Renewables, Energy Mix and Inflation in the European Union Countries

Abstract

One of the effects of the 2022 energy crisis was a high increase in inflation. According to a review of the literature on the subject, a factor that may increase the economy’s resistance to external price shocks is the relatively high share of renewable sources in energy production. The aim of this paper is to assess the relationship between the share of renewables in energy production and the level of HICP and core inflation in a cross-sectional approach in the crisis year of 2022 within the EU countries. This study used regression methods, cluster analysis and dispersion measures. As a result of the analysis, it was found that in 2022 (using a cross-sectional approach), there was a statistically significant relationship between the above-mentioned variables. A higher share of renewables by 1 p.p. meant lower HICP by 0.13 p.p. and lower core inflation by 0.1 p.p. “Wind” and “solar” had the greatest importance in the multiple regression equation. It can also be stated that in 2022, countries with a similar energy mix structure were characterized as having a similar rate of inflation. It is therefore justified to increase the share of renewables in energy production, because it brings not only positive environmental but also economic effects.

Keywords

• renewables
• inflation
• energy mix