Structural changes and trends in China's renewable electricity production in the policy evolution process

Abstract

This study employs the econometrics test of endogenous structural breaks to separately investigate the changes in trends of the share of hydropower and non-hydro renewable power in electricity production for China using two separate sub-panels of data spanning from 1971 to 2015 and 1990–2015. To identify structural changes in each renewable power generation series, we apply the Bai and Perron procedure for determining structural breaks to estimate shifting-mean autoregressions and use the low frequency Fourier-type Lagrange Multiplier test to approximate the time series in a non-linear form. Through these tests, our empirical results reveal that the series under investigation are characteristic of segmented trend stationary processes around four or one structural breaks, among which, there are two upward shifts in the 45-year series of hydroelectricity generation occurring in 1978 and 2008, respectively. Meanwhile, one upward shift is identified in the 26-years series of non-hydro renewable generation occurring in 2005. The patterns in the timing of structural changes are suggestive of the causal effects from the recent regulatory shocks and policy change. In the present study, we conduct an innovative attempt to reveal the relevance of renewable energy and policy changes, which may also provide some empirical value in investigating the effect of policy series on renewable energy in other countries.