Determinants of renewable energy development in the G20 economies

This study investigates whether energy price index stimulates share of electricity produced from renewable energy in the G20 and whether governance quality shapes this relationship. Using annual data for 2000–2021, we test two hypotheses: first, that higher energy prices independently promote share of electricity produced from renewable energy, and second, that governance quality strengthens this price–innovation link. The analysis employs the common correlated effects ARDL (CS-ARDL) estimator to capture both short-run dynamics and long-run relationships while accounting for cross-sectional dependence. The dynamic common correlated effects ARDL (DCCE-ARDL) estimator is used as a robustness check. The results show that energy price index has a statistically significant negative effect on share of electricity produced from renewable energy in both the short and long run, challenging the induced innovation hypothesis. However, the interaction between governance quality and energy price index is positive and statistically significant, supporting the view that strong institutions enhance the responsiveness of renewable supply to price signals. These findings suggest that market signals alone are insufficient. Institutional capacity is essential to translate price pressures into long-term investment and production gains. By adopting a supply-side perspective, the study addresses a critical but underexplored dimension of the energy transition in the world’s most influential economies.