UAE Energy Transition: Legal Issues for Renewable Energy and Clean Tech Projects

The UAE has committed over $50 billion to clean energy and set a net-zero target for 2050. That ambition has already produced some of the world's largest solar projects, the region's first nuclear power plant, and a pipeline of green hydrogen initiatives. But behind every megawatt of new capacity sits a legal structure that determines who bears the risk, who gets paid, and what happens when things go wrong.

For project developers, investors, EPC contractors, and corporate buyers, the legal framework for renewable energy in the UAE is not contained in a single law. It is a patchwork of emirate-level procurement regimes, a new federal climate law with mandatory reporting obligations, utility-specific regulations for distributed generation, and standard-form construction contracts adapted for energy projects. Getting one of these wrong can stall a project, trigger regulatory penalties, or create exposures that surface years after commercial operation.

This article covers the legal issues that matter most across the UAE renewable energy and clean tech sector, from utility-scale procurement to rooftop solar, from the new Climate Change Law to the emerging carbon credit market.

How utility-scale projects are procured

The UAE does not have a single electricity market. Each emirate controls its own power sector, and the procurement frameworks differ between Abu Dhabi and Dubai.

Abu Dhabi: the IPP model

Abu Dhabi's independent power producer (IPP) framework, established under Abu Dhabi Law No. 2 of 1998, is the most developed in the region. The Emirates Water and Electricity Company (EWEC) acts as the sole buyer, procuring generation capacity through competitive tenders. Private developers bid on the basis of a levelised tariff (cents per kilowatt-hour), and the winning bidder enters into a long-term power purchase agreement (PPA), typically 25 to 30 years.

The "Abu Dhabi model" has delivered some of the world's lowest solar tariffs. The 2GW Al Dhafra solar PV plant, inaugurated in 2023, was at the time the largest single-site solar project globally. EWEC awarded the 1.5GW Al Ajban solar PV project in 2024, with commercial operation expected before the end of 2026.

Key legal features of Abu Dhabi utility-scale PPAs include:

• Government offtake. EWEC's purchase obligation is backed by the Abu Dhabi government, providing bankable credit support for project finance. Lenders treat this as quasi-sovereign risk.
• Tariff structure. The tariff is typically split into a capacity payment (covering fixed costs and debt service) and an energy payment (covering variable costs). This de-risks revenue for the developer.
• Land and grid connection. The government typically provides the project site and grid connection infrastructure. Land risk sits with the government, not the developer.
• Change in law. PPAs include change-in-law provisions that allow tariff adjustments if new legislation materially affects project economics. Given the pace of regulatory change in the UAE (including corporate tax, climate law, and labour regulations), these clauses require careful review.
• Dispute resolution. Typically ICC arbitration with an Abu Dhabi seat. Government entities in the UAE generally prefer local arbitration seats but accept international institutional rules. The choice of arbitration institution and clause drafting matters: a poorly drafted clause can create jurisdictional disputes before the substantive issue is even addressed.

Dubai: DEWA's procurement framework

Dubai's IPP regime operates under Dubai Law No. 6 of 2011. The Dubai Electricity and Water Authority (DEWA) procures renewable energy capacity through competitive tenders, primarily for the Mohammed bin Rashid Al Maktoum (MBR) Solar Park, which has a target capacity of 5GW.

The MBR Solar Park has been developed in phases: Phase VI, a 1,800MW solar PV project awarded to Masdar, is scheduled to become operational in stages through 2026. DEWA is also procuring a 250MW pumped-storage hydroelectric project at Hatta, expected to be operational in 2026.

Dubai's PPA structure mirrors Abu Dhabi's in its core features (long-term offtake, government-backed credit, competitive tariff), but the regulatory framework is less codified. Developers should pay attention to DEWA-specific technical standards and grid connection requirements, which are issued as DEWA regulations rather than emirate-level legislation.

What developers and investors should watch

Regardless of the emirate, utility-scale renewable energy PPAs in the UAE share common legal pressure points:

Termination and step-in rights. Project finance lenders require direct agreements with the government offtaker, giving them step-in rights if the developer defaults. The structure of these direct agreements, including cure periods and lender consent requirements, is a key negotiation point.

