Modelling of the Effects of Renewable Energy Establishments towards the Economic Growth of a Nation

Renewable energy is one of the current hot topics in the global energy forum and many of the conventional fossil fuels-based establishments have been replaced with renewable sources over the last few decades. Countries such as China, USA and India have already made huge investments on installing renewable energy infrastructure. Hence, many of these countries are in need of investigating the effects of their investments on the countries’ economic growth, carbon footprint and the well-being of their environment. This study provides a comprehensive discussion on how renewable energy usage can contribute towards the economic enhancements mainly to the Gross Domestic Production (DGP). A conceptual model were established to understand the effects of the development of renewable energy establishments on some key economic performance indicative parameters such as the household consumption, government consumption, capital formation, trade balance and energy import and then eventually on the GDP formation. Then, the data collected from an emerging economy were analysed incorporating a path analysis by using SPSS Amos software. Chi square (χ2) test and maximum likelihood indices are used to assess the overall fit of the model. Overall, the findings of this study clearly show that the promotion of renewable energy establishments can cause a significant reduction in energy related imports while increasing the GDP of a nation. Accordingly, it is apparent that Sri Lanka has aligned their economic strategies in terms of becoming a 100% sustainable energy driven nation by 2050 as their major economic indicators are positively correlated with the promotion of renewable energy establishments.