Complementarity and Substitution Effects of Investments in Renewable Energy and Global Economic Growth: Strategic Planning Opportunities for Development of Rural Areas

Abstract

Economic growth and societal well-being are highly dependent on the availability and efficient use of energy resources. This process evolves over time, along with changing developmental challenges, leading to an alteration of the world energy mix. The role of renewable energy sources in addressing these challenges has been widely recognized, but mostly from the ecological and climate change perspectives. Not enough focus has been paid to economic growth effects, such as potential job creation and income increases related to this process, often taking place in rural areas due to the availability of space and raw materials. In this context, the first objective of this study is to analyze the complementarity and substitution effects of investments in renewables and their connectedness with global economic growth. The second is to discuss the importance of effective strategic planning in supporting the growth of rural areas by promoting the production of renewable energy, based on selected international examples, including the EU Vision for Agriculture and Food recently presented by the European Commission. Using various data sources and employing basic statistical tools, we found that investing in renewable energy contributes to global economic growth. We also show how different countries view the indispensable role of rural areas in this process differently in their strategic policy documents.

1. Introduction

Since the 1800s, global energy mixes have been systematically changing, with visible transitions from one source to another. Until the mid-19th century, traditional biomass (i.e., the burning of solid fuels such as wood, crop waste, or charcoal) was the prevailing source of energy used across the world. The Industrial Revolution marked the first turning point, such as the rapidly rising use of coal and, subsequently, oil and gas. By the turn of the 20th century, hydropower became a recognized source of energy, and in the 1960s, nuclear energy was introduced on a noticeable scale. Finally, in the 1980s, renewables such as solar and wind energy were added to the mix [1]. These latter technological developments have induced changes in the global energy mix and, thus, dynamically accelerated related investments in recent years.

Global investments in renewable energy sources and clean energy production capacities, driven by environmental concerns and symptoms of climate change, have been very visibly increasing in the last several years. After 2010, when new investments into renewable energy exceeded USD 200 billion globally for the first time, they continued to increase even more. The world now invests almost twice as much into clean energy as it does in fossil fuels. Global investments in the energy transition amounted to USD 2.1 trillion in 2024, mostly spent on renewable power, grids, and storage. The largest investors building up solar and wind electricity capacities are China, the United States, and European Union countries, with China being the world leader in renewable power investments, particularly in solar PV and wind energy. In the United States, investments in clean energy have been driven by policies such as the Inflation Reduction Act. Similarly, the growth of the EU’s clean energy investments is supported by various policy initiatives and funding mechanisms [2,3].

The role of renewable energy sources in meeting the world’s changing developmental challenges is mostly perceived from the ecological and climate change perspectives. However, a long-run relationship between economic growth and renewable energy consumption, as well as a relationship between the existence of bidirectional causality between renewable energy use and economic growth, has been found [4,5]. Moreover, the development of renewable energy sources such as solar, wind, and biogas installations is an investment involving various stakeholders. This process often takes place in rural areas due to the availability of space and raw materials, but greater focus should be placed on economic growth effects, such as potential job creation and income increases in rural communities.

In general, the primary aim of this study is to analyze the complementarity and substitution effects of investments in renewables in relation to global economic growth. Considering the role of developmental policies in stimulating such processes, the importance of effective strategic planning in supporting the growth of rural areas by promoting the production of renewable energy is also highlighted, based on selected international examples, including the EU Vision for Agriculture and Food recently launched by the European Commission [6]. In this context, our research question concerns how the energy transition is supported by strategic planning with regard to the development of renewable energy production in rural areas in different regions and countries.

Consequently, the objectives of this study are as follows:

• To describe the scale of changes in renewable energy production capacity and shifts in the energy mix in the and in the five top world economies in 2004–2024;
• To analyze the effect of complementarity and substitution of renewables for non-renewables in the world and the five top economies, and their connectedness with global economic growth during the same period;
• To examine selected strategic policy documents, with special attention paid to the potential role of rural areas in allocating renewable energy production facilities and related opportunities for economic advancement of rural communities.

The first two objectives are meant to provide empirical evidence for the positive impact of investment in producing renewable energy on global economic growth, whereas the third one is formulated to point out the importance of rural areas in the context of policies designed to stimulate sustainable development of renewables as a contribution to economic prosperity.

According to basic macroeconomic theory, investments are a component of GDP; thus, investing in renewable energy sources on a considerable scale should influence GDP growth, as well as energy prices, determining their use and consumption. Energy is used virtually by all producers and consumed by every household, so it also constitutes a part of the consumption component of GDP. High energy prices increase overall production costs. Additionally, as experienced after Russia invaded Ukraine in February 2023, expensive energy can negatively affect people’s lives, even in relatively wealthy world regions such as Europe [7].

Energy production and consumption are strongly intertwined. If societies or economies limit energy use, the amount of energy produced also changes, leading eventually to excess generation capacities and saving fossil fuel reserves. The opposite is also true, with existing generation capacities and energy prices determining actual production and, therefore, consumption. Energy is a complex, specific type of good. Its market price is determined by the cost of energy resource exploration, recovery, refinement, pollution control, distribution, and transportation, as well as taxes and other fees, but energy prices do not reflect externality costs, which occur due to environmental damage, property damage, civil unrest, war, and health care. Notwithstanding, both externality costs and market prices influence the rate of energy consumption [8].

