Does renewable energy diversification shield against energy uncertainty? Unpacking the role of innovation
Himanshu Sekhar Panda, Mantu Kumar MahalikPurpose
Rising energy demand and disrupted supply chains have continuously intensified worldwide energy-related uncertainty. In this context, developing multiple sources of renewable energy can help mitigate energy uncertainty in emerging and developed economies. Based on this, this study aims to investigate whether diversifying renewable energy development can mitigate such energy uncertainty. Additionally, it introduces innovation as a moderating factor that may strengthen the effect of renewable energy diversification in reducing energy-related uncertainty.
Design/methodology/approach
The above interrelations are investigated through a comparative study of emerging and developed economies. This study uses two balanced panel samples to explore this nexus: 8 emerging economies and 16 developed economies spanning 1996–2022. In this context, the long-run results from the pooled mean group autoregressive distributed lag method are analysed. For consistency check, the feasible generalized least squares and system generalized method of moments methods are used.
Findings
Results indicate that renewable energy diversification is more effective at mitigating energy uncertainty in emerging economies than in developed economies. Findings suggest that innovation reduces energy uncertainty in both emerging and developed economies while simultaneously moderating the impact of renewable energy diversification on mitigating energy uncertainty in both groups. Furthermore, it confirms that economic growth and strong institutional quality reduce energy-related uncertainty, while geopolitical risk increases it in both emerging and developed economies.
Research limitations/implications
The major limitation of this study is limited data availability regarding the energy uncertainty reduces the small sample size of emerging and developed economies. Therefore, it may limit the generalizability of the obtained findings of this study.
Practical implications
Emerging economies should prioritize a highly diversified renewable energy portfolio, similar to that of developed economies, when facing energy-related uncertainty, and also foster an environment that promotes innovation.
Social implications
By reducing energy-related uncertainty, diversified renewable energy portfolios can improve the reliability and affordability of energy supply, thereby supporting household welfare and economic stability. The stronger impact observed in emerging economies suggests that renewable energy diversification can contribute to inclusive development and improved living standards. Moreover, innovation facilitates the efficient integration and management of renewable energy systems, creating opportunities for technological advancement and employment. The results further emphasize the importance of institutional quality and economic growth in fostering social well-being and resilience to energy-related shocks.
Originality/value
This study contributes to the energy economics literature by offering a comprehensive analysis of the nexus between renewable energy diversification, innovation and energy uncertainty in developed and emerging economies. Unlike previous studies that primarily focus on renewable energy adoption, this research examines whether diversification across renewable energy sources can enhance energy market stability and reduce uncertainty. Furthermore, it explores the moderating role of innovation in strengthening the effectiveness of renewable energy diversification. By providing a comparative assessment across different levels of economic development, the study uncovers novel insights into the mechanisms through which diversified renewable energy establish energy security.