(Translated by https://www.hiragana.jp/)
Are fluctuations in production of renewable energy permanent or transitory?
IDEAS home Printed from https://ideas.repec.org/p/mos/moswps/2012-05.html
   My bibliography  Save this paper

Are fluctuations in production of renewable energy permanent or transitory?

Author

Listed:
  • Hooi Hooi Lean
  • Russell Smyth

Abstract

This study examines the integration properties of total renewable energy production, as well as production of biofuels and biomass in the United States. To do so we employ Lagrange Multiplier(LM) univariate unit root tests with up to two structural breaks. We conclude that each production series contains a unit root. This result suggests that random shocks, including regulatory changes, to renewable energy production may lead to permanent departures from predetermined target levels. Furthermore, this result implies that positive shocks associated with a permanent policy stance (such as renewable portfolio standards) that increases the production of renewable energy resources will realize more in terms of positively altering the energy mix between renewable energy and energy from fossil fuels than temporary policy stances (such as investment tax credits over a predetermined time horizon).

Suggested Citation

  • Hooi Hooi Lean & Russell Smyth, 2012. "Are fluctuations in production of renewable energy permanent or transitory?," Monash Economics Working Papers 05-12, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2012-05
    as

    Download full text from publisher

    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2012/0512areflutuationsleansmyth.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alfredo M. Pereira & Jos� M. Belbute, 2014. "Final Energy Demand in Portugal: How Persistent it is and Why it Matters for Environmental Policy," International Economic Journal, Taylor & Francis Journals, vol. 28(4), pages 661-677, December.
    2. Menegaki, Angeliki N., 2011. "Growth and renewable energy in Europe: A random effect model with evidence for neutrality hypothesis," Energy Economics, Elsevier, vol. 33(2), pages 257-263, March.
    3. Kumar Narayan, Paresh & Smyth, Russell, 2007. "Are shocks to energy consumption permanent or temporary? Evidence from 182 countries," Energy Policy, Elsevier, vol. 35(1), pages 333-341, January.
    4. Kumar Narayan, Paresh & Narayan, Seema & Popp, Stephan, 2010. "Energy consumption at the state level: The unit root null hypothesis from Australia," Applied Energy, Elsevier, vol. 87(6), pages 1953-1962, June.
    5. Maslyuk, Svetlana & Smyth, Russell, 2009. "Non-linear unit root properties of crude oil production," Energy Economics, Elsevier, vol. 31(1), pages 109-118, January.
    6. Apergis, Nicholas & Payne, James E., 2010. "Renewable energy consumption and growth in Eurasia," Energy Economics, Elsevier, vol. 32(6), pages 1392-1397, November.
    7. Mozumder, Pallab & Marathe, Achla, 2004. "Gains from an integrated market for tradable renewable energy credits," Ecological Economics, Elsevier, vol. 49(3), pages 259-272, July.
    8. Sailor, David J. & Smith, Michael & Hart, Melissa, 2008. "Climate change implications for wind power resources in the Northwest United States," Renewable Energy, Elsevier, vol. 33(11), pages 2393-2406.
    9. Apergis, Nicholas & Loomis, David & Payne, James E., 2010. "Are fluctuations in coal consumption transitory or permanent? Evidence from a panel of US states," Applied Energy, Elsevier, vol. 87(7), pages 2424-2426, July.
    10. Gilberto Libanio, 2005. "Unit roots in macroeconomic time series: theory, implications, and evidence," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 15(3), pages 145-176, September.
    11. James E. Payne, 2010. "Survey of the international evidence on the causal relationship between energy consumption and growth," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(1), pages 53-95, January.
