Renewable energy generation in ASEAN: The influence of economic factors, infrastructure, and governance quality

Saizal Pinjaman, Mcxin Tee, Wong Sing Yun, Debbra Toria Nipo, Fei Zhou, Liangyan Lu

Article ID: 5245
Vol 8, Issue 8, 2024

VIEWS - 131 (Abstract) 84 (PDF)

Abstract


This paper examines the relationship between renewable energy (RE) generation, economic factors, infrastructure, and governance quality in ASEAN countries. Based on the Fixed Effects regression model on panel data spanning the years 2002–2021, results demonstrate that domestic capital investment, foreign direct investment, governance effectiveness, and crude oil price exhibit an inverse yet significant relationship with RE generation. An increase in those factors will lead to a decline in RE generation. Meanwhile, economic growth and infrastructure have a positive relationship, which implies that these factors act as stimulants for RE generation in the region. Hence, it is advisable to prioritise policies that foster economic growth, including offering tax breaks specifically for RE projects. Additionally, it’s crucial to streamline governance processes to facilitate infrastructure conducive to RE generation, along with investing in RE infrastructure. This could be achieved by establishing one-stop centres for consolidating permitting processes, which would streamline the often-bureaucratic process. However, given the extensive time period covered, future research should examine the short-term relationship between the variables to address any potential temporal trends between the factors and RE generation.


Keywords


renewable energy; developing countries; energy policy; energy development; ASEAN countries; economic factors; infrastructure; governance quality

Full Text:

PDF


References


AlDarraji, H. H. M., Bakir, A. (2020). The impact of renewable energy investment on economic growth. Journal of Social Sciences (COES&RJ-JSS), 9(2), 234–248.

Allison, P. D. (2005). Fixed effects regression methods for longitudinal data using SAS. Available online: https://statisticalhorizons.com/wp-content/uploads/FixedEffects_PaulAllison.pdf (accessed on 13 January 2024).

Awan, A., Abbasi, K. R., Rej, S., et al. (2022). The impact of renewable energy, internet use and foreign direct investment on carbon dioxide emissions: A method of moments quantile analysis. Renewable Energy, 189, 454–466. https://doi.org/10.1016/j.renene.2022.03.017

Baltagi, B. H. (2008). Econometric analysis of panel data. Chichester: Wiley, 4, 135–145.

Bamati, N., & Raoofi, A. (2020). Development level and the impact of technological factor on renewable energy production. Renewable Energy, 151, 946–955. https://doi.org/10.1016/j.renene.2019.11.098

Best, R. (2017). Switching towards coal or renewable energy? The effects of financial capital on energy transitions. Energy Economics, 63, 75–83. https://doi.org/10.1016/j.eneco.2017.01.019

Breusch, T. S., & Pagan, A. R. (1980). The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics. The Review of Economic Studies, 47(1), 239. https://doi.org/10.2307/2297111

Chen, C., Pinar, M., & Stengos, T. (2021). Determinants of renewable energy consumption: Importance of democratic institutions. Renewable Energy, 179, 75–83. https://doi.org/10.1016/j.renene.2021.07.030

De Hoyos, R. E., & Sarafidis, V. (2006). Testing for Cross-Sectional Dependence in Panel-Data Models. The Stata Journal: Promoting Communications on Statistics and Stata, 6(4), 482–496. https://doi.org/10.1177/1536867x0600600403

Djellouli, N., Abdelli, L., Elheddad, M., et al. (2022). The effects of non-renewable energy, renewable energy, economic growth, and foreign direct investment on the sustainability of African countries. Renewable Energy, 183, 676–686. https://doi.org/10.1016/j.renene.2021.10.066

Dossou, T. A. M., Ndomandji Kambaye, E., Asongu, S. A., et al. (2023). Foreign direct investment and renewable energy development in sub-saharan Africa: Does governance quality matter? Renewable Energy, 219, 119403. https://doi.org/10.1016/j.renene.2023.119403

Driscoll, J. C., & Kraay, A. C. (1998). Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data. Review of Economics and Statistics, 80(4), 549–560. https://doi.org/10.1162/003465398557825

Drukker, D. M. (2003). Testing for Serial Correlation in Linear Panel-data Models. The Stata Journal: Promoting Communications on Statistics and Stata, 3(2), 168–177. https://doi.org/10.1177/1536867x0300300206