Investments in renewable energy are strongly stimulated by a growing awareness of global climate change and policy initiatives to mitigate its intensity and negative effects. In 2023, the International Renewable Energy Agency (IRENA) claimed that annual use of renewable energy sources must at least triple by 2030 to achieve global climate goals, specifically to reach the 1.5 °C climate target set by the Paris Agreement [9]. Although global investment across all transition technologies reached a record high of USD 1.3 trillion in 2022, investments would need to more than quadruple annually to remain on target.

One of the most spectacular policy initiatives in this area is the European Green Deal, which is the EU climate policy aiming for Europe to become the first climate-neutral continent by 2050. This policy is supposed to be achieved by investing in environmentally friendly technologies, decarbonizing the energy sector, making buildings more energy-efficient, and implementing cleaner forms of private and public transport [10]. The Commission has pledged to mobilize at least EUR 1 trillion in related investments over the next decade [11]. Additionally, the most ambitious energy and climate law in American history, the Inflation and Reduction Act (IRA), passed by the US Congress in August 2023, is worth mentioning. The IRA creates a foundation for a green revolution, with public spendings exceeding USD 800 billion, which are likely to be augmented by private decarbonization investments, adding up to USD 1.6 trillion [12]. Interestingly, the current world leader in energy sector transition investment appears to be China, accounting for nearly half of the global total in 2022 [13]. Correspondingly, it made up more than 50% of the world’s renewable energy investment [2,3].

Considering these facts, two hypotheses have been formulated:

• Increased global renewable energy production capacities allow for the substitution of non-renewable energy due to decreases in the relative prices of renewables over time;
• Investments into renewable energy are positively connected with global economic growth.

The first hypothesis requires some additional empirical justification and theoretical clarification. On the empirical side, it needs to be underlined that according to estimates based on data collected by IRENA [14], the cost of renewable energy between 2014 and 2023 plummeted. Double-digit cost per kWh (USD) declines in the following green energy sources were observed over this 10-year period:

• Bioenergy—19.4%;
• Concentrated solar power—54.2%;
• Offshore wind—60.0%;
• Onshore win—62.3%;
• Solar PV—75.0%.

Moreover, renewables have become the most cost-competitive source of new electricity generation. The levelized cost of electricity (LCOE) of 91% of newly commissioned utility-scale renewable capacity-delivered power is lower than that for the cheapest new fossil fuel-based alternative, enabling technologies such as battery storage, digitalization, and hybrid systems to become increasingly vital for integrating variable renewable energy, enhancing asset performance, and improving grid responsiveness. Renewables not only help reduce fossil fuel costs but also enhance energy security, economic resilience, and long-term affordability [14]. All this implies both the potential complementarity of producing energy from various sources and the increasing substitution of renewables for non-renewables.

Theoretically, the substitution effect is associated with the income effect resulting from changes in the relative prices of factors and increases in the use of cheaper factors. Based on Hicks’ decomposition approach, similarly to that shown, e.g., by Hirschey [15], the hypothesized substitution and income effects of lower production costs, and hence, decreased relative renewable energy prices, are illustrated in Figure 1.

Point A is the initial situation wherein a combination of certain amounts of non-renewable and renewable energy are consumed, assuming a given shape for the indifference curve and slope of the budget line. Following a drop in renewable energy prices by half, ceteris paribus, consumption at point C becomes possible, leading to increased consumer welfare. This change consists of two components. First, the leftward movement along the original budget line to point B, a tangency with the dashed hypothetical line representing new relative renewable and non-renewable energy prices, is the substitution effect. The upward shift from point B to point C on the higher indifference curve is the income effect resulting from the renewable energy price reduction. Such a proposition seems plausible in light of the observed tendency of power costs generated from non-renewables (e.g., solar and wind) and electricity storage costs to decrease [8,16]. More broadly, a change in the relative prices of production factors itself leads to more economical uses of factors that have become relatively expensive. This reasoning has also been applied to the view that increases in energy costs serve as motivation for more rapid innovative improvements in energy efficiency [17].

The second hypothesis is sort of self-explanatory, as investments, including investments in renewables, are part of the macroeconomic GDP equation. Using various data sources, mainly databases and reports published by the International Renewable Energy Agency (IRENA) and the World Bank data, an empirical analysis was conducted on the scale of investments in renewable energy and economic growth. Employing basic analytical and statistical tools, we found out that investing in renewable energy sources has led to a substitution effect of renewables for non-renewables and contributed to global economic growth. The growth rate of global investments in renewables and the global economic growth rate appear to be correlated. Having analyzed the shifts between shares of renewables and non-renewables in total electricity generation capacities in 2004–2024, it can be surmised that lower relative renewable energy prices may eventually lead to a noticeable substitution of non-renewables and, thus, an income effect. Therefore, both research hypotheses have been positively verified.

Examining the prospects for further development of renewable energy production capacities, special attention is paid to the role of rural areas in expanding such capacities and the importance of effective strategic planning in supporting the growth of rural areas by inproving the marketing of renewable energy. We not only emphasize a pivotal role of rural areas in this process but also indicate the potential economic gains for rural communities. Based on evidence presented in various studies, the rational use of space and natural resources available in rural areas can be argued to be vital for accelerating investments in renewable energy production. While contributing to the development of renewables, rural areas may also substantially benefit from such developments thanks to job creation and increased income in rural populations. Therefore, well-planned investments into renewables should be seen as a way to increase their prosperity. For instance, ensuring sustainable energy for agriculture is considered of strategic importance for the EU’s policies. This is envisaged through support in the form of subsidies covering the costs of installing new renewable energy systems on farms, reducing emissions, and increasing energy independence [18]. However, it needs to be borne in mind that objections to such developments are often lodged in the name of the environment and its protection, as well as the preservation of natural landscapes. A compromise to these conflicting interests might be the implementation of well-designed local development strategies and the promotion of new green jobs in rural areas [19].