    12. Hooi Hooi Lean & Russell Smyth, 2006. "Asian Financial Crisis, Avian Flu And Terrorist Threats: Are Shocks To Malaysian Tourist Arrivals Permanent Or Transitory?," Monash Economics Working Papers 11/06, Monash University, Department of Economics.
    13. Mei-Se Chien, 2010. "Structural Breaks and the Convergence of Regional House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 40(1), pages 77-88, January.
    14. Sadorsky, Perry, 2009. "Renewable energy consumption and income in emerging economies," Energy Policy, Elsevier, vol. 37(10), pages 4021-4028, October.
    15. repec:bla:obuest:v:63:y:2001:i:5:p:535-58 is not listed on IDEAS
    16. Gil-Alana, Luis A. & Loomis, David & Payne, James E., 2010. "Does energy consumption by the US electric power sector exhibit long memory behavior?," Energy Policy, Elsevier, vol. 38(11), pages 7512-7518, November.
    17. Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2008. "Are oil shocks permanent or temporary? Panel data evidence from crude oil and NGL production in 60 countries," Energy Economics, Elsevier, vol. 30(3), pages 919-936, May.
    18. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    19. Sen, Amit, 2003. "On Unit-Root Tests When the Alternative Is a Trend-Break Stationary Process," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 174-184, January.
    20. Apergis, Nicholas & Payne, James E., 2010. "Renewable energy consumption and economic growth: Evidence from a panel of OECD countries," Energy Policy, Elsevier, vol. 38(1), pages 656-660, January.
    21. Yoo, Seung-Hoon & Kim, Yeonbae, 2006. "Electricity generation and economic growth in Indonesia," Energy, Elsevier, vol. 31(14), pages 2890-2899.
    22. Arent, Douglas J. & Wise, Alison & Gelman, Rachel, 2011. "The status and prospects of renewable energy for combating global warming," Energy Economics, Elsevier, vol. 33(4), pages 584-593, July.
    23. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
    24. Chen, Pei-Fen & Lee, Chien-Chiang, 2007. "Is energy consumption per capita broken stationary? New evidence from regional-based panels," Energy Policy, Elsevier, vol. 35(6), pages 3526-3540, June.
    25. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    26. Nunes, Luis C & Newbold, Paul & Kuan, Chung-Ming, 1997. "Testing for Unit Roots with Breaks: Evidence on the Great Crash and the Unit Root Hypothesis Reconsidered," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 435-448, November.
    27. Barros, Carlos Pestana & Gil-Alana, Luis A. & Payne, James E., 2011. "An analysis of oil production by OPEC countries: Persistence, breaks, and outliers," Energy Policy, Elsevier, vol. 39(1), pages 442-453, January.
    28. Paresh Kumar Narayan & Stephan Popp, 2010. "A new unit root test with two structural breaks in level and slope at unknown time," Journal of Applied Statistics, Taylor & Francis Journals, vol. 37(9), pages 1425-1438.
    29. Cassard, Hannah & Denholm, Paul & Ong, Sean, 2011. "Technical and economic performance of residential solar water heating in the United States," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(8), pages 3789-3800.
    30. Gnansounou, Edgard, 2008. "Assessing the energy vulnerability: Case of industrialised countries," Energy Policy, Elsevier, vol. 36(10), pages 3734-3744, October.
    31. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    32. Junsoo Lee & Mark C. Strazicich, 2001. "Break Point Estimation and Spurious Rejections With Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-558, December.
    33. Apergis, Nicholas & Payne, James E., 2011. "The renewable energy consumption-growth nexus in Central America," Applied Energy, Elsevier, vol. 88(1), pages 343-347, January.
