How Do Oil Prices, Macroeconomic Factors and Policies Affect the Market for Renewable Energy?

Imran Shah, Carlie Hiles, Bruce Morley

Research output: Working paper / PreprintWorking paper

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The aim of this study is to determine the nature of any relationship between renewable energy investment, oil prices, GDP and the interest rate, using a time series approach. We concentrate on three countries with different relationships to the renewable energy industry, with Norway and the UK being oil-exporters for most of the sample and the USA an importer. Following estimation using a VAR model, the results provide evidence of considerable heterogeneity across the countries, with the USA having a strong relationship between oil prices and renewable energy, Norway having a less pronounced relationship and the UK no relationship. These results reflect the fact that the USA is predominantly an oil-importer during most of this sample and supports renewable energy relatively less than the other countries, so changes to renewable energy investment reflect other factors in the market such as the price of substitutes to a greater extent than countries where renewable energy receives more government support. The main policy implications from this study are that in countries where there is little support for the renewable energy sector, investment will be more dependent on macroeconomic aspects as well as substitutes such as oil, therefore the authorities will need to potentially increase support when oil prices are low or when the economy is in a downturn.
Original languageEnglish
PublisherDepartment of Economics, University of Bath
Publication statusPublished - 6 Apr 2017

Publication series

NameBath Economics Research Working Papers
PublisherDepartment of Economics, University of Bath


  • Renewable energy
  • VAR
  • oil price
  • Government Policy


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