Total factor efficiency and convergence analysis of renewable energy in Latin American countries

Abstract

This paper analyzes renewable energy efficiency in Latin American countries (LAC) and investigates the efficiency convergence. Based on the data of the period 2005–2014, Super-efficient Slack-Based Measure (S–U-SBM) model is applied to measure the total factor efficiency of renewable energy, and Malmquist-Luenberger productivity index (ML) is applied to detect the changing trend of efficiency. The S–U-SBM results show that the average value of the total factor efficiency of renewable energy in LAC is 0.808 and has an upward trend, and for individual country, the efficiency value ranges from 0.262 to 1.302 with an unbalanced development and utilization of renewable energy. The ML results show that the average of the total factor efficiency of renewable energy change index is 1.014, and the technical efficiency change is the main factor that drives the growth of the ML in LAC. For two sub-regions, South America, Central-North America and Caribbean, the main factor is technological progress change and technological efficiency change respectively. There are significant conditional convergences in the total factor efficiency growth of renewable energy in the whole Latin American region and the two sub-regions. Technological innovation is the key for Latin American countries to improve the total factor efficiency of renewable energy at this stage.