Fang, J., Gozgor, G., Mahalik, M. K., et al. (2022). Does urbanisation induce renewable energy consumption in emerging economies? The role of education in energy switching policies. Energy Economics, 111, 106081. https://doi.org/10.1016/j.eneco.2022.106081

Fatima, N., Li, Y., Ahmad, M., et al. (2021). Factors influencing renewable energy generation development: a way to environmental sustainability. Environmental Science and Pollution Research, 28(37), 51714–51732. https://doi.org/10.1007/s11356-021-14256-z

Furuoka, F. (2017). Renewable electricity consumption and economic development: New findings from the Baltic countries. Renewable and Sustainable Energy Reviews, 71, 450–463. https://doi.org/10.1016/j.rser.2016.12.074

Ghorashi, A. H., & Maranlou, H. (2021). Essential infrastructures and relevant policies for renewable energy developments in oil-rich developing countries: Case of Iran. Renewable and Sustainable Energy Reviews, 141, 110839. https://doi.org/10.1016/j.rser.2021.110839

Ghosh, S., Adebayo, T. S., Abbas, S., et al. (2023). Harnessing the roles of renewable energy, high tech industries, and financial globalization for environmental sustainability: Evidence from newly industrialized economies. Natural Resources Forum. https://doi.org/10.1111/1477-8947.12356

Giroud, A. (2024). World Investment Report 2023: Investing in sustainable energy for all. Journal of International Business Policy, 7(1), 128–131. https://doi.org/10.1057/s42214-023-00178-9

Greene, W. H. (1999). Econometric analysis, 4th ed. Prentice Hall.

Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251. https://doi.org/10.2307/1913827

Hsiao, C. (2007). Panel data analysis—advantages and challenges. TEST, 16(1), 1–22. https://doi.org/10.1007/s11749-007-0046-x

IEA Energy Papers. (n.d.). https://doi.org/10.1787/20792581

International Energy Agency. (2023). ASEAN renewables: opportunities and challenges. Available online: https://www.imperial.ac.uk/business-school/faculty-research/research-centres/centre-climate-finance-investment/research/asean-renewables-challenges-and-opportunities/ (accessed on 9 January 2024).

International Renewable Energy Agency. (2016). Renewable energy benefits: Measuring the economics. Available online: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2016/IRENA_Measuring-the-Economics_2016.pdf (accessed on 6 January 2024).

Islam, Md. M., Ali, Md. I., Ceh, B., et al. (2022). Renewable and non-renewable energy consumption driven sustainable development in ASEAN countries: do financial development and institutional quality matter? Environmental Science and Pollution Research, 29(23), 34231–34247. https://doi.org/10.1007/s11356-021-18488-x

Islam, Md. M., Irfan, M., Shahbaz, M., et al. (2022). Renewable and non-renewable energy consumption in Bangladesh: The relative influencing profiles of economic factors, urbanization, physical infrastructure and institutional quality. Renewable Energy, 184, 1130–1149. https://doi.org/10.1016/j.renene.2021.12.020

Jaiswal, K. K., Chowdhury, C. R., Yadav, D., et al. (2022). Renewable and sustainable clean energy development and impact on social, economic, and environmental health. Energy Nexus, 7, 100118. https://doi.org/10.1016/j.nexus.2022.100118

Jalil, A., & Feridun, M. (2014). Energy-driven economic growth: Energy consumption-economic growth nexus revisited for China. Emerging Markets Finance and Trade, 50(5), 159–168.

Jin, T., & Kim, D. (2023). The role of renewable energy in hedging against oil price risks: A study of OECD net oil importers. Renewable Energy, 218, 119325. https://doi.org/10.1016/j.renene.2023.119325

Jochmans, K. (2020). Testing for correlation in error‐component models. Journal of Applied Econometrics, 35(7), 860–878. https://doi.org/10.1002/jae.2796

Karki, S. K., Mann, M. D., & Salehfar, H. (2005). Energy and environment in the ASEAN: challenges and opportunities. Energy Policy, 33(4), 499–509. https://doi.org/10.1016/j.enpol.2003.08.014

Khan, A., Chenggang, Y., Hussain, J., et al. (2021). Impact of technological innovation, financial development and foreign direct investment on renewable energy, non-renewable energy and the environment in belt & Road Initiative countries. Renewable Energy, 171, 479–491. https://doi.org/10.1016/j.renene.2021.02.075

