Determining If Oil Prices Significantly Affect Renewable Energy Investment in African Countries with Energy Security Concerns

Abstract

As concerns regarding the adverse impacts of energy production and consumption on the environment grow, countries across the world are now charged with developing effective strategies that provide energy security and protect the environment. This means that efforts to generate significant investments and business opportunities to boost the growth of renewable energy need to increase rapidly. However, there are limited studies on what will facilitate the increase of renewable energy investment in Africa. The main factor considered in this study relates to the sensitivity to changes in oil prices, gross domestic product (GDP), interest rate and oil price volatility’s impact on the renewable energy investment (REI) in countries with energy security concerns and if there is any significant influence from oil price shocks. With the help of an unrestricted vector retrogressive model and an annual panel data approach that covers the period 1990–2018, this paper examines the link between renewable energy investment and three macroeconomic variables: oil prices, GDP growth-adjusted interest rates and oil price volatility. The results indicate that REI exhibited immediate positive responses to oil shocks. However, renewable energy investment continued to fluctuate negatively in response to GDP. The results also show that the REI responded positively to interest rates in Africa and it exhibited immediate negative responses to oil price volatility but became positive after the second period.

The Differential Effects of Oil Prices on the Development of Renewable Energy in Oil-Importing and Oil-Exporting Countries in Africa

“…The positive impact of oil prices on REI in oil-importing countries can be explained well by the fact that higher oil prices increase the cost of fossil fuels and make renewable energy more economically competitive. This finding is in accord with the findings of extant studies showing a positive relationship between oil prices and the development of renewable energy e.g., [19,32,38]. In oil-importing countries, where the cost of fossil fuels can be a significant burden on the economy, higher oil prices can make renewable energy sources more competitive, driving investments in clean energy technologies.…”

A nexus between renewable energy, FDI, oil prices, oil rent and CO2 emission: panel data evidence from G7 economies

“…Escalating OP should inspire families and commerce to decrease energy consumption, securing more proficient produces and shift to nonconventional power sources. (Tambari and Failler, 2020).…”

Oil Price Volatility and Equity Valuation of Listed Energy Companies in Nigeria: A Panel ARDL Model

“…The results suggested that oil price had a large and beneficial impact on both stock markets, albeit the effect was less obvious in South Africa. Using a VAR model to explain the link between prices of crude oil and investments in renewable energy in African states, Tambari and Failler, (2020) found that oil price shocks had a positive and statistically significant impact on African countries' investments in renewable energy. Daggash and Abraham (2017) discovered an identical phenomenon using the VAR Granger Causality Method.…”