Renewable-to-total electricity consumption ratio: Estimating the permanent or transitory fluctuations based on flexible Fourier stationarity and unit root tests

This paper examines the stationarity properties of the renewable-to-total electricity consumption ratio. For this purpose we use Becker et al.’s (2006) flexible Fourier stationarity test as a benchmark, and the recent advanced Fourier ADF unit root test, for 90 countries, over the period 1980–2011. The results of the first test document the stationarity of the renewable-to-total electricity consumption ratio for 65 countries from different geographic areas, namely Africa, America, Asia-Pacific and Europe. However, when validated, the Fourier ADF test shows that the null hypothesis of unit root is rejected in all the cases, except for the United Kingdom. The fact that the stationarity in the share of renewable-to-total electricity consumption is documented by the new proposed, more powerful tests, does not necessarily mean that the renewable energy policies are ineffective, as the previous literature states. A wide range of elements might influence the stationarity or non-stationarity of this ratio. However, our findings are important from the modeling perspective, as the empirical studies on renewable energy can produce reliable results and use appropriate techniques for modeling and forecasting only if the stationarity or non-stationarity is correctly documented.