Potential of investments into renewable energy sources

Abstract

Greening the economy requires green innovations, and innovations require investments. Most countries of the world are still relying on conventional (fossil-based) sources of energy. The transition toward green or renewable energy sources is an effective and innovative way to meet ever-increasing demand as a result of the rising population. Another reason for innovations in the field of green energy is the need to mitigate climate change and avoid pollution, especially in developing countries. The monitored investments into renewable energy sources are usually public. Therefore, this paper aims to determine whether the selected countries of the world produced renewable energy efficiently, considering the investments made by public financial institutions and installed electricity capacity for renewable energy sources, for the period 2013–2017 (for a deeper analysis, the year 2017 was chosen). For this purpose, the Stochastic Frontier Analysis model in the logarithmic form of the Cobb-Douglas production function is used, which helps to judge the competitiveness of countries based on effectively transforming the inputs into outputs. Results suggest that the effect of the first variable “installed electricity capacity” on electricity generation was highly statistically significant, and the impact of the second variable “public investments” was characterized as statistically insignificant. The monitored countries were divided into 10 groups according to the different range of estimated output-oriented technical efficiency from 0.00 to 1.00. Most countries should increase the renewable electricity generation approximately by 40-49%, given the level of inputs (16 countries of 6th group with estimated output-oriented technical efficiency 0.51-0.60) for the year 2017.