Decomposition analysis of renewable energy demand and coupling effect between renewable energy and energy demand: Evidence from China

Abstract

Driving up demand for renewable energy is key to China's response to the energy crisis and to controlling carbon emissions. Several studies have been conducted to explore the factors affecting renewable energy demand. However, the literature on the importance of technological innovation in fossil energy production in affecting renewable energy demand is scant. Therefore, it is essential to explore the impact of technological innovations in fossil energy production on renewable energy demand, as well as to reveal the dynamic penetration mechanism of renewable energy in the field of energy demand, to provide policy guidelines for China to promote its energy revolution. This study decomposes renewable energy demand into 10 drivers with the extended IDA-PDA (Index Decomposition Analysis and Production-theory Decomposition Analysis) model. Then the dynamic penetration mechanism of renewable energy on the energy demand side is revealed by combining the coupled model and the decomposition results. The results show that the investment intensity effects and energy restructuring contributed the most to renewable energy demand growth, contributing 60.73 % and 79.97 % respectively. Conversely, technological advances in fossil energy combustion made the largest negative cumulative contribution to renewable energy demand growth, with a cumulative negative contribution of −39.57 %. The drivers of renewable energy demand vary considerably across types, regions and resource endowment levels, which means that regions should develop differentiated development strategies based on their own characteristics. In addition, the coupling effect between renewable energy demand and total energy demand is weakening, with market and policy effects becoming the drivers for augmenting the response of renewable energy to total energy demand. The findings of this study provide clear pathways for expanding renewable energy demand, offering important insights for the government to balance between promoting capital-driven interests and policy-driven development.