Determinants of renewable energy supply in Europe: a potential solution for Turkey’s energy dependency

Abstract

Energy resources are an essential part of sustainable economic development. Conventionally, industrialized economies use more energy per unit of output and per capita than the developing economies. However, emerging economies have increased their energy demand over the last decade and are expected to dominate world energy growth over the next decades. As an emerging economy, Turkey’s energy demand has risen dramatically over the past three decades. High economic growth and improvements in macroeconomic balances over the last decade have been the major driving forces in growing energy demand. Unfortunately, since traditional fossil fuels account for more than 90 percent of the total energy consumption and the country has no large oil and natural gas reserves, Turkey has become heavily dependent on energy. In addition, environmental concerns and the national energy security policy also force the country to seek new energy resources. Therefore, Turkey should utilize her huge alternative energy resources and change her current energy mix. The aim of this study is to analyze major determinants for energy generation from renewable energy resources, mainly wind, solar and geothermal energy for the EU-15 and the EU-12+2 countries over the period from 1995 to 2008. Major determinants for renewable energy supply are categorized as the domestic country’s fundamentals for producing renewable energy and defined as economic capacity, technological infrastructure capacity, foreign investment capacity, environmental effect, nuclear energy capacity, domestic energy capacity, energy trade capacity, renewable energy capacity, domestic oil and gas capacity and oil and gas trade capacity by using Panel Data Models. The empirical evidence of base model reveals that population and FDI have negative impacts on renewable energy supply for the pooled sample. Energy intensity has a negative impact on renewable energy supply for new and candidate countries. These countries should be more sensitive in implementing energy efficiency policies. Surprisingly, results show that the high capacity of nuclear energy is an important determinant for the renewable energy supply, especially for the EU-14 countries. When the components of renewable energy supply are analyzed, empirical results show that production of hydro and solar energy have an important positive contribution in all country groups. However, the striking difference between the EU-15 and the EU-14 is the potential role of geothermal and wind energy. Their contribution on renewable energy supply is positive for the EU-15 while it is negative for the EU-14. So, new member and candidate countries should utilize their wind and geothermal energy capacities fully and efficiently. This will also lower their energy dependency on conventional fossil fuels. This study may also serve as a guideline for potential investors in exploring the opportunities in Turkey’s renewable energy market.