    34. Apergis, Nicholas & Loomis, David & Payne, James E., 2010. "Are shocks to natural gas consumption temporary or permanent? Evidence from a panel of U.S. states," Energy Policy, Elsevier, vol. 38(8), pages 4734-4736, August.
    35. Pestana Barros, Carlos & Gil-Alana, Luis A. & Payne, James E., 2012. "Evidence of long memory behavior in U.S. renewable energy consumption," Energy Policy, Elsevier, vol. 41(C), pages 822-826.
    36. Sari, Ramazan & Ewing, Bradley T. & Soytas, Ugur, 2008. "The relationship between disaggregate energy consumption and industrial production in the United States: An ARDL approach," Energy Economics, Elsevier, vol. 30(5), pages 2302-2313, September.
    37. Laird, Frank N. & Stefes, Christoph, 2009. "The diverging paths of German and United States policies for renewable energy: Sources of difference," Energy Policy, Elsevier, vol. 37(7), pages 2619-2629, July.
    38. Lean Hooi Hooi & Russell Smyth, 2007. "Are Asian real exchange rates mean reverting? Evidence from univariate and panel LM unit root tests with one and two structural breaks," Applied Economics, Taylor & Francis Journals, vol. 39(16), pages 2109-2120.
    39. Subhadra, Bobban & Edwards, Mark, 2010. "An integrated renewable energy park approach for algal biofuel production in United States," Energy Policy, Elsevier, vol. 38(9), pages 4897-4902, September.
    40. Ozturk, Ilhan, 2010. "A literature survey on energy-growth nexus," Energy Policy, Elsevier, vol. 38(1), pages 340-349, January.
    41. Apergis, Nicholas & Tsoumas, Chris, 2012. "Long memory and disaggregated energy consumption: Evidence from fossils, coal and electricity retail in the U.S," Energy Economics, Elsevier, vol. 34(4), pages 1082-1087.
    42. Hasanov, Mübariz & Telatar, Erdinc, 2011. "A re-examination of stationarity of energy consumption: Evidence from new unit root tests," Energy Policy, Elsevier, vol. 39(12), pages 7726-7738.
    43. Ewing, Bradley T. & Payne, James E. & Caporin, Massimilano, 2022. "The Asymmetric Impact of Oil Prices and Production on Drilling Rig Trajectory: A correction," Resources Policy, Elsevier, vol. 79(C).
    44. Yang, Hao-Yen, 2000. "A note on the causal relationship between energy and GDP in Taiwan," Energy Economics, Elsevier, vol. 22(3), pages 309-317, June.
    45. Paresh Kumar Narayan & Russell Smyth, 2005. "Structural Breaks And Unit Roots In Australian Macroeconomic Time Series," Pacific Economic Review, Wiley Blackwell, vol. 10(4), pages 421-437, December.
    46. Mozumder, Pallab & Vásquez, William F. & Marathe, Achla, 2011. "Consumers' preference for renewable energy in the southwest USA," Energy Economics, Elsevier, vol. 33(6), pages 1119-1126.
    47. Lean, Hooi Hooi & Smyth, Russell, 2009. "Long memory in US disaggregated petroleum consumption: Evidence from univariate and multivariate LM tests for fractional integration," Energy Policy, Elsevier, vol. 37(8), pages 3205-3211, August.
    48. Apergis, Nicholas & Payne, James E., 2010. "Coal consumption and economic growth: Evidence from a panel of OECD countries," Energy Policy, Elsevier, vol. 38(3), pages 1353-1359, March.
    49. Hsu, Yi-Chung & Lee, Chien-Chiang & Lee, Chi-Chuan, 2008. "Revisited: Are shocks to energy consumption permanent or temporary? New evidence from a panel SURADF approach," Energy Economics, Elsevier, vol. 30(5), pages 2314-2330, September.
    50. Aslan, Alper, 2011. "Does natural gas consumption follow a nonlinear path over time? Evidence from 50 US States," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4466-4469.
    51. Aguilar, Francisco X. & Cai, Zhen, 2010. "Exploratory analysis of prospects for renewable energy private investment in the U.S," Energy Economics, Elsevier, vol. 32(6), pages 1245-1252, November.
    52. Brown, Marilyn A. & Gumerman, Etan & Sun, Xiaojing & Sercy, Kenneth & Kim, Gyungwon, 2012. "Myths and facts about electricity in the U.S. South," Energy Policy, Elsevier, vol. 40(C), pages 231-241.
