What influences shifts in electricity production by different energy sources? An application of VAR models to analyse dynamics of electricity production and economic performance.

Abstract

In this thesis, I analyse the dynamics in electricity production in relation to the development of a country’s economic performance. I investigate how the amount of electricity production from different energy sources reacts to changes in the unemployment rate or manufacturing output. Conversely, I analyse if increases in these two economic variables lead to changes in the amount of electricity produced by one or more energy sources. Data of four European countries (Austria, Czech Republic, France and Germany) are used in separate Vector Autoregressive (VAR) models, covering the period 2000 - 2019. I can show that there are strong patterns of interrelatedness between different sources of electricity production – renewables, combustible and nuclear fuels – and I present evidence for causal relationships between manufacturing output and renewable electricity production. The goal of this study is to contribute to the knowledge of mechanisms governing the electricity market and the transition to renewable energies. It is shown that VAR models have great potential for further analysis of the dynamics of energy production. I also discuss possibilities of further research, including a comparison of energy market trends in different countries based on their geographic potential.