The role of Portuguese electricity generation regimes and industrial production

Abstract

This paper examines how renewables (special regime) simultaneously interact with conventional sources (ordinary regime), within the Portuguese electricity generation system. There is also an appraisal of the relationship between these two regimes and economic activity, using the industrial production index. First difference VAR modelling was applied for monthly data for the time span of 2007:M1 to 2012:M10. The appropriateness of the VAR is proved. The relationship between variables develops within a structure of endogeneity, i.e., they generate feedback and may be both explained and explaining variables, simultaneously. The outcomes show a strong complementarity between the ordinary and special regimes. Economic activity causes electricity consumption but only the special regime causes economic activity. Moreover, the non-renewable component of the special regime does not cause a need for backup from either the ordinary regime or imports, contributing to a reduction in energy dependency.