This chapter assesses the economics of installing solar energy at both residential and utility scales in the countries of the Gulf Cooperation Council (GCC). When examining residential installations, the analysis focuses on the homeowner’s finances; for utility scale deployment, investment needed for new generation and to ensure system reliability is assessed. Initial results show that in both situations, solar power is not economically viable at the present fuel and electricity prices.

Solar proponents in the GCC argue, however, that generating electricity from solar power can partially replace burning oil. Each barrel of avoided consumption for domestic electricity can potentially increase oil rents through additional exports, facilitate diversion of oil to higher value uses, or simply save and reserve resources for later use. As a rule of thumb, each gigawatt (GW) of solar installed in the GCC would avoid burning approximately 3 million barrels (Mbbl) of oil annually.

Thus, despite the rather poor forecasts produced when each sector is examined in isolation, this chapter demonstrates that viewing the situation from an economy wide perspective changes the equation. Applying a partial equilibrium model – which measures gains and losses incurred across diverse sectors – demonstrates that expanding solar deployment can deliver positive financial gains for the government’s bottom line. In turn, this can benefit the broader economy.