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Are fluctuations in production of renewable energy permanent or transitory?

  • Hooi Hooi Lean
  • Russell Smyth

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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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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