The effects of cross-border electricity trade on power production from different energy sources

Abstract

In this study, we provide empirical evidence to emphasize the crucial role of cross-border electricity trade for decreasing the use of fossil fuels in power industries and attaining higher electricity supply from solar and wind energy sources. We collected data for 48 countries across three continents (Americas, Europe and Asia) from 1991 to 2018 to create a world sample that would reflect the diversity of various energy mixes in different electricity markets. We showed the existence of long-term relationships between power production from natural gas, solar, wind and the level of cross-border electricity trade. Later on, we conducted panel data analyses that utilize the fixed-effect approach with interactive variables. The empirical evidence reveals that when electricity production from solar and wind energy sources interacts with cross-border electricity trade, the rate of power production from natural gas decreases statistically significantly. Furthermore, we created efficiency indices for solar and wind energy sources and to provide evidence for the increased utilization of solar and wind electricity production in the presence of cross-border electricity trade. The resulting empirical evidence reveals that for countries with positive economic growth, a rise in the levels of cross-border electricity trade leads to more efficient electricity production from solar and wind energy sources.