2. Materials and Methods

Numerous data sources have been reviewed to obtain an appropriate data set needed for conducting an empirical analysis aimed at addressing our research objectives and hypotheses. After checking primarily for consistency, the following data were used:

• A time series regarding electricity capacity by world regions and technologies reported by the International Renewable Energy Agency (IRENA) [20];
• Data on global primary energy consumption generated from renewable sources [1];
• Data on investments by BloombergNEF into renewable energy [2];
• Time series data regarding the world economic development indicators, such as growth of GDP (gross domestic product) by countries provided by the World Bank [21].

The data set collected was processed to present the results of the calculations in tabular and graphic form. Apart from calculating basic descriptive statistics and providing an estimation of trends, a regression analysis using the Gretl Version 3 econometrics package [22] was also applied to determine the relationship between global investment in renewable energy and global economic growth. Both variables in question were expressed in growth rates to make them comparable. Next, such transformed time series were examined for stationarity using the ADF and KPSS tests. Additionally, the Doornik–Hansen and Jarque–Bera tests for normality were applied. Furthermore, to check for potential Granger causality between the variables, VAR models were estimated. Finally, a regression model (described in a greater detail in the subsequent section) was estimated, and dummy variables were used to reflect the impact of shocks caused by the financial crisis of 2008 and the COVID-19 pandemic on the analyzed relationship.

Additionally, to examine the complementarity and substitution between non-renewables and renewables, we used a dynamic approach looking at the quantities and changes in their shares in total energy generation capacity over time. The mathematical formula applied to identify the type of effect (i.e., complementarity or substitution) and its degree is as follows:

$$CSE=dQRE/dt\vee dQNRE/dt$$

(1)

where

• CSE—degree of complementarity or substitution;
• dQRE/dt—derivative of the share of renewables in the total electricity generation capacity with respect to time;
• dQNRE/dt—derivative of the share of non-renewables in the total electricity generation capacity with respect to time.

The calculated value of the CSE shows the degree of identified simultaneous effects (dQRE/dt or dQNRE/dt), which in this case, would be a shift in the renewable energy and non-renewable energy mix in one unit of added capacity, assuming monotonic growth in the analyzed period. The sign of the ratio indicates what type of effect prevails, namely, a negative value of dQNRE/dt and, automatically, a positive value of dQRE/dt mean substitution of renewables for non-renewables, whereas a negative value of dQRE and, hence, a positive value of dQNRE/dt mean complementarity (CSE = 0 implies no shift and perfect complementarity). The formula reflects symmetric changes in shares (− and +), and numerically, it is a difference between shares in two consecutive periods (e.g., t1 and t2, t2 and t3, and so on).

3. Results and Discussion

3.1. The Changing Level and Geographic Allocation of the Global Installed Electricity Capacity from Renewable Energy Sources

Investments in energy production can be analyzed from the physical and financial points of view. In the first case, developments in energy generation capacity can serve as a proxy indicator, whereas in the second, financial outlays serve as a proxy. The increasing importance of renewables is especially clear regarding electricity capacities. The changing levels of global renewable energy electricity capacity in 2004–2024, as reported by IRENA [20], are presented in Figure 2.

In the 2004–2024 period, the global renewable energy electricity generation capacity exhibited exponential growth, as shown by the statistically significant trend line fitting very well to the data. The relatively steady growth in the second half of the first decade strongly accelerated in later years. At the beginning of the third decade, the global electricity generation capacity from renewables exceeded 3 terawatts (TW) and continued to grow up to around 4.5 TW in 2024. The allocation of this capacity by world regions differs considerably and has been changing over time. As presented in

Table 1. Shares of the world regions in global renewable energy electricity capacity in 2004–2024.

Year	Africa	Asia	Central America	Eurasia	Europe	Middle East	North America	Oceania	South America
2004	2.9%	22.5%	0.8%	8.0%	25.1%	0.6%	22.5%	1.8%	15.9%
2005	2.8%	23.3%	0.7%	7.8%	25.1%	0.6%	22.2%	1.8%	15.7%
2006	2.8%	23.4%	0.7%	7.8%	25.3%	0.6%	22.1%	1.7%	15.7%
2007	2.7%	24.3%	0.8%	7.6%	25.3%	0.8%	21.6%	1.7%	15.3%
2008	2.6%	25.2%	0.7%	7.3%	25.5%	1.0%	20.9%	1.7%	15.0%
2009	2.5%	26.0%	0.7%	7.1%	25.8%	1.1%	20.4%	1.7%	14.7%
2010	2.4%	27.0%	0.7%	6.8%	25.8%	1.1%	20.1%	1.7%	14.4%
2011	2.3%	27.9%	0.7%	6.6%	25.8%	1.1%	19.9%	1.7%	13.9%
2012	2.2%	29.5%	0.7%	6.3%	25.8%	1.1%	19.6%	1.6%	13.3%
2013	2.3%	30.6%	0.6%	6.0%	25.9%	1.0%	19.3%	1.5%	12.7%
2014	2.2%	31.6%	0.6%	5.7%	26.2%	1.0%	19.0%	1.5%	12.2%
2015	2.1%	32.5%	0.6%	5.4%	27.1%	0.9%	18.3%	1.5%	11.6%
2016	2.0%	33.1%	0.6%	5.3%	27.3%	0.9%	18.2%	1.5%	11.1%
2017	1.9%	35.2%	0.6%	5.2%	26.6%	0.9%	17.4%	1.4%	10.7%
2018	1.9%	37.3%	0.6%	4.7%	25.9%	0.9%	16.9%	1.4%	10.3%
2019	1.9%	39.0%	0.6%	4.5%	25.1%	0.9%	16.7%	1.4%	9.9%
2020	1.9%	40.3%	0.7%	4.3%	24.1%	0.8%	16.5%	1.3%	10.1%
2021	2.0%	42.1%	0.6%	4.2%	23.4%	0.8%	16.0%	1.3%	9.6%
2022	2.0%	43.5%	0.6%	4.1%	22.7%	0.8%	15.6%	1.5%	9.2%
2023	2.0%	44.2%	0.6%	4.0%	22.5%	0.8%	15.5%	1.6%	8.8%
2024	1.9%	46.3%	0.6%	3.8%	21.5%	0.8%	15.1%	1.7%	8.3%

