Renewable Energy: A Resource If Well Thought Out

Many policy makers and opinion leaders look to renewable energy sources as a major driver for economic development. Yet, looking at the evidence produced in the literature finds sparse results. For instance, much seems to depend on the final use of energy. According to Bowden and Payne (2010) commercial and industrial renewable energy consumption do not seem to have any connection to output, while residential renewable energy consumption seems to have a positive connection with output.

Much could also depend on the short time periods taken into consideration or on possible changes across time of the investigated relationship. In order to overcome such difficulties, our forthcoming paper (Vaona, 2012) on Energy policy, takes into consideration the case of Italy over 150 years, from 1861 to 2000. We investigate the connection between renewable and non-renewable energy consumption, on one side, and output, on the other – also allowing for the fact that such connections could change over time.

Our results have clear policy implications. The economy tends to make more efficient use of non-renewable energy consumption as time passes. Conservation policies favoring energy savings in buildings, lighting and transportation, therefore, hasten an underlying tendency of the economy and they should be pursued notwithstanding a possible small negative short-run impact on output.

However, we do not find evidence of any link between renewable energy consumption and output. What can this teach us?

In the past, renewable energy consumption in Italy was mostly connected to hydroelectric power generated by large dams, whose impact on the economy can be limited by a number of factors.

First, large dams need appropriate sites to be built and there is evidence that in Italy all such sites have already been exploited (Enea, 2010, 189). Second, the social acceptance of these projects can be hampered by their controversy, as they can produce not only benefits, but also high environmental and social costs for specific local communities. On one side they provide flood control, water supply, low-cost energy and increased opportunities for recreation, while also reducing CO2 emissions. On the other they displace people from the area and they change a terrestrial ecosystem into an aquatic one (Koch, 2002; Frey and Linke, 2002). This – in absence of proper management and in inappropriate places (as those characterized by high seismicity) – can challenge the security of local communities, as the Vajont disaster in 1963 in Northern Italy reminds us.

These considerations can offer policy implications so that other kinds of renewable energy sources can have a sizeable economic impact. The need for specific sites is shared also by wind, solar and geo-thermal energy. As a matter of consequence, a good strategy is not to concentrate only on one form of renewable energy. On the contrary, there should be a diversification among different renewable energy sources, which can also help overcome the problem of their intermittency.

In addition it is important that building new renewable energy facilities is not constrained by social acceptance issues. Therefore it is necessary to not understate concerns regarding “distributional justice (How are costs and benefits shared?), procedural justice (Is there a fair decision making process giving all relevant stakeholders an opportunity to participate?)”, and, finally, trust building among local communities, on one side, and investors and actors outside the community, on the other (Wüstenhagen et al., 2007). In addition, costs should be widely spread over the population (Wüstenhagen et al., 2006, p. 1695). Under the latter respect, many small scale installations can be preferable to a few larger ones (Elliot, 2000), even though their global environmental impact should be carefully considered as “one large hydro project can well be more benign than a hundred small ones, which generate the same amount of electricity” (Koch, 2002, p. 1210).

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Bowden, N. and J.E. Payne (2010) Sectoral Analysis of the Causal Relationship between Renewable and Non-Renewable Energy Consumption and Real Output in the U.S., Energy Sources, Part B:, Economics, Planning, and Policy, 5, 400–408.

Elliot, D. (2000) Renewable energy and sustainable futures, Futures 32, 261–274.

ENEA (2010) Le fonti rinnovabili 2010. Ricerca e innovazione per un futuro low-carbon, ENEA, Rome.

Frey, G. W. and D. M. Linke (2002) Hydropower as a renewable and sustainable energy resource meeting global energy challenges in a reasonable way, Energy Policy 30, 1261–1265.

Koch, F. H. (2002) Hydropower — the politics of water and energy: Introduction and overview, Energy Policy 30, 1207–1213.

Vaona, A. (2010) Granger non-causality tests between (non)renewable energy consumption and output in Italy since 1861: the (ir)relevance of structural breaks, Working Papers 19/2010, Università di Verona, Dipartimento di Scienze economiche, forthcoming on Energy Policy.

Wüstenhagen, R. and M. Bilharz (2006) Green energy market development in Germany: effective public policy and emerging customer demand, Energy Policy 34, 1681-1696.

Wüstenhagen, R., M. Wolsink, M. J. Burer (2007) Social acceptance of renewable energy innovation: An introduction to the concept, Energy Policy 35, 2683-2691.

One Response to "Renewable Energy: A Resource If Well Thought Out"

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