Disillusioning the benefits of renewable energy in energy intensity: global panel analysis

This study re-examines the widely held assumption that the expansion of renewable energy enhances national energy efficiency, typically inferred through reductions in energy intensity. Although energy intensity defined as the ratio of energy use to economic output is frequently employed as a proxy for efficiency, its interpretation becomes increasingly problematic when measured using total energy supply (TES), particularly amid the rising share of variable renewable energy (VRE). Unlike conventional energy sources, VRE lacks a defined fuel input, which can artificially lower TES-based intensity figures without reflecting actual improvements in technical efficiency. Using a global panel dataset covering 149 countries from 1990 to 2020, this study applies a mediating effect model and long-run panel cointegration techniques to investigate whether the observed reductions in energy intensity genuinely reflect efficiency gains or are merely statistical artifacts. The results show that a 1% increase in the share of renewable energy is associated with a 0.20% reduction in TES-based energy intensity, primarily through enhanced generation efficiency. However, this mediating effect does not appear when energy intensity is measured using total final consumption (TFC), indicating no improvement in demand-side efficiency. Additional long-run analysis reveals that while renewable energy expansion plays a significant role in mitigating greenhouse gas emissions, its relationship with economic growth is weak or even negative. These findings suggest that conventional TES-based energy intensity metrics may misrepresent true efficiency progress. Policymakers are therefore encouraged to adopt TFC-based indicators or develop new metrics that more accurately capture the structural changes driven by renewable energy transitions.