Modeling Persistence Characteristics of Primary Energy Consumption from Renewable and Clean Resources: Considering Asymmetries and Structural Breaks

Tanrıverdi S., Yıldırım Kasap D.

ICE-TEA 2022, Nevşehir, Turkey, 1 - 04 September 2022, pp.87

  • Publication Type: Conference Paper / Summary Text
  • City: Nevşehir
  • Country: Turkey
  • Page Numbers: pp.87
  • Middle East Technical University Affiliated: Yes


This study aims to analyze the persistence characteristics of share of renewables and clean energy (nuclear and renewables) in primary energy consumption for 5 countries, Austria, Brazil, New Zealand, Norway and Sweden over the period 1950-2020. The list of countries is selected based on their high level of primary energy consumption from renewables by 2020. We consider the importance of true specification of the deterministic components to better analyze the persistence properties. Changes in regulatory policies, implementation of new environmental laws, and potential market instabilities arising from some major events might result in structural breaks in the series. We employ a methodology that accounts for those breaks. Unlike the existing studies, our study allows for smooth and instant breaks together. Multiple unknown break dates are estimated by Bai and Perron (2003) methodology and smooth breaks are introduced in Fractional Fourier Functional Forms. To account for the sign and size asymmetry of responses of the series, which might arise from the break-even between adjustment costs and the burden of the shock, we further utilize Quantile Unit Root procedures. Bootstrap critical values are estimated accounting for the concerns arise from reduced sample sizes and non- standard distribution of the detrended series. By considering all factors affecting the stochastic properties of the series, we aim to provide reliable inferences regarding the long memory property of total and clean energy consumption, which will help policy-makers to better design and drive their policy objectives. Results show that especially Global Oil Crisis (1977) and policies towards easing climate change (2000s) had a significant impact on the countries decisions of energy mix. After accounting for the structural breaks, share of renewables and clean resources in the primary energy consumption are mostly stationary but show persistence for the lowest quantiles.