, in 2004, Asia, Europe, and North America had the largest comparable shares (well over 20% each) in the world total capacity. Since 2010, Asia has become a dominant region, reaching 46.3% in 2024. Consequently, the shares of Europe, and especially North America, have diminished.

The growth of the global renewable energy electricity generation capacity has been driven by the largest world economies. The current top five world economies (the USA, China, Japan, Germany, and India), accounting for more than half of the world’s GDP, have also been the main contributors to this growth. In 2004, they made up 33.2% of the global renewable energy electricity generation capacity. In subsequent years, this share has systematically grown, accounting for 62.3% in 2024. The compound annual growth rates (CAGRs) of renewable energy electricity generation for these economies are shown in Figure 3.

China had the highest CAGR for the period considered, exceeding 13%. Germany had the second highest CAGR, which was, however, considerably lower. The results for India and Japan are even less impressive but are still above the global rate, 7.4%. For Japan and the USA, the calculated CAGRs are somewhat below this value. However, given the fact that in 2022, generation from renewable sources surpassed coal-fired generation in their electric power sectors for the first time, investments into increasing their renewable energy electricity generation capacities are likely [23].

3.2. Identification of Complementarity and Substitution Effects of Global Investments in Renewable Energy and Their Connectedness with Global Economic Growth

The dynamically growing installed global electricity capacity from renewable energy sources has translated into exponentially increasing global primary energy consumption from renewables (Figure 4).

In 2024, this consumption was almost 3 times higher than in 2004. This increase can be argued to have resulted from the visibly changing global energy mix, specifically from the increasing substitution of non-renewable for renewable energy sources. This tendency is depicted in Figure 5. Between 2004 and 2008, the proportions of these two main sources of energy electricity capacity basically remained stable (21.8–22.8% and 78.2–77.2%, respectively), but in the following years, the share of renewables gradually increased, reaching 46.4% in 2024. This considerable shift in the world electricity capacity mix towards renewables observed in this period stems from a relatively faster growth of the electricity generation capacity from renewables than from non-renewables. The results of the calculations showing this tendency for the top five world economies and the world are illustrated in Figure 6.

First, between 2004 and 2021, the overall world electricity generation capacity increased by 2.4 times, while capacities from non-renewables and renewables increased by 1.7 and 5.1 times, respectively. This is mainly because, in the top 5 world economies, the growth of electricity generation capacity from renewables surpassed that from non-renewables very substantially, especially in Germany, the USA, and Japan, where electricity generation capacities from non-renewables in 2024 were basically the same as in 2004. Second, the biggest increases in total electricity generation capacities took place in China (7.6 times) and India (3.8 times), but the development of renewable energy sources was an evidently important part of these increases, particularly in China.

Energy generated from renewable sources can be used to complement or substitute energy supplied from non-renewable ones. In dynamic settings, both situations are possible at the same time, and clearly distinguishing between them is difficult. Using the approach described in Section 2 of this article, an attempt has been made to identify the type of effect from changing from non-renewable sources to a non-renewable electricity generation capacity mix.

Table 2. CSE (dQRE/dt) for the world and the top 5 five largest economies in the period from 2004 to 2024 (annual change in %).

Year	USA	China	Japan	Germany	India	World
2004	−0.18%	−0.28%	0.05%	1.81%	0.97%	0.16%
2005	0.10%	−1.07%	0.25%	2.42%	0.97%	0.18%
2006	0.26%	−1.60%	0.35%	2.25%	1.17%	0.05%
2007	0.54%	−0.20%	−0.13%	1.58%	−0.15%	0.22%
2008	0.68%	1.56%	0.12%	1.00%	0.85%	0.56%
2009	0.90%	1.41%	0.08%	4.14%	−1.40%	0.72%
2010	0.84%	0.73%	0.55%	3.58%	−0.25%	0.61%
2011	0.66%	1.01%	0.24%	3.47%	−0.66%	0.90%
2012	1.48%	1.07%	0.20%	5.52%	−1.28%	1.04%
2013	0.68%	2.27%	2.01%	1.37%	−0.77%	1.09%
2014	0.75%	1.76%	2.55%	0.52%	0.30%	1.03%
2015	1.43%	1.39%	3.15%	2.39%	−0.17%	1.27%
2016	1.64%	1.42%	1.67%	1.99%	2.03%	1.35%
2017	1.08%	2.11%	2.02%	2.08%	2.32%	1.28%
2018	1.08%	1.36%	1.65%	−0.32%	1.00%	1.02%
2019	1.46%	1.15%	2.48%	2.01%	0.91%	1.44%
2020	2.18%	2.98%	1.69%	2.24%	0.83%	2.01%
2021	2.12%	2.09%	1.69%	0.87%	1.80%	1.77%
2022	1.87%	2.27%	1.46%	1.50%	2.12%	1.88%
2021	1.86%	4.70%	1.56%	3.82%	1.30%	2.87%
2024	−0.18%	4.76%	0.58%	2.58%	3.00%	3.26%