Force majeure and political risk. While the UAE is politically stable, force majeure provisions must address supply chain disruption, sanctions risk (relevant for equipment sourced from certain jurisdictions), and extreme weather events. The April 2024 flooding in the UAE, the heaviest rainfall in over 70 years, highlighted infrastructure vulnerability that was previously considered theoretical.

Performance guarantees. Solar PPAs include performance ratio guarantees and degradation curves. If the plant underperforms, the developer faces liquidated damages or tariff adjustments. The EPC contract must flow these obligations down to the contractor, which requires careful alignment between the PPA and the EPC agreement.

For guidance on how EPC contract risk allocation works in energy projects, including performance guarantee structures, see our comparison of FIDIC and bespoke contracts.

The Climate Change Law: Federal Decree-Law No. 11 of 2024

The most significant legal development for the UAE energy sector in 2024 was not a power sector regulation. It was the Climate Change Law.

Federal Decree-Law No. 11 of 2024 on the Reduction of Climate Change Effects came into force on 30 May 2025. Full compliance is required by 30 May 2026. It applies to every public and private sector entity operating in the UAE, including those in free zones.

This is the first binding climate legislation in the MENA region. It transforms emissions management from a voluntary corporate initiative into a legal obligation with enforcement teeth.

What the law requires

Emissions measurement and reporting. All entities must measure, report, and verify their Scope 1 (direct) and Scope 2 (indirect) greenhouse gas emissions using internationally recognised standards, specifically the GHG Protocol and ISO 14064. The Ministry of Climate Change and Environment (MOCCAE) oversees implementation through a Measurement, Reporting and Verification (MRV) platform.

Emissions reduction plans. Reporting alone is not sufficient. Entities must develop and implement evidence-based strategies to actively reduce their carbon footprint. The law does not specify universal reduction targets, but the Cabinet will set annual sector-specific reduction targets for energy, infrastructure, waste management, and other sectors.

Climate risk assessments. Entities must assess their exposure to climate-related risks and implement adaptation plans. This requirement connects to corporate governance: Article 14 of the law encourages the appointment of climate officers and mandates climate-related staff training.

Large emitter registration. Companies emitting 0.5 million metric tonnes or more of CO2 equivalent annually (Scope 1 and 2) must register with the National Register for Carbon Credits (NRCC), established under Cabinet Resolution No. 67 of 2024. This captures most oil and gas operators, power generators, heavy manufacturers, and large industrial facilities.

Penalties

Administrative fines range from AED 50,000 to AED 2 million for first offences. Repeat violations within two years face doubled penalties. For a company with significant UAE operations, the reputational and operational consequences of non-compliance may exceed the fine itself: regulatory scrutiny, potential procurement disqualification, and investor due diligence flags.

Why this matters for renewable energy

The Climate Change Law creates legal demand for renewable energy procurement. Companies that previously treated sustainability as a branding exercise now face mandatory reduction obligations. Procuring renewable energy, whether through rooftop solar, corporate PPAs (where available), or I-REC certificates, becomes a compliance tool rather than a voluntary choice.

For entities operating across multiple sectors, the Climate Change Law intersects with corporate tax obligations (particularly around capital expenditure on clean energy assets), ESG reporting requirements for listed companies and regulated financial institutions, and broader ESG compliance obligations for private companies that were previously voluntary.

Carbon credits and the National Register

The Climate Change Law's carbon market provisions deserve separate attention, because they create both obligations and commercial opportunities.

The National Register for Carbon Credits (NRCC)

Cabinet Resolution No. 67 of 2024 established the NRCC under MOCCAE's oversight. The register facilitates the issuance, tracking, and trading of carbon credits. The UAE Securities and Commodities Authority (SCA) is developing licensed trading platforms.

This is not a full cap-and-trade system like the EU Emissions Trading System. The UAE's approach is closer to an offset-based model: entities can purchase carbon credits to offset unavoidable emissions, and entities that outperform reduction targets can generate and sell surplus credits.

Legal issues in carbon credit transactions

The carbon credit market in the UAE is in its early stages, but the legal framework is taking shape. Key issues for participants include:

Credit quality and verification. The NRCC will establish verification standards. Until implementing regulations are finalised, entities purchasing credits should confirm additionality (the project would not have happened without carbon finance), permanence (the emission reduction is not easily reversed), and the absence of double-counting.

Contractual structure. Carbon credit purchase agreements need to address delivery risk (the project may not generate the expected credits), price adjustment mechanisms, vintage requirements (the age of the credits), and warranties about the credits' eligibility under UAE law.