Khuong, P. M., McKenna, R., & Fichtner, W. (2019). Analyzing drivers of renewable energy development in Southeast Asia countries with correlation and decomposition methods. Journal of Cleaner Production, 213, 710–722. https://doi.org/10.1016/j.jclepro.2018.12.192

Koengkan, M., Fuinhas, J. A., & Santiago, R. (2020). The relationship between CO2 emissions, renewable and non-renewable energy consumption, economic growth, and urbanisation in the Southern Common Market. Journal of Environmental Economics and Policy, 9(4), 383–401. https://doi.org/10.1080/21606544.2019.1702902

Ku Azman Shah, K. N. A., Mohd Yusop, M. Z., Rohani, J. M., et al. (2021). Solar and biomass potential of renewable energy in selected ASEAN countries and Japan. Journal of Physics: Conference Series, 2053(1), 012018. https://doi.org/10.1088/1742-6596/2053/1/012018

Kumaran, V. V., Ridzuan, A. R., Khan, F. U., et al. (2020). An empirical analysis of factors affecting renewable energy consumption in association of southeast Asian nations-4 countries. International Journal of Energy Economics and Policy, 10(2), 48–56. https://doi.org/10.32479/ijeep.8142

Lee, C. C., Chen, M. P., & Yuan, Z. (2023). Is information and communication technology a driver for renewable energy? Energy Economics, 124, 106786. https://doi.org/10.1016/j.eneco.2023.106786

Lidula, N. W. A., Mithulananthan, N., Ongsakul, W., et al. (2007). ASEAN towards clean and sustainable energy: Potentials, utilization and barriers. Renewable Energy, 32(9), 1441–1452. https://doi.org/10.1016/j.renene.2006.07.007

Lin, B., & Omoju, O. E. (2017). Focusing on the right targets: Economic factors driving non-hydro renewable energy transition. Renewable Energy, 113, 52–63. https://doi.org/10.1016/j.renene.2017.05.067

Mahmood, H., Tanveer, M., & Furqan, M. (2021). Rule of Law, Corruption Control, Governance, and Economic Growth in Managing Renewable and Nonrenewable Energy Consumption in South Asia. International Journal of Environmental Research and Public Health, 18(20), 10637. https://doi.org/10.3390/ijerph182010637

Malik, I. A., Siyal, G.-A., Bin Abdullah, A., et al. (2014). Turn on the lights: Macroeconomic factors affecting renewable energy in Pakistan. Renewable and Sustainable Energy Reviews, 38, 277–284. https://doi.org/10.1016/j.rser.2014.05.090

Marques, A. C., Fuinhas, J. A., & Pereira, D. S. (2019). The dynamics of the short and long-run effects of public policies supporting renewable energy: A comparative study of installed capacity and electricity generation. Economic Analysis and Policy, 63, 188–206. https://doi.org/10.1016/j.eap.2019.06.004

Mejdoub, H., & Ghorbel, A. (2018). Conditional dependence between oil price and stock prices of renewable energy: a vine copula approach. Economic and Political Studies, 6(2), 176–193. https://doi.org/10.1080/20954816.2018.1463600

Mrabet, Z., Alsamara, M., Saleh, A. S., et al. (2019). Urbanization and non-renewable energy demand: A comparison of developed and emerging countries. Energy, 170, 832–839. https://doi.org/10.1016/j.energy.2018.12.198

Narayan, S. (2016). Predictability within the energy consumption–economic growth nexus: Some evidence from income and regional groups. Economic Modelling, 54, 515–521. https://doi.org/10.1016/j.econmod.2015.12.037

Ndlovu, V., & Inglesi-Lotz, R. (2020). The causal relationship between energy and economic growth through research and development (R&D): The case of BRICS and lessons for South Africa. Energy, 199, 117428. https://doi.org/10.1016/j.energy.2020.117428

Okumus, I., Guzel, A. E., & Destek, M. A. (2021). Renewable, non-renewable energy consumption and economic growth nexus in G7: fresh evidence from CS-ARDL. Environmental Science and Pollution Research, 28(40), 56595–56605. https://doi.org/10.1007/s11356-021-14618-7

Omri, A., & Nguyen, D. K. (2014). On the determinants of renewable energy consumption: International evidence. Energy, 72, 554–560. https://doi.org/10.1016/j.energy.2014.05.081

