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Technological Advancements and Economic Growth as Key Drivers of Renewable Energy Production in Saudi Arabia: An ARDL and VECM Analysis

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  • Faten Derouez

    (Department of Quantitative Method, College of Business Administration, King Faisal University, Al Ahsa 31982, Saudi Arabia)

Abstract

This study examines the short- and long-term effects of various economic, environmental, and policy factors on renewable energy production (REP) in Saudi Arabia from 1990 to 2024, using the Autoregressive Distributed Lag (ARDL) approach and Vector Error Correction Model (VECM) techniques. The analysis focuses on fossil fuel consumption (FFC), renewable energy investment (REI), carbon emissions (CEs), energy prices (EPs), government policies (GPs), technological advancements (TAs), socioeconomic factors (SEFs), and economic growth (EG) as determinants of REP, measured as electricity generated from solar power sources in kilowatt-hours (kWh). Short-term findings reveal a positive momentum effect, where prior REP levels significantly influence current production, driven by factors such as learning by doing, economies of scale, and consistent policy support. However, FFC negatively impacts REP, highlighting resource competition and market dynamics favoring fossil fuels. Positive short-term influences include REI, CEs, EPs, GPs, TAs, SEFs, and EG, which collectively enhance renewable energy adoption through investments, technological innovation, policy incentives, and economic development. Long-term analysis underscores a strong negative relationship between FFC and REP, with a 7503-unit decline in REP associated with increased fossil fuel dependency. Conversely, REP benefits from REI, CEs, EPs, GPs, TAs, and EG, with significant contributions from technological advancements (3769-unit increase) and economic growth (9191-unit increase). However, SEFs exhibit a slight negative impact, suggesting that rapid urbanization and population growth may outpace renewable infrastructure development. Overall, the study highlights the complex interplay of factors shaping renewable energy production, emphasizing the importance of sustained investments, supportive policies, and technological innovation, while addressing challenges posed by fossil fuel reliance and socioeconomic pressures. These insights provide valuable implications for policymakers and stakeholders aiming to accelerate the transition to renewable energy in Saudi Arabia.

Suggested Citation

  • Faten Derouez, 2025. "Technological Advancements and Economic Growth as Key Drivers of Renewable Energy Production in Saudi Arabia: An ARDL and VECM Analysis," Energies, MDPI, vol. 18(9), pages 1-16, April.
    • Handle: RePEc:gam:jeners:v:18:y:2025:i:9:p:2177-:d:1641539
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    References listed on IDEAS

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    1. Faten Derouez & Adel Ifa, 2025. "Assessing the Sustainability of Southeast Asia’s Energy Transition: A Comparative Analysis," Energies, MDPI, vol. 18(2), pages 1-24, January.
    2. Al-Ajlan, S.A. & Al Faris, H. & Khonkar, H., 2003. "A simulation modeling for optimization of flat plate collector design in Riyadh, Saudi Arabia," Renewable Energy, Elsevier, vol. 28(9), pages 1325-1339.
    3. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    4. Ali Mohammed AL-Dossary & Daeung Danny Kim, 2020. "A Study of Design Variables in Daylight and Energy Performance in Residential Buildings under Hot Climates," Energies, MDPI, vol. 13(21), pages 1-16, November.
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