Note: negative values marked in red indicate a complementarity effect, whereas positive values marked in green indicate a substitution effect.

includes the CSE values calculated in this case, presented as dQRE/dt, for the world and the top 5 five largest economies during the 2004–2024 period. Recall that the calculated values of dQRE/dt should be interpreted as reflecting a degree and prevalence of either a complementarity or substitution effect (i.e., negative values indicate the former, whereas positive values indicate the latter). The proposed formula is an indirect way to identify complementarity and substitution effects in dynamic settings. Its application to changes in shares of renewables and non-renewables in electricity generation capacity conjecturally implies that such changes are ultimately reflected in the changing energy mix supplied and used from these two types of sources. Therefore, based on the obtained results, our reasoning about complementarity and substitution effects seems plausible.

During the 21-year period, the substitution effect from increasing renewable electricity generation capacities dominated every year. Moreover, the effect strengthened. In other words, expanding electricity generation capacities through the development of renewable energy sources led to a relative decrease in non-renewable energy sources in the overall electricity capacity mix. Each country among the top 5 world largest economies is characterized by somewhat different patterns of change in calculated dQRE/dt values. Nevertheless, all countries but India experienced a clear prevalence of the substitution effect. Even in India, such a tendency has been observed since 2016, before which the complementarity effect was quite often the prevalent case.

The described development of the global electricity generation capacity from renewable energy sources has been made possible due to investments underlying this process. BloombergNEF data on global investments in renewable energy in the last 21 years are presented in Figure 7 [2,3]. As can be easily noticed, the levels of investment exhibit an increasing trend, similar to the trend of renewable energy electricity generation installation capacity levels shown in Figure 1. In both cases, much growth has occurred, especially in the last three years. In view of such a finding, a sort of natural question arises: whether investments in renewable energy are correlated with global economic growth, as theoretically assumed. This finding can also potentially be explained by economics, namely, the substitution of electricity generation capacity from non-renewables with renewables implies the existence of an income effect, following our first hypothesis formulated in the Introduction in light of the related theory.

Economic growth is determined by various factors. On the macroeconomic basis, apart from investment, a key driving force is consumption. Moreover, the consumption of energy is an important indicator of the intensity of economic activities. Simply, assuming a certain energy efficiency, higher energy consumption leads to greater economic output. This is consistent with the earlier described exponential growths in global renewable energy electricity generation capacity (Figure 2) and primary energy consumption from renewables around the world (Figure 4).

Logically, a positive relationship between investments in renewable energy and economic growth is supposed to exist. However, economic growth can be significantly hampered by random events, which drastically affect both producers and consumers on the global scale. This century witnessed two such events, namely, the global financial crisis of 2008 and the COVID-19 pandemic, both causing negative implications for global economic growth and its departure from previously established growth paths [24,25]. Bearing this in mind, to evaluate connectedness between global investments in renewable energy and global economic growth first, the period 2010–2019 (after the financial crisis ended and before the COVID-19 pandemic started) was chosen for an empirical analysis. During this period, the yearly growth rates of investments in renewable energy were positively correlated with the global growth rates (the correlation coefficient of 0.71 is statistically significant at α ≤ 0.05).

The dynamics of the yearly growth rates of investments in renewable energy and global GDP growth rates were also analyzed for the period 2004–2024, taking into account shocks caused by the financial crisis, as well the COVID-19 pandemic, using the following simple regression model:

$$GDPGR={\beta }_0+{\beta }_{1}IREGR+{\beta }_{2}FCShock+{\beta }_{3}CPShock$$

(2)

where

• GDPGR—GDP growth rate;
• IREGR—global renewable energy investment growth rate;
• FCShock—dummy variable for the financial crisis growth shock;
• CPShock—dummy variable for the COVID-19 pandemic growth shock;
• β₀, β₁, β₂, and β₃—constants and regression coefficients.

Data on investments are expressed as growth rates to make them comparable with GDP growth rates. Based on the results of the ADF and KPSS tests (with constants and trends), both examined series of growth rates can be considered stationary. Additionally, using the Doornik–Hansen and Jarque–Bera tests for normality, variable values cannot be concluded as normally distributed. Apart from these tests, the estimated VAR model statistics provided no clear evidence for the existence of Granger causality between the variables.

The results of the model estimation are presented in

Table 3. Parameters and selected statistics of the estimated regression model.

Item	Value	S.E.	t-Statistic
β0	3.10	0.30	10.27 ***
β1	0.02	0.01	1.83 *
β2	−4.38	0.98	−4.46 ***
β3	−6.21	0.96	−6.48 ***
F-statistic		22.99 ***
R2 statistic		0.82
Adjusted R2 statistic		0.78
Log-likelihood		−24.71
Schwarz criterion		61.41
Akaike criterion		57.43
Hannan–Quinn		58.21
Durbin–Watson statistic		2.04
Doornik–Hansen test (normality of residual)		13.84

*, ***—statistical significance levels at α ≤ 0.10, and α ≤ 0.01, respectively.