Cross-border recognition. The NRCC operates under Article 6 of the Paris Agreement, which governs international carbon market mechanisms. Whether UAE-issued credits will be recognised by EU, UK, or other jurisdictions for compliance purposes remains to be clarified. Companies with multinational operations should not assume fungibility.

Tax treatment. The corporate tax treatment of carbon credit income and expenses under Federal Decree-Law No. 47 of 2022 (the Corporate Tax Law) is not yet fully addressed in published guidance. Revenue from credit sales may be taxable, and the deductibility of credit purchases as an operating expense will depend on the entity's specific circumstances.

Distributed solar and rooftop generation

Not every renewable energy project is a utility-scale megaproject. Distributed solar, primarily rooftop installations, is a growing segment. But the regulatory framework imposes significant constraints that developers and building owners must understand.

Dubai: Shams Dubai (net metering)

DEWA launched the Shams Dubai programme in 2015 to encourage rooftop solar installation. The programme operates on a net metering basis: surplus electricity generated by the customer's solar panels is exported to the grid and credited against their electricity bill at the retail tariff rate.

Key regulatory constraints:

• DEWA approval required. No person or entity may connect a solar facility to the distribution system without DEWA's prior consent, subject to the requirements of Resolution 46.
• Rooftop only. Ground-mounted solar projects are no longer permitted under Shams Dubai. DEWA eliminated this option in 2020.
• Capacity cap. The maximum PV capacity per plot is capped at approximately 1-2 MW, depending on the customer's total connected load.
• No wheeling. Dubai does not permit wheeling, which means a solar generator cannot sell electricity through the grid to a third-party consumer at a different location. Solar generation must be consumed on-site or exported to DEWA under net metering.

Abu Dhabi

Abu Dhabi Distribution Company (ADDC) and Al Ain Distribution Company (AADC) operate similar distributed solar programmes, though the regulatory details differ from DEWA's Shams Dubai.

Legal issues for building owners and tenants

Lease implications. If a tenant wants to install rooftop solar on a leased property, the lease must permit it. Many commercial leases in the UAE are silent on rooftop installations. Landlords may resist because of structural concerns, aesthetic impact, or the question of what happens to the panels when the lease expires.

Community management restrictions. In strata-titled buildings and managed communities, owners' association approval is typically required. Master community declarations may restrict rooftop installations entirely.

Insurance. Rooftop solar systems need to be covered under the building's property insurance or a separate policy. Standard building insurance policies may not cover solar equipment or may exclude damage to the building caused by the installation.

Contractor selection. Under Shams Dubai, the installation must be carried out by a DEWA-approved contractor. Building owners should ensure the installation contract addresses performance warranties, defect liability, and ongoing maintenance obligations.

Green hydrogen: regulation still developing

The UAE's National Hydrogen Strategy positions the country as a major producer of green and low-carbon hydrogen. The strategy sits alongside the existing oil and gas regulatory framework, with ADNOC playing a central role in both hydrocarbon operations and hydrogen development. Under the Masdar partnership, ADNOC holds the leading role in Masdar's hydrogen business (43% stake), with Mubadala (33%) and TAQA (24%).

DEWA is piloting hydrogen projects, and Abu Dhabi is exploring export-oriented hydrogen production for European and Asian markets. However, the legal framework for hydrogen has not kept pace with the commercial ambition.

What exists

There is no dedicated UAE hydrogen law. Production, transportation, and sale of hydrogen are governed by general industrial licensing, environmental regulations, and emirate-level utility frameworks. The National Hydrogen Strategy identified the development of a regulatory framework as a priority enabler for the period 2023 to 2025, and work is underway, but a dedicated legal regime has not yet been published.

Key legal gaps

Production licensing. There is no specific licensing regime for hydrogen production facilities. Developers rely on general industrial and environmental permits, which were not designed for hydrogen-specific risks (high-pressure storage, flammability, water consumption).

Transportation and pipeline regulation. Existing pipeline regulations cover oil and gas, not hydrogen. If hydrogen is to be blended into natural gas networks or transported via dedicated pipelines, new regulations will be needed.

