The impact of regulatory mechanisms for the integration of renewable energy sources on the state’s energy security under the financial conditions of the energy transition

Abstract

The article examines the regulatory mechanisms for the integration of renewable energy sources and their impact on the indicators of the state's energy security, taking into account the financial and credit conditions of the energy transition. The relevance of the topic is enhanced by the fact that the modern transformation of the energy sector is taking place under the simultaneous influence of the post-pandemic consequences of COVID-19, military and energy shocks, disruption of logistics chains, price volatility in energy markets, as well as the growth of demand for electricity associated with the spread of digital infrastructure and technologies based on artificial intelligence. The purpose of the study is to assess the impact of the regulatory mechanisms for the integration of renewable energy sources on the indicators of the state's energy security, as well as to substantiate the financial and credit conditions under which the energy transition becomes more sustainable. The empirical basis is data for 20 countries of the European Union for 2014-2023. An integrated energy security index was constructed based on three normalized components, namely net electricity imports, the share of fossil generation, and the carbon intensity of electricity production. To assess the effects of the regulatory environment, pooled ordinary least squares, fixed effects, and random effects models were used, as well as diagnostic procedures for checking multicollinearity and heteroscedasticity. At the same time, an additional analytical comparison of the security results with indicative financial parameters was carried out, in particular, the volatility of wholesale electricity prices, the estimated cost of debt capital for new renewable energy projects, balancing costs, and the role of public and guaranteed financing mechanisms. The results showed that at the cross-country level, a stronger regulatory environment is associated with a higher level of energy security, while in the time dynamics within the country, the most significant positive effect is provided by the actual increase in the share of renewable energy sources.