. The model estimates indicate a statistically significant relationship between global GDP growth rate and global renewable energy investment growth rate if the dummy variables for shocks are included.

Moreover, 82% of the global GDP growth rate variability is explained by the model. Therefore, despite simplicity and robustness not free from deficiencies, the model estimates provide empirical evidence supporting our hypothesis that investments in renewable energy are positively connected with global economic growth. However, clearly, sustainable continuation and, particularly, intensification of this positive development will require not only improved or new technology solutions but also locations to place necessary installations and electric grids. Relevant strategic planning and effective public policy implementation regarding investments in producing renewable energy in rural areas could facilitate such further progress in the energy transition process.

3.3. Renewable Energy Production as a Developmental Opportunity for Rural Areas in the Context of Cross-Country Approaches to Strategic Policy Planning

Global investments in energy transition technologies have accelerated in recent years; however, the current pace is not sufficient to meet the world climate or socio-economic development goals [26]. Therefore, more investments into renewable energy generation capacities must inevitably be embraced by rural areas. Renewable energy generation is part of the bioeconomy and widely believed to be a development opportunity for rural areas [27,28]. Circular bioeconomy is an element of the green transition and an important tool for reaching zero greenhouse gas emissions. Thus, rural areas are “increasingly important for sustainable energy transition” [28], and it is common to link “renewable energy” to “rural development” [29]. EU policies strongly emphasize the green transition and the role of renewable energy as part of the EU’s climate policy. For rural areas, it provides not only economic opportunities but also a chance to increase the reliability of energy supply [30] and to improve the air quality [31].

Rural areas offer two very important resources to produce renewable energy: space for solar and wind installations, as well as raw biomass materials [12,24,32,33]. Each source of renewable energy has specific requirements to be optimally used and mostly depends on natural and socio-economic conditions, together with the expected costs of the generated energy [34,35]. While the costs of solar energy are primarily influenced by technology, climate, and national policies, offshore wind energy costs are predominantly affected by policies. On the other hand, bioenergy costs are the most variable due to factors such as cost and availability of the primary material, the type of conversion process, and the power production process. Similarly, environmental and natural conditions determining the optimal renewable energy source should be precisely defined to allow for the potential benefits to be calculated. Studies of rural areas conducted at the local level incorporate different aspects of renewable energy production, emphasizing the dependance of additional income generation on the application of technologies based on local environments [36]. Investments into renewable energy in rural areas improve the rural household economy in different ways. The construction and maintenance of related installations create demand in other economic sectors, as well as employment. Similarly, new sources of energy attract other sectors of the economy, and energy surpluses are a direct source of income [37].

Among others, different sources of biomass in rural areas that could be used for energy production have been identified in additional to those associated with agricultural production. Therefore, investments aimed at producing energy from biomass due to the wide range of biomass sources are likely to stimulate the development of infrastructure and local employment in rural areas beyond the potential associated with agriculture. Generally, in the European Union, forestry used to be considered the main source of biomass for energy production [38]. However, agricultural biomass available in some European countries (e.g., the Baltic Sea region countries) can also be effectively used for producing energy [39], and the potential of biomass originating from the agricultural and processing sectors can be recognized as a source of energy supply diversification needed due to political reasons [40]. Investments into renewable energy projects in rural areas are also recognized as a factor reducing poverty by providing job opportunities in countries such as China, Brazil, and India [41].

The expansion of renewable energy sources in rural areas is very much in line with the concept of decentralized supply renewable energy [42]. Small-scale solar and wind generation units, and biomass processors are argued to be more environmentally sustainable when optimized for the use of local resources and allow for less transportation infrastructure demands; namely, the production of dedicated energy crops on marginal or degraded lands in additional to the provision of biomass for energy production could result in various positive effects with no competition with land for food crops [43]. These are related to ecosystem services such as improved soil water and wind erosion control, soil C sequestration, the absorption or retention of pollutants or metals, the stabilization or reclamation of minesoils, and improvements in soil properties [44]. All of these services can result in upgrades to local conditions and can stimulate economic activities formerly limited by poor environmental conditions.

Rural areas are at the center of the so-called water–energy–food nexus. This is a dynamic interrelation [45], and the current disruptions related to green transition will reshape and rearrange the relations between water–energy and food security. For example, expansions to solar energy production are likely to directly compete for land already used for commercial purposes, such as cropland or commercial forest due to economic and suitability constraints [46]. However, the coexistence of different forms of economic activities related to land must be ensured even at the local level. This can be a difficult task as different stakeholders can have conflicting approaches to the use of natural resources and landscapes. A good example of such a problem is island tourism. A study conducted showed that as many as 40% of island residents were against any form of renewable energy as they perceive the use of all types of renewable energy as a destruction of the touristic attractiveness of an island [47]. Therefore, a renewable energy mix, or hybrid renewable energy system [48], should be carefully chosen at the local level to make it suitable for local needs and the potential of generating different types of renewable energy, as well as to align it with other economic activities present in the area.

