Renewable Energy Sources and Investment in European Power Transmission Networks

During the past decade, renewable energy sources have become an indispensable pillar in European electricity generation. This paper aims at examining if the increasing importance of renewables stimulates investment in European power transmission networks. The question of interest is addressed by an error correction investment model that builds on Neoclassical theory and is further augmented by recent literary findings. Under the proposed threefold estimation strategy, the share of renewables is not found to significantly influence investment spending when the full set of transmission system operators are considered. However, a slight and justified sample restriction leads to the conclusion that a rising share of renewable energy sources substantially increases investment in power transmission networks.