In post #21 of this series, I examined the relationship between electricity prices across European Union (EU) countries and the market penetration of renewable (solar and wind) energy sources. There’s been some discussion amongst the defenders of the continued uninterrupted burning of fossil fuels of a finding that allegedly shows the higher the market penetration of renewables, the higher electricity prices. I demonstrated in the previous post that this is a spurious relationship and a more plausible reason for the empirical relationship is that market penetration is highly correlated with how rich (and expensive) a country is. Indeed, I showed that controlling for cost-of-living in a particular country, the relationship between market penetration of renewables and cost of electricity was not statistically significant.
I noted at the end of that post that I would show the results of a simple multiple linear regression of the before-tax price of electricity and market penetration of renewables across these countries.
But, first here is a chart of the results of the predicted price of before-tax electricity in a country given the cost-of-living, holding the market penetration of renewables constant. We see a strong positive relationship—the higher the cost-of-living in a country, the more expensive the before-tax cost of electricity.
Here’s the chart based on the results of a multiple regression analysis using before-tax electricity price as the dependent variable, with renewables market penetration as the main dependent variable, holding the cost-of-living constant. The relationship is obviously negative, but it is not statistically significant. Still, there is NOT a positive relationship between the market penetration of renewables and the before-tax price of electricity across EU countries.
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