Growth of Renewable Energy: A Review of Drivers from the Economic Perspective

Yoram Krozer (), Sebastian Bykuc and Frans Coenen
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Yoram Krozer: Sustainable Innovations Academy, Iepenplein 44, 1091 JR Amsterdam, The Netherlands
Sebastian Bykuc: Institute of Fluid Flow Machinery, Polish Academy of Sciences, 80-231 Gdansk, Poland
Frans Coenen: Section of Governance and Technology for Sustainability (CSTM), University of Twente, Postnox 217, 7500 AE Enschede, The Netherlands

Energies, 2025, vol. 18, issue 19, 1-19

Abstract: Global modern renewable energy based on geothermal, wind, solar, and marine resources has grown rapidly over the last decades despite low energy density, intermittent supply, and other qualities inferior to those of fossil fuels. What is the explanation for this growth? The main drivers of growth are assessed using economic theories and verified with statistical data. From the neo-classic viewpoint that focuses on price substitutions, the growth can be explained by the shift from energy-intensive agriculture and industry to labour-intensive services. However, the energy resources complemented rather than substituted for each other. In the evolutionary idea, investments supported by policies enabled cost-reducing technological change. Still, policies alone are insufficient to generate the growth of modern renewable energy as they are inconsistent across countries and in time. From the behavioural perspective that is preoccupied with innovative entrepreneurs, the value addition of electrification can explain the introduction of modern renewable energy in market niches, but not its fast growth. Instead of these mono-causalities, the growth of modern renewable energy is explained by technology diffusion during the pioneering, growth, and maturation phases. Possibilities that postpone the maturation are pinpointed.

Keywords: renewable energy; economic theories; technology diffusion; prices; cost; value (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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