In recent years, the EU has substantially strengthened its efforts in achieving zero emissions. The European Green Deal and the regulations based on strategies related to greening the EU economy also apply to the agricultural sector as it is an important source of greenhouse gas emissions. Agriculture is to be included in the Fit for 55 regulation package, which sets strict emission reduction targets for 2030. The planned reduction cannot be achieved without active involvement of farmers. In November 2022, an agreement was reached on the national annual targets on reducing emissions from sectors not included in the Emissions Trading System (ETS) [49]. However, neither agriculture nor fisheries will become part of the new ETS [50]. The regulations of Fit for 55 adopted by the Council in April 2023 do not tackle agriculture, and only in the regulation establishing a Social Climate Fund (COD 2021/02) are rural areas mentioned among the areas in need of support from this fund, as rural households can be especially affected by transport poverty. One of the variables used to calculate maximum allocation for the Member States is populations at risk of poverty living in rural areas. However, the amendment in the March 2023 regulation (EU) 2018/841 related to land use, land use change, and forestry (LULUCF) once again recalls the need to reduce emissions but does not target agriculture at a farm level [51]. It only applies to the Member States’ target emission reductions, with the method of which they reach their goals is up to the individual states, whether using national policies or EU policies such as the Common Agricultural Policy (CAP). The strategic plans for agricultural development currently being implemented clearly show differences in the approaches of EU Member States in supporting investments in climate change adaptation and the development of renewable energy sources [52]. On the one hand, in Belgium, Ireland, and Austria, more than 10% of farms are implementing investments in renewable energy sources. On the other hand, in Italy, Greece, and Romania, such support is envisaged for less than 1% of farms (

Table 4. Values of indicators in selected EU Member States.

Member State	R15	R16
Belgium—Flandres	6.30	17.55%
Ireland	39.40	15.15%
Austria	182.25	11.54%
Spain	184.60	6.92%
France	3.23	5.20%
Netherlands	5.54	3.67%
Slovakia	90.04	3.45%
Hungary	131.29	3.16%
Finland	50.00	2.78%
Germany	N/A	2.44%
Slovenia	43.00	2.12%
Poland	236.80	1.12%
Latvia	11.00	1.07%
Sweden	N/A	0.45%
Portugal	22.00	0.27%
Malta	N/A	0.14%
Lithuania	1.6	0.14%
Italy	51.00	0.08%
Greece	11.00	0.03%
Romania	89.00	0.01%

R15—Renewable energy from agriculture and forestry and from other renewable sources: supported investments in renewable energy production capacity, including bio-based sources in MW. R16—Climate-related investments: share of farms benefitting from CAP investment support contributing to climate change mitigation and adaptation and to the production of renewable energy or biomaterials in % of total farms. N/A—not available.

).

The Russian invasion of Ukraine has added a new dimension to the problem of energy supply in the EU. Therefore, a new program was launched in May 2022 called REPowerEU [53]. The program includes four pathways for ensuring affordable and sustainable energy in the EU:

• Diversifying energy supply sources;
• Saving energy;
• Securing affordable energy supplies;
• Investing in renewables.

The program offers both grants and loans as part of the Recovery and Resilience Facility and includes not only investments but also changes in regulations to enable faster development of means of renewable energy use and to increase energy efficiency. During the program period from 2014 to 2022, investments in renewable energy were made possible within the CAP Pillar II co-financed Rural Development Programmes (RDPs). However, these programs did not contribute significantly to the use of renewable energy. For instance, the Czech RDP enables investments in renewable energy, but its overall contribution to the use of renewable energy in the Czech Republic amounted to only 0.29% [54].

Additionally, within the EU co-financed regional operational program in 2014–2022, local self-governments had implemented projects related to renewable energy sources, for example, those in Poland [55,56]. Rural municipalities invested in renewable energy mainly for public buildings, although some of them also tackled residential multi-family buildings. The majority of the projects (78%) were related to solar energy [49]. An analysis of the supported projects showed that less-developed rural municipalities with a significant share of agriculture in their economy had been the main beneficiaries. These findings are in line with the results of the study conducted by Klepacki et al. [57], which shows that Polish local government units could invest in renewable energy systems only thanks to the EU funds.

Such investment projects should help popularize renewables among rural communities. However, the extent of this development is not satisfactory, the issues related to renewable energy are part of the objectives of the current CAP. Therefore, specific energy-related objectives are present in the Polish CAP Strategic Plan 2023–2027. However, as stated in this document, the objectives “Development of sustainable energy based on non-food applications of agricultural and forest biomass” and “Use and development of alternative energy production possibilities” are only partially included in the plan. In fact, only one measure tackles the issue of renewable energy, which is I.10.2. “Investments in farms in the field of renewable energy sources and improvement energy efficiency”. As stated in the Polish CAP Strategic Plan, only 257 projects related to agricultural biogas and energy efficiency of farm buildings will be supported [58]. This means that just one in four rural and urban–rural Polish communes can receive the funding. This shows that this measure will not have a significant impact on the green energy transition in Polish rural areas. The total number of supported farms is estimated to amount to approximately 4900 (0.35% of) farms in Poland [59].

However, Poland also has a program for “Energy for the countryside”, running from 2022 to 2030. It aims to increase the availability and use of renewable energy sources in rural areas. This program is targeted at farmers and energy cooperatives. Support can be granted for investments into photovoltaic installations, water power plants, and wind and biogas installations. The program offers loans of up to 100% of eligible costs, as well as grants [60]. After the first call, the program budget was increased 5 times to over EUR 100 million. In the first edition of the program, over 90% of the applications were projects related to biogas installations.

