With Climate Change Threatening, Kuwait Seeks to Secure its Energy Sector

Kuwait, a small nation endowed with approximately six percent of the world’s oil reserves, finds itself at a critical crossroads. The country’s heavy dependence on oil has not only exposed it to volatile global markets but has also left its energy infrastructure ill-prepared to meet its growing domestic electricity demand. 

Despite Kuwait’s wealth and status as a major oil exporter, its national electricity grid is buckling under the pressure of rising per-capita energy consumption, particularly during the summer months. The strain has forced Kuwait to resort to importing both liquefied natural gas (LNG) and electricity to prevent widespread outages. Yet, these temporary fixes highlight a deeper, long-standing issue: Kuwait’s needs to diversify its energy sources to avoid widespread economic and social disruption.

Lagging Behind and Paralyzed

The dilemma facing Kuwait’s policymakers is not complicated. While Kuwait must develop a more resilient and sustainable energy portfolio, state finances continue to rely heavily on oil revenue and investment income. While authorities are working to diversify revenue streams and stimulate private sector growth under the Vision 2035, or the “New Kuwait,” initiative, it is important to note that Kuwait’s progress appears to be in its early stages when compared to its Gulf Cooperation Council (GCC) counterparts. Indeed, other Gulf states like Saudi Arabia and the United Arab Emirates (UAE) have more successfully implemented robust energy diversification strategies. 

As a result, Kuwait has been a notable outlier among its peers in the Gulf. Oil exports still account for around 90 percent of government revenue, which renders the nation vulnerable to fluctuating oil prices and exposed to long-term risks from the global shift toward cleaner energy sources. Years of political instability have made matters worse, undermining the institutional stability, government mechanisms, regulations, and structures essential for facilitating a smooth shift away from an oil-driven economy. The last two decades in Kuwait have seen a staggering 25 governments, eight governments in the last four years, and three parliamentary elections in just the past two years. Moreover, the recent passing of Emir Sheikh Sabah al-Ahmed in 2020 and Emir Sheikh Nawaf Ahmed in 2023 have compounded these challenges. The accession of Sheikh Mishal Al Sabah, who is 84, does little to quell worries about stability at the highest echelons of the Kuwaiti state. According to an August 2023 consultation visit by the International Monetary Fund , political gridlock between the government and Parliament has impeded economic diversification efforts, leaving the country increasingly susceptible to climate transition risks. 

Kuwait’s unique political challenges have significant implications for its energy sector, and the domestic power sector is bearing the brunt of these delays. Stifling bureaucratic hurdles have stymied reforms in government contracting processes. Consequently, no significant capacity expansion has taken place since 2020. This lack of progress has left Kuwait with an aging energy grid that is becoming more expensive to maintain. Furthermore, there have been reported year-long delays in responding to international energy developers’ proposals to the Ministry of Electricity and Water (MEWA).

In addition to these internal factors, the power disruptions in Kuwait over the past 15 years must also be attributed to market externalities. Domestic private sector contractors primarily focus on grid and power plant maintenance, with minimal input into grid development planning and execution. Moreover, fragmented and unhelpful government regulations have deterred international investors from modernizing the grid.

Combating the Crisis

Kuwait’s energy crisis intensified in 2024 as extreme summer temperatures pushed the grid to its limits. In late August 2024, MEWA recorded its highest ever electrical load, coinciding with temperatures soaring past 50°C (122°F). In response, the government implemented temporary rolling power cuts for the first time since 2006 to alleviate the burden on the grid. Minister of Electricity, Water and Renewable Energy Mahmoud Bushehri underscored the necessity of energy conservation amid the ongoing heatwave, even as residents reported more frequent outages in 2024. 

The ramifications of this crisis are widespread. This year’s disruptions impacted six key industrial zones, three agricultural areas, and 31 residential neighborhoods. Furthermore, surging summer demand led to a shutdown of gas processing units at the Kuwait National Petroleum Company, disrupting supplies to turbines at two power plants and desalination facilities. 

In the face of such challenges, the government has taken initial steps to address the situation. MEWA has done its best to modernize the country’s power generation infrastructure and tackle deferred maintenance at its power plants. In January 2024, GE Vernova completed an upgrade at the Sabiya plant. In April, the ministry awarded a contract to a consortium led by Mitsubishi Power and HEISCO to optimize and rehabilitate eight units at the Az-Zour South Power Station. 

