Renewable Energy Adoption and Its Economic Impact in Saudi Arabia: A Panel Data Approach

This study examines the impact of renewable energy (RE) capacity, RE investment, and RE share on GDP growth, renewable energy employment, and subsidy reduction in Saudi Arabia over the period 2015 to 2023. The study applies the Autoregressive Distributed Lag (ARDL) model to capture both short-run and long-run effects. This methodological approach accommodates mixed integration orders and corrects for potential endogeneity and heterogeneity, making it particularly suitable for the structural characteristics of Saudi Arabia’s transitioning economy. The empirical results reveal that RE capacity, RE investment, RE share, education index, and urbanization rate significantly and positively influence non-oil GDP growth and RE employment in both the short and long run. Additionally, RE capacity, investment, share, and education significantly enhance subsidy reduction, whereas urbanization negatively affects subsidy reform due to rising energy demand in rapidly expanding urban areas. The negative and significant error-correction term across all models confirms stable long-run equilibrium relationships. The study’s novelty lies in its integrated framework, simultaneously analyzing growth, employment, and fiscal outcomes within the context of renewable energy transition using ARDL estimation. The findings extend Energy Transition Theory, Endogenous Growth Theory, and Resource Curse Theory by positioning renewable energy as both an economic driver and a governance reform mechanism. The results have strong policy implications, suggesting that coherent investment in renewable energy, education, and urban planning can foster sustainable economic diversification under Vision 2030. This study contributes to sustainability literature by demonstrating how renewable energy expansion can accelerate inclusive growth, fiscal stability, and employment transformation in energy-dependent economies. JEL Classification: Q28, Q42, O44, H23.