Export certification. For green hydrogen exports to the EU, the product must meet the EU's Renewable Energy Directive (RED III) requirements, including additionality, temporal correlation, and geographic correlation between the electrolyser and the renewable energy source. This means the PPA structure underpinning the hydrogen plant must be designed to satisfy EU certification requirements, not just UAE domestic standards.

Offtake agreements. Hydrogen offtake agreements are not standardised. Unlike power PPAs, which have well-established templates in the UAE market, hydrogen purchase agreements require bespoke drafting to address product specification (purity, pressure), delivery point, price indexation, take-or-pay obligations, and force majeure.

Companies considering hydrogen investments in the UAE should structure their contracts to accommodate regulatory change, because the framework will evolve significantly as implementing rules are issued. Change-in-law provisions and regulatory review mechanisms in project agreements are not optional in this space.

Corporate PPAs and direct procurement: the structural gap

In many jurisdictions, corporate power purchase agreements allow companies to contract directly with renewable energy generators. A technology company in Europe or the US can sign a 10-year PPA with a wind or solar developer and claim the renewable energy attributes for its Scope 2 emissions reporting.

This is not straightforward in the UAE.

The absence of wheeling in Dubai means a corporate buyer cannot purchase electricity from an off-site renewable generator through the grid. In Abu Dhabi, limited C&I frameworks exist, but they are not as developed as in mature markets.

Current options for UAE-based companies seeking to procure renewable energy include:

• Rooftop self-generation under Shams Dubai or equivalent Abu Dhabi programmes (capacity-limited)
• Green tariff programmes offered by certain utilities (check availability with DEWA/EWEC)
• International Renewable Energy Certificates (I-RECs) purchased on the voluntary market (these unbundle the environmental attribute from the physical electricity, allowing companies to claim renewable energy use for reporting purposes)
• Behind-the-meter installations on company-owned properties (subject to utility approval and grid connection rules)

The gap between corporate demand for renewable energy procurement (driven by the Climate Change Law, ESG commitments, and supply chain requirements from international customers) and the available legal structures creates a market that is likely to see regulatory development in the near term.

EPC and construction contracts for renewable energy projects

Renewable energy projects in the UAE are built under construction contracts that share DNA with traditional infrastructure projects, but carry sector-specific risks that standard forms do not always address.

Contract form

FIDIC Yellow Book (design-and-build) is common for solar projects where the contractor designs and constructs the plant. FIDIC Silver Book (EPC/turnkey) is used where the developer wants to transfer maximum risk to the contractor, particularly on projects with a single point of responsibility for performance.

For a detailed comparison of how these forms allocate risk in the UAE, see our article on FIDIC vs bespoke construction contracts.

Sector-specific risks

Performance ratio guarantees. Solar EPC contracts include guaranteed performance ratios (the ratio of actual energy output to theoretical output). If the plant underperforms, the contractor faces liquidated damages. The measurement methodology, test conditions, weather data sources, and degradation assumptions must be defined precisely in the contract. Ambiguity here generates disputes years after commercial operation.

Technology risk. Battery energy storage systems (BESS) and concentrated solar power (CSP) carry technology risks that differ from proven solar PV. Warranty structures, performance testing regimes, and long-term service agreements for specialist equipment (turbines, inverters, battery management systems) need separate treatment.

Grid connection delay. The contractor builds the plant, but the utility provides the grid connection. If the grid connection is delayed, who bears the cost? Under most EPCs, the developer retains this risk, but the contractor may have prolongation claims if the delay affects its construction programme.

Land access and permitting. On utility-scale projects, the government typically provides the site. On distributed or commercial projects, land access depends on lease terms, zoning approvals, and (in some cases) environmental impact assessments. Permitting delays are a common source of claims. Our construction law team regularly advises on delay and disruption claims arising from permitting issues on energy projects.

For broader guidance on managing construction contract risk during the pre-contract stage, including how to structure performance guarantees and liquidated damages provisions for energy projects, see our construction risk management guide.

For guidance on managing performance bonds and guarantees in energy EPC contracts, including advance payment guarantees and retention bonds, see our commercial contracts guide.

Project finance and bankability

Most utility-scale renewable energy projects in the UAE are project-financed, meaning the debt is secured against the project's cashflows and assets rather than the developer's balance sheet. The legal structure must satisfy lender requirements, which are extensive.