    53. Menyah, Kojo & Wolde-Rufael, Yemane, 2010. "CO2 emissions, nuclear energy, renewable energy and economic growth in the US," Energy Policy, Elsevier, vol. 38(6), pages 2911-2915, June.
    54. Lean, Hooi Hooi & Smyth, Russell, 2010. "Multivariate Granger causality between electricity generation, exports, prices and GDP in Malaysia," Energy, Elsevier, vol. 35(9), pages 3640-3648.
    55. Ghosh, Sajal, 2009. "Electricity supply, employment and real GDP in India: evidence from cointegration and Granger-causality tests," Energy Policy, Elsevier, vol. 37(8), pages 2926-2929, August.
    56. Apergis, Nicholas & Tsoumas, Chris, 2011. "Integration properties of disaggregated solar, geothermal and biomass energy consumption in the U.S," Energy Policy, Elsevier, vol. 39(9), pages 5474-5479, September.
    57. Paolo Agnolucci & Andrew Venn, 2011. "Industrial energy intensities in the UK: is there a deterministic or stochastic difference among sectors?," Applied Economics, Taylor & Francis Journals, vol. 43(12), pages 1447-1462.
    58. Payne, James E., 2010. "A survey of the electricity consumption-growth literature," Applied Energy, Elsevier, vol. 87(3), pages 723-731, March.
    59. Zarnikau, Jay, 2011. "Successful renewable energy development in a competitive electricity market: A Texas case study," Energy Policy, Elsevier, vol. 39(7), pages 3906-3913, July.
    60. Heiman, M.K., 2006. "Expectations for renewable energy under market restructuring: the U.S. experience," Energy, Elsevier, vol. 31(6), pages 1052-1066.
    61. Adelaja, Soji & Shaw, Judy & Beyea, Wayne & Charles McKeown, J.D., 2010. "Renewable energy potential on brownfield sites: A case study of Michigan," Energy Policy, Elsevier, vol. 38(11), pages 7021-7030, November.
    62. Apergis, Nicholas & Payne, James E., 2010. "Structural breaks and petroleum consumption in US states: Are shocks transitory or permanent?," Energy Policy, Elsevier, vol. 38(10), pages 6375-6378, October.
    63. Schmidt, Peter & Phillips, C B Peter, 1992. "LM Tests for a Unit Root in the Presence of Deterministic Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 257-287, August.
    64. Aslan, Alper & Kum, Hakan, 2011. "The stationary of energy consumption for Turkish disaggregate data by employing linear and nonlinear unit root tests," Energy, Elsevier, vol. 36(7), pages 4256-4258.
    65. Mishra, Vinod & Sharma, Susan & Smyth, Russell, 2009. "Are fluctuations in energy consumption per capita transitory? Evidence from a panel of Pacific Island countries," Energy Policy, Elsevier, vol. 37(6), pages 2318-2326, June.
    66. Apergis, Nicholas & Payne, James E. & Menyah, Kojo & Wolde-Rufael, Yemane, 2010. "On the causal dynamics between emissions, nuclear energy, renewable energy, and economic growth," Ecological Economics, Elsevier, vol. 69(11), pages 2255-2260, September.
    67. Lokey, Elizabeth, 2007. "How the next US president should slow global warming," Energy Policy, Elsevier, vol. 35(11), pages 5399-5402, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lean, Hooi Hooi & Smyth, Russell, 2014. "Will initiatives to promote hydroelectricity consumption be effective? Evidence from univariate and panel LM unit root tests with structural breaks," Energy Policy, Elsevier, vol. 68(C), pages 102-115.
    2. Smyth, Russell, 2013. "Are fluctuations in energy variables permanent or transitory? A survey of the literature on the integration properties of energy consumption and production," Applied Energy, Elsevier, vol. 104(C), pages 371-378.
    3. Smyth, Russell & Narayan, Paresh Kumar, 2015. "Applied econometrics and implications for energy economics research," Energy Economics, Elsevier, vol. 50(C), pages 351-358.
    4. Paresh Narayan & Russell Smyth, 2014. "Applied Econometrics and a Decade of Energy Economics Research," Monash Economics Working Papers 21-14, Monash University, Department of Economics.
