Searching for sustainable electricity generation: The possibility of substituting coal and natural gas with clean energy

Abstract

It is now a common consensus that there is a need to lessen the consumption of fossil fuels as they are the main cause of greenhouse gases. Electricity is one of the chief determinants of greenhouse gases emission as its generation is dominated by fossil fuels. Thus, it is imperative to decarbonize the electric power sector. The main objective of this work is, therefore, to examine the potentials to switch from fossil fuels to clean energy which comprises of nuclear power and the various renewable energy sources of solar energy, hydropower, wind energy, biofuels, and geothermal. Due to the unsuitability of the ordinary least squares (OLS) procedure in the face of severe multicollinearity, the ridge regression procedure was adopted to obtain the parameter estimates using the U.S. annual electricity sector data for the period 1985 to 2018. The results show that substantial substitution exists between clean energy and the fossil fuels of coal and natural gas in the U.S. electricity sector. The results also underscore the importance of energy resource in the process of economic growth and development of U.S. To fully harness the potentials of clean energy, the study recommends increased investment in each of the components of clean energy. This should be complemented with various policy instruments such as provisions of tax credits and feed-in tariffs for clean energy and imposition of tax on carbon consumption.