How do oil prices, macroeconomic factors and policies affect the market for renewable energy?

Abstract

The aim of this study is to determine the nature of any relationship between renewable energy investment, oil prices, GDP and the interest rate, using a time series approach. We concentrate on three countries with different relationships to the renewable energy industry, with Norway and the UK being oil-exporters for most of the sample and the USA an importer. Following estimation using a VAR model, the results provide evidence of considerable heterogeneity across the countries, with the USA having a strong relationship between oil prices and renewable energy, Norway having a less pronounced relationship and the UK no relationship. These results reflect the fact that the USA is predominantly an oil-importer during most of this sample and supports renewable energy relatively less than the other countries, so changes to renewable energy investment reflect other factors in the market such as the price of substitutes to a greater extent than countries where renewable energy receives more government support. The main policy implications from this study are that in countries where there is little support for the renewable energy sector, investment will be more dependent on macroeconomic aspects as well as substitutes such as oil, therefore the authorities will need to potentially increase support when oil prices are low or when the economy is in a downturn.

Oil price shocks and renewable energy transition: Empirical evidence from net oil-importing South Asian economies

“…The overall results highlighted that the movements in oil prices were second to financial development in explaining the changes in the growth of the RE sector of China. Shah et al (2018) analyzed the impacts of oil price shocks and other macroeconomic aggregates on RE investment trends in Norway, the USA and the UK. The study utilized annual data stemming from 1960 to 2015 to perform the forecast error variance decomposition analysis within a VAR framework.…”

How the COVID-19 Crisis is Showing us the Complexities in the Global Energy Transition

“…It is premature to confirm, but current low oil and natural gas price levels (since 2014), volatility and uncertainties could be factors that may dampen the growth potential of RES. Recent results using a time-series approach indicate that oil price affects renewable energy investment in the USA and Norway, but not in the UK [24]. Moreover, Cao, Guo, and Zhang [25] provide evidence that the scale of investments of Chinese renewable energy firms (wind, solar, and biomass) is affected by oil price uncertainty.…”

“…Nevertheless, more original research, systematic reviews, and meta-analyses are needed on these topics because the role of RES on the energy mix is recent (the 2000s), and the sharp decline in oil prices is even more recent (2014-2020). Besides, in countries where there is little support for the renewable energy sector, the investment will be more dependent on macroeconomic aspects as well as substitutes such as oil [24]. Finally, there is no consensus about the impact of oil price behaviors on clean stock markets [26,27], and the effect of oil prices on green assets appears to be statistically insignificant [28].…”

The environmental and economic analysis of grid-connected photovoltaic power systems with silicon solar panels, in accord with the new energy policy in Iran

“…Comparatively low worldwide prices for coal, natural gas, and oil, keep challenging renewable energy markets, particularly in the heating and transport sectors [10,11]. Subsidies for fossil fuels, which stayed remarkably greater than renewable energy subsidies, also continued to influence renewable energy development.…”