Different EU countries take different approaches to supporting energy transition in rural areas. For a comparison, France has adopted much more extensive use of CAP funding than Poland in its CAP strategic plan 2023–2027 regarding investments into renewable energy [61]. In France, the need to reduce the use of energy in the agricultural and forestry industries is also strongly emphasized in its CAP strategic plan, as is the use of renewable energy to increase the use of renewables, up to 32% of the total energy used by 2030 and up to 40% by 2050 [61]. The most striking difference in the French use of CAP resources compared with the Polish one is the fact that in France, as many as 5.20% [61] of farms are to benefit from the investment in the use of renewable resources. Thus, the share of farms to be supported is nearly 5 times higher than the respective number in Poland, which indicates a scale of foregone benefits.

There is no doubt that the role of rural areas in contributing to the global development of renewables is, to a great extent, determined by national economic conditions and the implantation of policy solutions. Still, the economic forces driving this process are shaped by the largest world economies, such as China, the USA, or the EU, and their orientation towards the use of renewable energy, especially in minimizing electricity generation from fossil fuel sources. Ambitious world energy transition goals cannot be achieved without rural areas accommodating the necessary investments in renewables. However, both government actions and economic incentives facilitating the implementation of renewable energy investment projects are required to intensify this process. Otherwise, the potential of rural areas to supply energy from renewable sources will not be well utilized.

An interesting example of publicly supported investment in renewable energy pro-duction is provincial incentives from rural economic development programs to support small photovoltaic applications in China [34]. Additionally, solutions such as lowering electricity costs for people living near wind farms or for those whose land is used to build transmission lines could be more widely offered [33]. This solution might help drive investments into renewable energy that are often held back by slow procedures for securing permission to build on land and to connect to the grid, especially in Europe and North America. In general, without active involvement of rural communities based on shared value and benefits, ensuring that global investments in renewable energy production remain on the right track can be argued to be very challenging.

4. Conclusions

As theoretically expected, increased investment and consumption should contribute to economic growth. The results of the analysis presented in this article provide empirical evidence that this was the case with rising global investments into renewable energy and global primary renewable energy consumption positively influencing global economic growth from 2010 to 2019. Achieving global climate goals requires a very drastic reduction in electricity generation from fossil fuels. The substitution of non-renewable means of electricity generation with renewable ones not only helps meet this challenge but also, due to lower costs, as shown in the article, may lead to increases in income. Consequently, economic growth can be stimulated and consumer welfare increased through appropriately planned and implemented investment policies in the development of renewable energy. The use of renewable sources is also important in meeting the objectives of energy security and affordability. Increasing the supply of energy from renewable sources can contribute to the decentralization of highly state-controlled and regulated markets.

Rural areas, due to their environmental and socio-economic characteristics such as low population density and space availability, can be characterized as suitable for renewable energy production investments; namely, technologies, be it solar, wind, or biomass-based, can be implemented based on their ability to take advantage of the local environment [35]. The positive impact of renewable investments on new employment opportunities can be matched with ongoing structural changes in the primary sector, resulting in farm upscaling and diminishing demand for labor in the agricultural sector [40]. Similarly, investments in renewable energy improve conservation of the natural environment, which can then stimulate rural tourism-related activities [32,43]. Therefore, the use of sustainable energy for agriculture is considered by a wide range of rural development stakeholders to be a feasible future development strategy for the EU’s agriculture industry, as noted in the discussion about strategies, pointing to the need for support in the form of subsidies covering the costs of installing new renewable energy systems on farms to reduce emissions and to increase energy independence [18].

However, the deployment of renewable energy in rural areas creates social and spatial problems when these changes do not sufficiently align with appropriate economic and social transformations [62]. Simultaneously, underinvestment in ICT and human capital may hamper the efficiency of solar and wind energy projects [63].

Examples from the EU Member States indicate that the potential of renewable energy to stimulate rural economies can be undermined in national agriculture and rural development strategies. On the other hand, local rural development stakeholders recognize the potential benefits accompanying such investments [51]. This indicates that at the local level, optimal technology and renewable energy green transition of rural areas should be implemented. Therefore, planning policies targeting rural development at different administrative levels should harmoniously offer support for the use of renewable energy. What should be particularly addressed is the growing inability to absorb energy generated from wind and photovoltaic farms due to outdated infrastructure and energy management system [64]. The concept of territorial justice seems the most suitable for improving the planning of rural development policies, with elaborations at different administrative levels [65], as it focuses on the specific needs of local communities and adjusts the form and scale of support to specific local conditions [66]. This clear evidence of the positive influence of renewable energy development on economic growth is, therefore, a valid point in supporting right valuation of such investments’ position in strategic development plans. The effective implementation of such plans would contribute to sustainable development through more environmentally friendly production and the use of energy, as well as the creation of green jobs in rural areas.

Finally, this study is not free from limitations. One of the most important limitations is the availability of consistent and reliable data on the capacities and production of renewable energy around the world as well as on investments in renewables in rural areas and subsequent job creation. Additionally, although widely used, the GDP is not a perfect measure of economic growth and welfare. Another limitation hindering unquestionable conclusions from being drawn comes from the proposed method being applied for the identification of complementarity substitution effects. This is a proxy solution used in the absence of reliable data to directly estimate these effects. Similarly, the simplicity of the statistical model used provides rather basic information about connectedness between the variables considered (in reality, the discussed relationship is much more complex). Another limitation is related to difficulties in performing an objective comparison of the discussed strategic development plans and their implementation. Nevertheless, despite these limitations, the authors believe that the study results provide useful contributions to the discussion about determinants and implications of developing energy supply from renewable sources, especially in rural areas. Additionally, they may constitute inspiration for further more in-depth studies, devoted more specifically to the impacts of investing in rural renewables on job creation in and the economic welfare of rural communities.