Energy security and RES penetration in a growing decarbonized economy in the era of the 4th industrial revolution

Abstract

The 4th industrial revolution is expected to deeply transform the functioning of the global economy, society, and financial system. It has already triggered several challenges and opportunities for the energy sector. In this context, a secure energy supply is one of the most important factors of international economic activity and technological revolution. This study explores the link between economic growth based on the 4th industrial revolution and energy security. To this end, we use data from the European Union countries for the period 2005–2019. We also use the gross domestic product and energy security indicators as outputs of a ray production function whose inefficiencies can be explained by the share of their fossil and renewable energy. We develop a multiple-output production model using a ray production function with polar coordinates allowing for the estimation of production frontiers and country-specific inefficiency effects. Using the multiple-output production function along with different energy security indicators, we can explore how the energy system endorses economic growth, which is crucial to addressing policy designs from the perspective of the 4th industrial revolution. Forecast analysis confirms that renewable energy sources have positive effects and reduce deviations from the efficient frontier.