Osei-Assibey Bonsu, M., & Wang, Y. (2022). The triangular relationship between energy consumption, trade openness and economic growth: new empirical evidence. Cogent Economics & Finance, 10(1). https://doi.org/10.1080/23322039.2022.2140520

Osman, A. I., Chen, L., Yang, M., et al. (2022). Cost, environmental impact, and resilience of renewable energy under a changing climate: a review. Environmental Chemistry Letters, 21(2), 741–764. https://doi.org/10.1007/s10311-022-01532-8

Paramati, S. R., Apergis, N., & Ummalla, M. (2017). Financing clean energy projects through domestic and foreign capital: The role of political cooperation among the EU, the G20 and OECD countries. Energy Economics, 61, 62–71. https://doi.org/10.1016/j.eneco.2016.11.001

Pesaran, M. H. (2004). General Diagnostic Tests for Cross Section Dependence in Panels. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.572504

Przychodzen, W., & Przychodzen, J. (2020). Determinants of renewable energy production in transition economies: A panel data approach. Energy, 191, 116583. https://doi.org/10.1016/j.energy.2019.116583

Qamruzzaman, M., & Karim, S. (2023). Does public-private investment augment renewable energy consumption in BIMSTEC nations? Evidence from symmetric and asymmetric assessment. Energy Strategy Reviews, 49, 101169. https://doi.org/10.1016/j.esr.2023.101169

Rahman, M. M., & Velayutham, E. (2020). Renewable and non-renewable energy consumption-economic growth nexus: New evidence from South Asia. Renewable Energy, 147, 399–408. https://doi.org/10.1016/j.renene.2019.09.007

Riansyah, S., & Chalid, D. A. (2020). Consideration factors in domestic investment for renewable energy development in Indonesia. E3S Web of Conferences, 202, 08002. https://doi.org/10.1051/e3sconf/202020208002

Saba, C. S., & Biyase, M. (2022). Determinants of renewable electricity development in Europe: Do Governance indicators and institutional quality matter? Energy Reports, 8, 13914–13938. https://doi.org/10.1016/j.egyr.2022.09.184

Sahu, P. K., Solarin, S. A., Al-mulali, U., et al. (2021). Investigating the asymmetry effects of crude oil price on renewable energy consumption in the United States. Environmental Science and Pollution Research, 29(1), 817–827. https://doi.org/10.1007/s11356-021-15577-9

Salahuddin, M., & Alam, K. (2016). Information and Communication Technology, electricity consumption and economic growth in OECD countries: A panel data analysis. International Journal of Electrical Power & Energy Systems, 76, 185–193. https://doi.org/10.1016/j.ijepes.2015.11.005

Salari, M., Kelly, I., Doytch, N., et al. (2021). Economic growth and renewable and non-renewable energy consumption: Evidence from the U.S. states. Renewable Energy, 178, 50–65. https://doi.org/10.1016/j.renene.2021.06.016

Salim, R. A., & Rafiq, S. (2012). Why do some emerging economies proactively accelerate the adoption of renewable energy? Energy Economics, 34(4), 1051–1057. https://doi.org/10.1016/j.eneco.2011.08.015

Shah, I. H., Hiles, C., & Morley, B. (2018). How do oil prices, macroeconomic factors and policies affect the market for renewable energy? Applied Energy, 215, 87–97. https://doi.org/10.1016/j.apenergy.2018.01.084

Shah, M. I., AbdulKareem, H. K. K., Ishola, B. D., et al. (2022). The roles of energy, natural resources, agriculture and regional integration on CO2 emissions in selected countries of ASEAN: does political constraint matter? Environmental Science and Pollution Research, 30(10), 26063–26077. https://doi.org/10.1007/s11356-022-23871-3

Shahbaz, M., Sinha, A., Raghutla, C., et al. (2022). Decomposing scale and technique effects of financial development and foreign direct investment on renewable energy consumption. Energy, 238, 121758. https://doi.org/10.1016/j.energy.2021.121758

Sharif, A., Raza, S. A., Ozturk, I., et al. (2019). The dynamic relationship of renewable and nonrenewable energy consumption with carbon emission: A global study with the application of heterogeneous panel estimations. Renewable Energy, 133, 685–691. https://doi.org/10.1016/j.renene.2018.10.052

Shi, X. (2016). The future of ASEAN energy mix: A SWOT analysis. Renewable and Sustainable Energy Reviews, 53, 672–680. https://doi.org/10.1016/j.rser.2015.09.010

Song, Y., Shahzad, U., & Paramati, S. R. (2022). Impact of energy infrastructure investments on renewable electricity generation in major Asian developing economies. Australian Economic Papers, 62(1), 1–23. https://doi.org/10.1111/1467-8454.12282

Timmons, D., Harris, J. M., & Roach, B. (2014). The economics of renewable energy. Available online: https://www.bu.edu/eci/files/2019/06/RenewableEnergyEcon.pdf (accessed on 8 January 2024).

