The relationship between renewable energy and retail electricity prices: Panel evidence from OECD countries

The centrality of electricity to everyday life is indisputable, and the price thereof can have significant implications. Literature is inconclusive over the effect of the renewable energy share in the energy mix on retail electricity prices as a country-specific regulatory policy has a significant i...

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Bibliographic Details
Published inEnergy (Oxford) Vol. 238; p. 121790
Main Authors Oosthuizen, Anna Maria, Inglesi-Lotz, Roula, Thopil, George Alex
Format Journal Article
LanguageEnglish
Published Oxford Elsevier Ltd 01.01.2022
Elsevier BV
Subjects
Electricity
Electricity prices
Electricity pricing
Energy
Energy dependence
Energy policy
Energy security
Fossil fuels
OECD
Prices
Renewable energy
Renewable resources
Security
Statistical analysis
Energy dependence
OECD
Renewable energy
Electricity prices
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Summary:The centrality of electricity to everyday life is indisputable, and the price thereof can have significant implications. Literature is inconclusive over the effect of the renewable energy share in the energy mix on retail electricity prices as a country-specific regulatory policy has a significant impact on retail electricity prices. The purpose of this paper is to determine the effect of the increasing renewable electricity share on retail electricity prices for 34-OECD countries, considering the change in market structure for 23 EU countries. The results show that the influence of the renewable energy share in the energy mix on retail electricity prices is positive and statistically significant. Increasing renewable sources is inescapable in reaching SDG7, while increased awareness of true price signals should prompt private investment while phasing out support schemes in the long run. A sound regulatory framework is required to account for renewable intermittency as well as effective supply and demand matching. The positive impact on electricity prices should not deter policymakers from promoting renewable energy as the effect is marginal and is expected to decline in forthcoming years, improving energy security. The benefits of employing renewables far outweigh the environmental cost. •The effect of the renewable energy share (RES) on electricity prices is analyzed.•Panel data techniques are applied to 34 OECD countries from 1997 to 2015.•Results reveal a positive impact of RES on retail electricity prices.•Depending on market structure, the impact of RE on retail electricity prices differ between 0.038 and 0.053.
ISSN:0360-5442
1873-6785
DOI:10.1016/j.energy.2021.121790