlackRock, Creek Capital		500*	na
Radiant Energy	I Squared Capital, FAS		100*	1,000
Yellow Door Energy	Actis, Mitsui, IFC, TAEF	150	250	na

*Publicly available data do not provide a breakdown of their contracted capacity

Sources: Official websites and press releases of individual companies

Different strokes

While policies fostering a more widespread deployment of distributed solar PVs are improving, there is still a substantial room for growth, the executives said.

“The policies are there, but it does not mean we do not need further improvements,” said the Saudi-based executive, who cited models used in other regions that could further encourage regional C&I growth, including the adoption of a wheeling model that allows independent power producers (IPPs) to generate renewable energy at an optimum location and transmit it to the consumer using the transmission operator’s grid for a fee. “This would eliminate onsite space constraints and potentially improve costs especially for larger C&I assets.”

“Growth will come through – and will be inevitably bound to – these policies,” he noted, adding that even the largest utility and renewable energy developers will struggle to meet Saudi Arabia’s ambition to procure and install 20 GW of renewable energy capacity annually until 2030.

“Where you expect major business-to-business growth and have a supportive regulatory framework, you will expect growth in [distributed solar] demand,” the executive added.

The reduction or elimination of heavy government subsidies for diesel products, in places such as the UAE, is also expected to drive off-grid solar PV deployment, according to another senior executive at a UAE-based C&I platform.

At the time of publication, the global average cost per litre of diesel, which powers generators in off grid sites, was roughly USD 1.6. This compares with is SAR 1.79 (USD 0.46) in Saudi Arabia where it is heavily subsidised, and AED 4.30 (USD 1.17) in the UAE, which no longer subsidises diesel.

“When you consider that off peak costs for solar is between SAR 0.20 and SAR 0.32 /KWh in Saudi Arabia versus the diesel cost of energy at SAR 0.70KWh, plus you have solar PV installations lasting at least 25 years without the fluctuations in diesel costs, it is easy to decide which system is more cost effective,” the executive told Infralogic.

A subsidiary of Saudi mining giant Maaden is one of the many companies that saw this potential, prompting it last year to sign a 30-year PPA with Emerge to develop and operate an 8 MW off-grid, ground mounted solar PV system supported by a 30 MWh battery energy storage system.

Iran conflict

Even the recent Iran conflict could not dampen the C&I trajectory in the GCC states on a meaningful scale. In fact, the opposite could be true, two of the sources said.

“Gigawatt-scale projects [without sufficient energy storage] could expose the GCC grids to major fluctuations, which presents a substantial risk [to supply],” the Saudi-based C&I executive said, adding that there might be a need to develop smaller, decentralised solar or wind generation assets to complement the massive solar farms being built in some GCC states.

Beyond the potential – though unlikely – disruption of electricity supply caused by targeting conventional and renewable power generation plants in a military conflict, the immediate threat comes from logistics disruption, noted the executive with a UAE-based C&I firm.

“Costs are getting pushed up, and this could affect tariffs,” he said, referring to the three-fold increase in shipping fees for materials such as solar panels, as major shipping lines adopt emergency war risk and conflict surcharges ranging from USD 1,500 to USD 3,800 per container.

The major C&I platforms can sometimes show more flexibility to adapt to the changes. The investments they recently received from their new stakeholders have reinvigorated their businesses, and they are signalling a willingness to cooperate with customers to address the rising costs arising from the Iran conflict. This includes extending PPAs by a few years to avoid charging their clients higher tariffs, as well as using newer and more advanced technologies to increase efficiency.

In a quest for scale, some of the C&I platforms are also dipping their toes in the utility-size market, with at least one company in the market to buy stakes in large brownfield projects from some of developers that are currently exiting the GCC, such as Marubeni and Jinko Power.

In a GCC market where off-grid sites can be as large as 340 MW, such as the Red Sea Global development, the opportunity for distributed solar platforms to scale up is significant.

The most ambitious will not have to choose between C&I and gigawatt-scale – with the right plan they can be both.