Vakulchuk, R., Overland, I., & Suryadi, B. (2022). ASEAN’s energy transition: how to attract more investment in renewable energy. Energy, Ecology and Environment, 8(1), 1–16. https://doi.org/10.1007/s40974-022-00261-6

Veng, V., Suryadi, B., Pranadi, A. D., et al. (2020). A review of renewable energy development and its policy under nationally determined contributions in ASEAN. International Journal of Smart Grid and Clean Energy, 149–161. https://doi.org/10.12720/sgce.9.1.149-161

Verbeek, M. (2017). A guide to modern econometrics. John Wiley & Sons.

Vidinopoulos, A., Whale, J., & Fuentes Hutfilter, U. (2020). Assessing the technical potential of ASEAN countries to achieve 100% renewable energy supply. Sustainable Energy Technologies and Assessments, 42, 100878. https://doi.org/10.1016/j.seta.2020.100878

Wei, X., Mohsin, M., & Zhang, Q. (2022). Role of foreign direct investment and economic growth in renewable energy development. Renewable Energy, 192, 828–837. https://doi.org/10.1016/j.renene.2022.04.062

Wen, J., Okolo, C. V., Ugwuoke, I. C., et al. (2022). Research on influencing factors of renewable energy, energy efficiency, on technological innovation. Does trade, investment and human capital development matter? Energy Policy, 160, 112718. https://doi.org/10.1016/j.enpol.2021.112718

Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. MIT press.

Wursten, J. (2018). Testing for Serial Correlation in Fixed-effects Panel Models. The Stata Journal: Promoting Communications on Statistics and Stata, 18(1), 76–100. https://doi.org/10.1177/1536867x1801800106

Xu, X., Chen, H. H., Feng, Y., et al. (2018). The production efficiency of renewable energy generation and its influencing factors: Evidence from 20 countries. Journal of Renewable and Sustainable Energy, 10(2). https://doi.org/10.1063/1.5006844

Yang, X., Islam, Md. M., Mentel, G., et al. (2024). Synergistic dynamics unveiled: Interplay between rare earth prices, clean energy innovations, and tech companies’ market resilience amidst the Covid-19 pandemic and Russia-Ukraine conflict. Resources Policy, 89, 104615. https://doi.org/10.1016/j.resourpol.2023.104615

Yu, X. (2003). Regional cooperation and energy development in the Greater Mekong Sub-region. Energy Policy, 31(12), 1221-1234. https://doi.org/10.1016/S0301-4215(02)00182-9

Zeraibi, A., Balsalobre-Lorente, D., & Murshed, M. (2021). The influences of renewable electricity generation, technological innovation, financial development, and economic growth on ecological footprints in ASEAN-5 countries. Environmental Science and Pollution Research, 28(37), 51003–51021. https://doi.org/10.1007/s11356-021-14301-x

Zhao, Y., Zhang, Y., & Wei, W. (2020). Quantifying international oil price shocks on renewable energy development in China. Applied Economics, 53(3), 329–344. https://doi.org/10.1080/00036846.2020.1808173

Zhao, Z. Y., Chen, Y. L., & Li, H. (2019). What affects the development of renewable energy power generation projects in China: ISM analysis. Renewable Energy, 131, 506–517. https://doi.org/10.1016/j.renene.2018.07.063

Zheng, J., & Wang, X. (2021). Can mobile information communication technologies (ICTs) promote the development of renewables-evidence from seven countries. Energy Policy, 149, 112041. https://doi.org/10.1016/j.enpol.2020.112041




DOI: https://doi.org/10.24294/jipd.v8i8.5245

Refbacks

  • There are currently no refbacks.


Copyright (c) 2024 Saizal Pinjaman, Mcxin Tee, Wong Sing Yun, Debbra Toria Nipo, Fei Zhou, Liangyan Lu

License URL: https://creativecommons.org/licenses/by/4.0/

This site is licensed under a Creative Commons Attribution 4.0 International License.