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Does the increased electricity consumption (provided by capacity expansion and/or reliability improvement) cause economic growth?

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  • Shakouri, Hamed
  • Pandey, Shikhar
  • Rahmatian, Farnoosh
  • Paaso, Esa A.

Abstract

Research suggests a strong correlation between a region's electricity consumption and its economic growth. Microgrids expand cleaner electricity production, improve electricity availability/reliability/resilience, and provide a more dependable platform for technology-based economic activities. This dependability has the potential to attract more investors to the microgrid region, which may induce additional economic growth (compared to the region's historical trends). Since there is not enough statistical data to test the relationship for microgrid footprints, this paper studies the correlation between electricity and the economy to investigate whether the nexus between electricity consumption and economic growth is two-way. A brief survey indicates the existence of a clear relationship in over 75% of 317 cases reviewed. This research has also shown a tight feedback relationship between electricity and economic activity in the U.S. through a comprehensive model-based study and the Granger causality concept. Drawing on research, we infer that an improvement in electricity reliability can increase the potential for regional economic growth. A causal loop diagram (CLD) is also provided as a visual model to justify the feedback relationship.

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  • Shakouri, Hamed & Pandey, Shikhar & Rahmatian, Farnoosh & Paaso, Esa A., 2023. "Does the increased electricity consumption (provided by capacity expansion and/or reliability improvement) cause economic growth?," Energy Policy, Elsevier, vol. 182(C).
    • Handle: RePEc:eee:enepol:v:182:y:2023:i:c:s0301421523002896
    DOI: 10.1016/j.enpol.2023.113704
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    2. Wang, Yubao & Zhen, Junjie, 2024. "Regional electricity cooperation model for cost-effective electricity management with an emphasis on economic efficiency," Energy Policy, Elsevier, vol. 195(C).

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