Additionally, Kuwait finalized a new 15-year LNG supply contract with Qatar in August, marking its second such agreement with Doha to help relieve pressure on its power generation facilities. This new deal complements Kuwait’s broader energy strategy, ensuring a reliable supply of LNG to fulfill its power generation requirements. It also aligns with the country’s sustainability goals while focusing on increase in gas production as part of its 2040 growth strategy.

Belated Steps Towards Renewable Energy

The Kuwaiti government has recently taken strides to grow the country’s green energy portfolio and to catch up with its Gulf neighbors in renewable energy adoption. For example,  Amiri Decree No. 57 of 2022 and Amiri Decree No. 20 of 2023 empower MEWA to purchase renewable energy. The government is exploring proposals to equip government buildings with solar panels. However, these plans have yet to be agreed upon, let alone widely implemented, despite years of debate. 

Similarly, MEWA is considering a project to encourage citizens to produce renewable energy by installing rooftop solar panels with plans to purchase the generated electricity at competitive rates—an initiative raised a decade ago that never came to fruition. However, Hamad Al Radhan, CEO of Kuwait-based renewable energy firm Life Energy, notes that frequent changes within government ministries and in the Cabinet have led to delays and hindered effective project execution.

Despite these challenges, in a significant development, Kuwait is looking to establish Independent Power Provider projects, whereby companies or consortia construct solar power stations to produce clean, affordable electricity. While embracing new approaches to revitalizing its energy sector, Kuwait is also looking to enhance its existing infrastructure, which once led the region. For example, the Shagaya Renewable Energy Park became fully operational in 2019. Initially, this complex—the first in the Gulf to integrate solar, wind, and solar thermal energy—outperformed expectations while placing Kuwait at the forefront of renewable energy. However, momentum behind Shagaya waned after the government relinquished control of the site to encourage private investment. This unprecedented move led to legal disputes over electricity sales to Kuwait’s sole energy supplier, resulting in years of delays and project cancellations.

Pursuing Foreign Partnerships

Kuwait’s push towards energy diversification has seen the government pursue a slew of new partnerships. Among the five consortiums shortlisted for the project to develop the previously mentioned solar project are Saudi Arabia’s ACWA Power with Alternative Energy Projects Company of Kuwait; Masdar from the UAE with Kuwait’s Fouad Alghanim & Sons; France’s EDF Renewables and Kuwait’s Al Sagar; China’s Jinko Power paired with Japan’s Jera; and France’s Total Energies Renewables collaborating with Vietnam’s Trungnam Group. The Kuwait Oil Company (KOC) recently engaged U.S.-based KBR as an advisory consultant to devise a nationwide “masterplan” for achieving 17 GW of renewables and 25 GW of green hydrogen production by 2050. 

In addition, the government has engaged in discussions with international energy firms to explore possibilities for investments in renewable energy projects, opening doors for foreign companies to participate in the development of solar and wind energy initiatives within Kuwait. For instance, Wärtsilä Corporation, a Finnish developer, has proposed building and fully finding a 1,500 MW power plant project slated for completion in 18 months, with provisions to switch to green hydrogen as a fuel source once it becomes viable. Kuwait is also in talks with Burgenland Energie of Austria to develop its clean energy sector. However, the effectiveness of these foreign partnerships remains contingent on resolving the same domestic political deadlock that has long hindered energy sector reforms.

A Critical Crossroads

In a region severely impacted by climate change, the urgency to meet energy production challenges is perhaps greater in Kuwait than elsewhere across the globe. Environmental shifts alter demand patterns, increasing the need for cooling and desalination, while also testing the resilience of the power system. Elevated temperatures, more common droughts, rising sea levels, and increasingly frequent flash floods can severely impact supply operations and reduce overall output. 

Kuwait must adapt to the new reality and build resilience before the country becomes uninhabitable. However, political instability remains a formidable obstacle. The nation has witnessed a series of parliamentary elections and government changes, including leadership transitions following the deaths of two emirs.

Ultimately, Kuwait’s efforts to diversify its energy mix must be swift and substantial if it is to safeguard its economic and energy security. Equipped with an aging energy infrastructure, the stakes are higher than ever. While Kuwait’s leadership have begun to recognize the crisis at hand, only time will tell if the government can transform aspirations into concrete change. 

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.