The role of institutional quality on public renewable energy investments

Abstract

In this paper, we examine the determinants of public renewable energy investments in 87 countries from 2011 to 2020, with a focus on 64 middle-income economies. Using panel quantile regression analysis, we explore how institutional quality, financial stability, and economic and policy conditions influence these investments. Our findings show that lower perceived corruption significantly boosts public renewable energy investments, particularly in middle-income countries with low to moderate investment levels. Financial stability, measured by bank Z-scores, positively affects investments, especially in middle-income countries with moderate to high levels of investment. Additionally, GDP per capita and government spending are significant drivers for high-investing countries, whereas foreign direct investment impacts low-investing countries. We also find that public investors are resilient to economic policy uncertainty, emphasizing their role during volatile periods. These results provide key insights for policymakers seeking to accelerate renewable energy transitions, especially in developing economies. Our study contributes to the understanding of public investment dynamics in the renewable energy sector and underscores the importance of institutional quality and financial stability in promoting these investments.