Renewable energy transition paradox: How capacity and consumption share differentially affect energy poverty in the European Union

Center of Innovation in Economics Finance and Investment, Faculty of Economics, Chiang Mai University, Chaing Mai, Thailand, 50202

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Abstract

This study examines the relationship between renewable energy deployment and energy poverty across 25 European Union member states from 2015 to 2023. Employing multiple panel regression specifications, we analyze how renewable electricity capacity per capita and renewable energy share affect energy poverty. Panel unit root tests confirm variable stationarity, enabling robust panel estimation. Results reveal a paradoxical relationship: renewable electricity capacity per capita demonstrates negative associations with energy poverty, while renewable energy share exhibits positive relationships in fixed effects models, suggesting that rapid renewable penetration increases temporarily exacerbate affordability challenges through transition-related costs. Income inequality emerges as the strongest predictor across all specifications. These findings indicate that achieving a just energy transition requires restructuring renewable energy financing mechanisms away from regressive consumer levies toward progressive funding sources, while implementing compensatory measures protecting vulnerable households from short-term transition costs that disproportionately burden low-income populations.