MENA’s electricity demand crunch and the path to sustainability

Governments around the Middle East and North Africa region are investing billions of dollars in power generation, yet supply is struggling to keep up with soaring demand.
MENA’s total installed generation capacity increased by 15 percent in the four years to 2023 to exceed 462 gigawatts. Saudi Arabia is the regional leader in installed capacity, with 83.5 GW as of 2022. The Kingdom accounted for 22 percent of all planned power projects in MENA last year — an equivalent spend of $51 billion. Meanwhile, the UAE has invested $25 billion in the Barakah nuclear plant, which generates 40 terawatt hours, covering a quarter of the country’s electricity demand. Egypt, where power outages are frequent, has built several new gas-fired power plants.
Despite these large-scale projects, supply is slow to catch up with demand in most countries. Total capacity will need to increase by 40 percent by 2030 compared to a decade earlier, according to the latest estimates. However, increasing power generation alone will not address MENA’s electricity crunch; the root issue is not insufficient infrastructure but rather inefficient consumption — particularly in the residential and commercial sectors.
The most viable solution is demand-side management, leveraging smart pricing, digital technologies and behavioral incentives to optimize energy use and curb waste. Unless this is made a policy priority, the region risks grid instability, fiscal strain and an unsustainable energy future.
Despite major expansions in power generation capacity, consumption patterns remain fundamentally inefficient, which makes it challenging to keep pace with demand.
The residential sector is the primary driver of electricity demand across the MENA region, accounting for 40 percent of total consumption, according to independent calculations of data sourced from the International Energy Agency database. This figure rises to 47 percent in Qatar and 49 percent in Kuwait.
The commercial and public services sectors are second to residential, demonstrating that buildings are the biggest drain on electricity across the region. In fact, air conditioning is the single largest category of electricity use, accounting for 70 percent of peak consumption in the Gulf Cooperation Council countries. That the bulk of generated electricity is consumed by households and commercial buildings, rather than industrial production, highlights a fundamental inefficiency in the power sector — one that is straining grids without necessarily driving economic productivity.
As a result, MENA’s energy demand growth rate is higher than the global average — at 5 percent compared to 2.5 to 4 percent, according to the International Energy Agency. In Jordan, demand grew by about 4 percent per year between 2017 and 2022 and, in Qatar, it rose 4.5 percent. In Kuwait, peak demand reached a record high of approximately 17 GW in August 2023, marking a 5 percent year-on-year increase. Kuwait, despite holding 6 percent of the world’s proven oil reserves and playing a key role in global energy markets, continues to struggle with power shortages. Even Egypt, despite major expansions in power generation capacity, continues to face outages due to surging residential demand.
Moreover, electricity demand growth is uneven. For example, in Qatar in 2022, peak demand doubled compared to the previous year. The UAE’s growth rate has averaged 3 percent in the last five years but spiked to 6 percent in 2020 due to increased residential consumption during the COVID-19 pandemic. Fluctuating demand further increases costs, as additional reserve capacity is required to manage unpredictable surges.

The MENA region will remain vulnerable to blackouts, fiscal strain and environmental pressures if inefficient consumption continues.

Jessica Obeid

The rapid adoption of advanced technology, such as artificial intelligence, is further intensifying the region’s already high electricity demand.
Data centers, which are the backbone of AI, are highly energy-intensive and are currently being built across the region. Saudi Arabia, for example, is in discussions to develop a 1 GW data center in NEOM, valued at $18 billion, to position itself as a digital infrastructure hub. The electrification of sectors is another pressure point. The shift to electric vehicles is raising demand forecasts, adding new challenges for power supply and grid stability.
In fact, per capita electricity consumption in some MENA countries ranks among the highest globally. According to the International Energy Agency, Qatar, Kuwait and the UAE consumed more than 19,000, 18,000 and 16,000 kilowatt-hours per person, respectively, in 2022, placing them among the world’s top-five consumers.
Meanwhile, the MENA region accounts for nearly half of the world’s total energy consumption subsidies, placing a substantial financial burden on public budgets. Subsidies primarily cover fossil fuels but also extend to electricity, creating a double subsidy effect: first, through direct electricity subsidies, and second, through subsidies for fossil fuels used for power generation. In fact, fossil-fueled power plants generate more than 90 percent of the region’s electricity. As a result, these subsidies not only increase the strain on public budgets but also drive artificially high electricity consumption levels.
The solution to MENA’s electricity crunch is not to keep adding power generation capacity indefinitely. Instead, it is to address the root cause: inefficient consumption. Adopting a demand-side management strategy can alleviate pressure on power infrastructure and free up resources for economic diversification and social development.
A demand-side management strategy seeks to optimize electricity consumption and curb excessive use by focusing on three key areas: electricity pricing reform, behavioral incentives and smart technologies.
Pricing is one of the most pressing issues. Introducing a dynamic pricing model, such as time-of-use tariffs, where rates change based on peak and off-peak hours, can help reduce grid stress and flatten demand curves. Smart technologies and digital solutions are also effective means to reduce electricity consumption without compromising economic growth.
Deploying smart meters and AI-based demand response systems enables utilities and consumers to optimize electricity use in real time by shifting the energy consumption of nonessential appliances and systems, such as water heaters and washing machines, away from peak demand hours. Moreover, adopting smart automation systems in buildings, particularly those that optimize air-conditioning efficiency, can significantly lower energy waste.
Consumer behavior change is also a critical element of demand-side management. Public awareness campaigns, efficiency labeling and incentives for energy-saving appliances can help shift consumption habits. Countries like Saudi Arabia and the UAE have introduced mandatory efficiency standards for appliances, but broader adoption across the region is needed.
Ultimately, the MENA region will remain vulnerable to blackouts, fiscal strain and environmental pressures if inefficient consumption continues. The most viable solution is not just generating more power — it is encouraging smarter use. Elevating demand-side management to a policy priority is key to ensuring a secure and sustainable energy future.

• Jessica Obeid is the Head of Energy Transitions at SRMG Think, where she leads research on energy security, clean technology and sustainable supply chains. She has extensive experience in engineering and policy, advising governments and private sector stakeholders on energy technologies, policy and market trends.