The Impact of Low Electricity Prices on Renewable Energy Production

Abstract

Many countries are actively developing plans to increase renewable energy production with some countries even targeting a goal of 100% renewable energy within the next few years. The reasons are twofold, reduced carbon emissions and reduced dependence on fossil fuels with the associated fluctuations in oil and natural gas prices. However, several other countries have not been taking the required actions to increase their production of renewable energy. In some cases, this occurs in energy-rich countries where electricity prices are heavily subsidized and hence residential and commercial consumers have no incentive to invest in renewable energy because the time taken to offset the investment is far too long. We use Machine Learning techniques to quantify this conjecture by showing the relationship between renewable energy production and electric prices for various countries. The data used for this exercise (namely electricity costs and renewable energy production per country) is taken from various online datasets. We conclude that, in order for a country to seriously increase its renewable energy production so that it is a significant percentage of total energy production, it must first reduce the heavy subsidies provided to its citizens. Using our model, we can determine, for a given country, what reduction in subsidies is required to achieve a certain renewable energy production target. Countries can then use this information to plan future renewable energy targets and electricity subsidy reductions. We use our home country as a use case for this exercise.