Renewable Energy and Banking Sector Development Impact on Load Capacity Factor in Malaysia

Abstract

BackgroundMost studies focusing on the environment predominantly utilize indicators such as CO2 and ecological footprint (EF), which solely examine the demand aspect of the environment, therefore overlooking the supply dimension. This limitation restricts the policy recommendations obtained from those studies. Load Capacity Factor (LCF) variable overcomes this deficiency in the literature by including both the supply and demand dimensions of the environment in the analysis and makes it possible to provide more comprehensive policy recommendations. This article discovers the impact of renewable energy consumption (REC), banking sector development (BSD), and economic growth (GDP) on the LCF in Malaysia between 1980 and 2018. Methodology: After investigating the stationarity of variables utilizing Lee and Strazicich's (2003) Unit Root (LSUR) test that considers structural breaks, the study tested the long-term (LT) relationship in the model through the ARDLB test approach. Subsequently, the short-term (ST) and LT coefficients of the GDP growth, BANK, and RE consumption variables are calculated. FindingsThe Load Capacity Curve (LCC) theory is valid in the ST and LT. In both the ST and LT, RE consumption has a detrimental effect on environmental sustainability (ES), while BSD has a positive impact. In conclusion, the study presents novel findings related to environmental policies for the policymakers of Malaysia.