Security package. Lenders require a share pledge over the project company, assignment of all project agreements (PPA, EPC, O&M), assignment of insurance proceeds, and direct agreements with the government offtaker and the EPC contractor. The direct agreement gives the lender step-in rights if the developer fails to perform.

Government support. The bankability of UAE renewable energy projects rests heavily on government offtake commitments. EWEC's and DEWA's purchase obligations, backed by government credit, are what make these projects financeable at competitive rates. Without government offtake, project finance for UAE renewable energy is significantly more difficult.

Insurance. Projects need construction all-risks (CAR) insurance during construction, operational all-risks during the PPA term, business interruption cover, and (in some cases) political risk insurance. Insurance requirements in the UAE energy sector have tightened, particularly around natural catastrophe coverage following the 2024 flooding.

Assignment restrictions. UAE law requires consent for the assignment of contractual rights. The PPA and EPC contract must contain express assignment provisions permitting collateral assignment to lenders. Without these, the security package is incomplete.

For buyers conducting due diligence on renewable energy acquisitions, the PPA terms, EPC warranty survival, land rights, and permit status are the critical items. A plant that is generating electricity does not mean the legal structure is clean.

Regulatory framework by emirate

What to do now

The UAE renewable energy legal framework is evolving quickly. The Climate Change Law creates immediate compliance obligations. The carbon credit market is being built. Hydrogen regulation is coming. Corporate PPA structures may open up as demand grows.

For project developers, the priority is ensuring that PPAs, EPC contracts, and financing documents are structured to handle regulatory change, because the framework will not stay static.

For corporate buyers, the priority is understanding what the Climate Change Law requires by 30 May 2026 and building the procurement, reporting, and governance systems to comply. The key regulatory changes affecting UAE companies in 2026 extend well beyond the energy sector, but the climate law is among the most operationally significant.

For investors considering renewable energy assets, due diligence must go beyond financial returns. The legal structure of the project, the PPA terms, the EPC warranty position, the land rights, and the regulatory approvals are what determine whether the investment is protected.

Kayrouz & Associates' energy law team advises project developers, investors, EPC contractors, and corporate buyers on all aspects of renewable energy and clean tech transactions in the UAE. We work across Abu Dhabi and Dubai on PPA negotiations, EPC contract review, regulatory compliance, and dispute resolution. For advice on a specific project or compliance question, contact our team.

FAQ

What laws regulate renewable energy projects in the UAE? There is no single federal renewable energy law. The framework combines emirate-level IPP laws (Abu Dhabi Law No. 2 of 1998, Dubai Law No. 6 of 2011), the federal Climate Change Law (Federal Decree-Law No. 11 of 2024), utility-specific regulations (DEWA Resolution 46, RSB Renewables Standards), and general commercial and construction law. Federal corporate tax law also applies to project revenues and carbon credit transactions.

Can a private company sell electricity directly to consumers in the UAE? Not under current law. Electricity generation and distribution remain state-controlled. Utility-scale generators sell to EWEC (Abu Dhabi) or DEWA (Dubai) under long-term PPAs. Distributed solar operates under net metering (surplus exported to the grid at the retail rate). Wheeling, which would allow off-site generation and direct sale, is not available in Dubai and is only limited in Abu Dhabi.

What are the penalties under the UAE Climate Change Law? Administrative fines range from AED 50,000 to AED 2 million for first offences. Penalties double for repeat violations within two years. All entities, including those in free zones, must comply by 30 May 2026. Companies emitting 0.5 million tonnes or more of CO2 equivalent annually face an earlier registration deadline with the National Register for Carbon Credits.

Is there a carbon trading market in the UAE? The National Register for Carbon Credits (NRCC) has been established under Cabinet Resolution No. 67 of 2024. MOCCAE oversees the register, and the Securities and Commodities Authority is developing licensed trading platforms. The system is offset-based rather than a full cap-and-trade regime. Entities that exceed reduction targets can sell surplus credits; those below target can purchase credits to offset emissions.

What contract form is used for UAE solar EPC projects?FIDIC Yellow Book (design-and-build) is common for solar PV projects. FIDIC Silver Book (EPC/turnkey) is used where the developer wants single-point contractor responsibility for performance. Particular Conditions are always required to address solar-specific issues: performance ratio guarantees, degradation curves, grid connection risk, and technology warranties. Abu Dhabi Government Conditions of Contract apply to public-sector projects in Abu Dhabi.

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