    5. Schneider, Nicolas & Strielkowski, Wadim, 2023. "Modelling the unit root properties of electricity data—A general note on time-domain applications," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 618(C).
    6. Lean, Hooi Hooi & Smyth, Russell, 2014. "Are shocks to disaggregated energy consumption in Malaysia permanent or temporary? Evidence from LM unit root tests with structural breaks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 319-328.
    7. Lean, Hooi Hooi & Smyth, Russell, 2013. "Will policies to promote renewable electricity generation be effective? Evidence from panel stationarity and unit root tests for 115 countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 22(C), pages 371-379.
    8. Meng, Ming & Payne, James E. & Lee, Junsoo, 2013. "Convergence in per capita energy use among OECD countries," Energy Economics, Elsevier, vol. 36(C), pages 536-545.
    9. Barros, Carlos Pestana & Gil-Alana, Luis A. & Payne, James E., 2013. "U.S. Disaggregated renewable energy consumption: Persistence and long memory behavior," Energy Economics, Elsevier, vol. 40(C), pages 425-432.
    10. Wang, Yuan & Li, Li & Kubota, Jumpei & Zhu, Xiaodong & Lu, Genfa, 2016. "Are fluctuations in Japan’s consumption of non-fossil energy permanent or transitory?," Applied Energy, Elsevier, vol. 169(C), pages 187-196.
    11. Yilanci, Veli & Tunali, Çiğdem Börke, 2014. "Are fluctuations in energy consumption transitory or permanent? Evidence from a Fourier LM unit root test," Renewable and Sustainable Energy Reviews, Elsevier, vol. 36(C), pages 20-25.
    12. Golpe, Antonio A. & Carmona, Monica & Congregado, Emilio, 2012. "Persistence in natural gas consumption in the US: An unobserved component model," Energy Policy, Elsevier, vol. 46(C), pages 594-600.
    13. Ozcan, Burcu & Ozturk, Ilhan, 2016. "A new approach to energy consumption per capita stationarity: Evidence from OECD countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 332-344.
    14. Cai, Yifei & Menegaki, Angeliki N., 2019. "Fourier quantile unit root test for the integrational properties of clean energy consumption in emerging economies," Energy Economics, Elsevier, vol. 78(C), pages 324-334.
    15. Akram, Vaseem & Sahoo, Pradipta Kumar & Jangam, Bhushan Praveen, 2019. "Do shocks to electricity consumption revert to its equilibrium? Evidence from Indian states," Utilities Policy, Elsevier, vol. 61(C).
    16. Shahbaz, Muhammad & Khraief, Naceur & Mahalik, Mantu Kumar & Zaman, Khair Uz, 2014. "Are fluctuations in natural gas consumption per capita transitory? Evidence from time series and panel unit root tests," Energy, Elsevier, vol. 78(C), pages 183-195.
    17. Lean, Hooi Hooi & Smyth, Russell, 2014. "Disaggregated energy demand by fuel type and economic growth in Malaysia," Applied Energy, Elsevier, vol. 132(C), pages 168-177.
    18. Barros, Carlos P. & Gil-Alana, Luis A. & Wanke, Peter, 2016. "Energy production in Brazil: Empirical facts based on persistence, seasonality and breaks," Energy Economics, Elsevier, vol. 54(C), pages 88-95.
    19. Suleyman Bolat & Murat Belke & Necati Celik, 2013. "Mean Reverting Behavior of Energy Consumption: Evidence from Selected MENA Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 3(4), pages 315-320.
    20. Mohamed Osman & Ariful Hoque & Geoffrey Gachino, 2018. "Structural Breaks and Energy Consumption in the Gulf Cooperation Council Countries: Are Random Shocks Transitory or Permanent?," Australian Economic Papers, Wiley Blackwell, vol. 57(4), pages 446-455, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2012-05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Simon Angus (email available below). General contact details of provider: https://edirc.repec.org/data/dxmonau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.