The Impact of Financial Development on Renewable Energy Consumption in Saudi Arabia A Quantitative Approach Using Linear Regression

Abstract

The research examines the relationship between financial development and renewable energy (RE) consumption in Saudi Arabia with a focus on Vision 2030 objectives. The country has established ambitious targets to transform its energy mix yet its renewable energy adoption remains behind major global economies. The study examines annual data from 1997 to 2015 through Ordinary Least Squares (OLS) regression models which employ concurrent and one year and two year lagged predictors to assess the effects of gross domestic product (GDP), domestic credit and foreign direct investment (FDI) on renewable energy use. The research indicates financial development affects RE adoption but its effects become more pronounced when looking at longer time periods. The two year lag model generated the most substantial results which showed domestic credit and past renewable consumption positively affecting RE growth but lagged FDI had a negative impact. The research indicates that domestic financing mechanisms need strengthening and foreign capital should be directed toward clean energy objectives to achieve sustainable energy transition. The research adds to the scarce body of knowledge about finance energy connections in oil based economies while offering useful guidance for Vision 2030 policy and investment approaches.