China Energy Engineering Corp Ltd announced on Tuesday it had inked a $972 million deal for a major photovoltaic project in Saudi Arabia, marking a significant step as the Middle East nation becomes a key investment destination for Chinese solar power equipment manufacturers, spurred by its commitment to green energy initiatives.

The project — the Saudi Arabia PIF Phase IV Haden 2GW Photovoltaic Project — was signed by a consortium of three subsidiaries of China Energy and a project company established by Saudi Arabia's ACWA Power, the Public Investment Fund, and Saudi Aramco Power Co.

China Energy said the project is expected to commence commercial operations by early 2027. Upon completion, it is projected to generate approximately 156 billion kilowatt-hours of electricity in 25 years, reducing carbon dioxide emissions by nearly 147 million metric tons, thereby contributing to Saudi Arabia's goal of achieving net-zero emissions by 2060.

Saudi Arabia also vowed to increase the share of renewable energy to 50 percent by 2030, and attract 20 gigawatts of renewable energy projects annually starting in 2024 to reach 130 GW by 2030.

The immense market potential is turning Saudi Arabia into a hot spot for PV investment. The China Photovoltaic Industry Association said that in the first half, the total export value of China's PV products reached $18.67 billion, with modules accounting for about 87 percent. The Saudi Arabian market, in particular, saw significant growth, becoming China's fifth-largest export market for modules in the first half, up from outside the top 10 in the same period last year.

It's not just Saudi Arabia. Other Middle East countries are also setting ambitious energy transition goals, increasing investment in new energy sources and reducing their reliance on traditional fossil fuels.

InfoLink Consulting said solar demand in the Middle East is expected to increase from 20.5-23.6 GW in 2023 to 29-35 GW in 2027, with significant demand growth expected in Turkiye, the United Arab Emirates and Saudi Arabia.

Major solar product manufacturers such as Jinko Solar, GCL Technology and Trina Solar have announced investment plans in the Middle East, spanning polysilicon, battery modules, auxiliary materials and more. Experts said that a complete photovoltaic industry chain is taking shape in the Middle East, with Chinese companies having a major presence.

"The Middle East region has abundant sunlight resources and low solar power generation costs. The economic and population growth in the Middle East has driven up electricity demand. Combined with the climate impact of fossil fuels and decreasing costs of photovoltaic projects, many countries are actively promoting energy transitions, buoying high PV demand," said Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University.

At the same time, record-low module prices are squeezing profit margins across the solar supply chain in the domestic market, while trade barriers are increasingly intensifying in major markets like Europe and the United States. This is another reason why Chinese companies are expanding into emerging markets like the Middle East, he said.

A report by Sinolink Securities said that to promote PV installations, Saudi Arabia, the UAE, Turkiye and other regions have successively launched renewable energy projects' tendering plans, which are expected to drive continued growth in PV installations.

The Middle East Solar Industry Association said that between 2011 and 2023, a total of 35 GW of PV tenders were issued in the Middle East, of which 10 GW are already operational.

Since the beginning of the year, Saudi Arabia has tendered 6.7 GW of solar and wind renewable energy projects and plans to increase tenders before the year ends to meet its annual goal of tendering 20 GW, which business insiders said will open greater room for PV installations and more opportunities for Chinese manufacturers.