This study explores the feasibility of an innovative system that combines solar energy generation with aquaculture (Solar-Powered Aquaculture Cooling and Energy System (SPACES)) in the Alhusseiniyah area of the River Alhusseiniyah in Karbala, Iraq, to address the country’s pressing water and energy scarcity problems. In addition to improving fish farming conditions by increasing oxygen levels and lowering water temperatures, the proposed SPACES utilizes solar panels to generate clean electricity. This innovative method improves water management by utilizing river surfaces to create solar power, reducing conflicts between land and water use. The study evaluates the 5 MW grid-connected system’s energy generation, economic viability, and environmental effects using RETScreen software. The results show a strong financial return with a pre-tax internal rate of return (IRR) of 44.39%, a benefit-cost ratio of 5.80, and the potential for 60.7 million cubic meters of water savings annually. These findings show how the system could improve food security, energy sustainability, and water conservation in Iraq. The innovative strategy significantly advances climate resilience and sustainable development since it not only addresses Iraq’s current resource issues but also offers a scalable model that can be applied to other regions facing similar challenges.