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Are fluctuations in production of renewable energy permanent or transitory?

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  • Hooi Hooi Lean
  • Russell Smyth

Abstract

This study examines the integration properties of total renewable energy production, as well as production of biofuels and biomass in the United States. To do so we employ Lagrange Multiplier(LM) univariate unit root tests with up to two structural breaks. We conclude that each production series contains a unit root. This result suggests that random shocks, including regulatory changes, to renewable energy production may lead to permanent departures from predetermined target levels. Furthermore, this result implies that positive shocks associated with a permanent policy stance (such as renewable portfolio standards) that increases the production of renewable energy resources will realize more in terms of positively altering the energy mix between renewable energy and energy from fossil fuels than temporary policy stances (such as investment tax credits over a predetermined time horizon).

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2012/0512areflutuationsleansmyth.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 05-12.

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Length: 28 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:mos:moswps:2012-05

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References

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Citations

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Cited by:
  1. Smyth, Russell, 2013. "Are fluctuations in energy variables permanent or transitory? A survey of the literature on the integration properties of energy consumption and production," Applied Energy, Elsevier, vol. 104(C), pages 371-378.
  2. Hooi Hooi Lean & Russell Smyth, 2012. "Will policies to promote renewable electricity generation be effective? Evidence from panel stationarity and unit root tests for 115 countries," Development Research Unit Working Paper Series 15-12, Monash University, Department of Economics.
  3. Suleyman Bolat & Murat Belke & Necati Celik, 2013. "Mean Reverting Behavior of Energy Consumption: Evidence from Selected MENA Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 3(4), pages 315 - 320.

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