The demand for renewable energy is increasing globally due to concerns about climate change, pollution, and the finite nature of fossil fuel resources, as renewable energy has been recognized as a significant factor in realizing sustainable development. The government of Saudi Arabia adopted the reduction of fossil fuel subsidies policy as a financial motivation for supporting both the production and consumption of fossil fuels. Therefore, this study aims to investigate the influence and shocks of Saudi’s financial development indicators on renewable energy consumption (REC). And to examine the track of causality between financial development indicators and REC. The study covers the annual data period of 1990-2021 and applies the Basic Vector Autoregressive model (VAR), Granger causality test, forecast error variance decomposition (FEVD), and impulse response function (IRF). The results imply that the financial development indicators have a significant positive impact on REC. The results of causality between REC and financial development indicators were conflicting. The results reveal that REC variation is explained by its innovative shocks and has a positive response to shocks in financial development. Authorities can encourage investment in renewable energy consumption by providing financial incentives also the governments can foster national and international partnerships between investors, policymakers, and industry stakeholders. Employing different determinants of financial development indicators and incorporating population factors in the REC function will be highly recommended for forming the renewable energy demand in Saudi Arabia.
