Research and Development and Investments in Renewable Energy: A Study on Power Generation Companies

Schappo, Fillipe; Ferreira, Denize Demarche Minatti

doi:10.15728/bbr.2022.1435.en

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Article • BBR, Braz. Bus. Rev. 21 (6) • 2024 • https://doi.org/10.15728/bbr.2022.1435.en copy

Research and Development and Investments in Renewable Energy: A Study on Power Generation Companies

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

Spending on Research and Development (R&D) stimulates technological innovation and is necessary to coordinate renewable energy consumption and the electric power industry’s sustainable economic development. This paper analyzes whether R&D expenditures influence sustainable economic development through investments in renewable energy matrices in the electric power industry. The study was carried out with thirteen power generation companies from 2017 to 2020. The results reveal that R&D expenditures positively affect investments in renewable energy, endorsing the view that allocating resources for R&D is essential for innovation in the Brazilian electric power industry. As contributions, we highlight the importance of R&D expenditures and this area’s ability to develop solutions and technologies to allow the industry’s sustainable economic development.

Keywords:
Research and Development; Electric power industry; Investments; Renewable energy matrix

	Companies	Services
1	AES Tietê Energia S.A.	G
2	Cemig Geração e Transmissão S.A.	G and T
3	Centrais Elétricas de Santa Catarina	G and D
4	CESP - Companhia Energética de São Paulo	G
5	Cia Estadual de Geração e Transmissão de Energia Elétrica-CEEE-GT	G and T
6	Companhia Paranaense de Energia S.A.	G, T, and D
7	CPFL Energia S.A.	G and D
8	EDP Energias Brasil S.A.	G, T, and D
9	Empresa Metropolitana de Águas e Energia S.A.	G
10	Enel Brasil S.A.	G, T, and D
11	Engie Brasil Energia S.A.	G
12	Neonergia S.A.	G, T, and D
13	Rio Paranapanema Energia S.A.	G

Variable	Description	Operacionalization	References
Dependent variable
RE	Disbursement to buy or expand assets related to renewable energy matrices	RE _it	(Wu et al., 2020Wu, T., Yang, S., & Tan, J. (2020). Impacts of government R&D subsidies on venture capital and renewable energy investment - An empirical study in China. Resources Policy, 68, 101715. https://doi.org/10.1016/j.resourpol.2020.101715 https://doi.org/10.1016/j.resourpol.2020... ; Yang et al., 2019Yang, X., He, L., Xia, Y., & Chen, Y. (2019). Effect of government subsidies on renewable energy investments: The threshold effect. Energy Policy, 132, 156-166. https://doi.org/10.1016/j.enpol.2019.05.039 https://doi.org/10.1016/j.enpol.2019.05.... )
Independent variables
RandD	R&D expenditures		(Kose et al., 2020Kose, N., Bekun, F. V., & Alola, A. A. (2020). Criticality of sustainable research and development-led growth in EU: The role of renewable and non-renewable energy. Environmental Science and Pollution Research, 27(11), 12683-12691. https://doi.org/10.1007/s11356-020-07860-y https://doi.org/10.1007/s11356-020-07860... )
Asset	Total asset	Total Asset _it	(Wu et al., 2020Wu, T., Yang, S., & Tan, J. (2020). Impacts of government R&D subsidies on venture capital and renewable energy investment - An empirical study in China. Resources Policy, 68, 101715. https://doi.org/10.1016/j.resourpol.2020.101715 https://doi.org/10.1016/j.resourpol.2020... ; Yang et al., 2019Yang, X., He, L., Xia, Y., & Chen, Y. (2019). Effect of government subsidies on renewable energy investments: The threshold effect. Energy Policy, 132, 156-166. https://doi.org/10.1016/j.enpol.2019.05.039 https://doi.org/10.1016/j.enpol.2019.05.... )
Concentration	Proportion of shares held by the main shareholder		(Wu et al., 2020Wu, T., Yang, S., & Tan, J. (2020). Impacts of government R&D subsidies on venture capital and renewable energy investment - An empirical study in China. Resources Policy, 68, 101715. https://doi.org/10.1016/j.resourpol.2020.101715 https://doi.org/10.1016/j.resourpol.2020... )
ROE	Proportion of net profit divided by the average balance of net equity	$R O E = \frac{N P}{\bar{x} N E}$	(Wu et al., 2020Wu, T., Yang, S., & Tan, J. (2020). Impacts of government R&D subsidies on venture capital and renewable energy investment - An empirical study in China. Resources Policy, 68, 101715. https://doi.org/10.1016/j.resourpol.2020.101715 https://doi.org/10.1016/j.resourpol.2020... ; Yang et al., 2019Yang, X., He, L., Xia, Y., & Chen, Y. (2019). Effect of government subsidies on renewable energy investments: The threshold effect. Energy Policy, 132, 156-166. https://doi.org/10.1016/j.enpol.2019.05.039 https://doi.org/10.1016/j.enpol.2019.05.... )
Growth	Growth rate of net operating income	${G r o w t h}_{n} = \frac{{N O I}_{n}}{{N O I}_{n - 1}}$	(Wu et al., 2020Wu, T., Yang, S., & Tan, J. (2020). Impacts of government R&D subsidies on venture capital and renewable energy investment - An empirical study in China. Resources Policy, 68, 101715. https://doi.org/10.1016/j.resourpol.2020.101715 https://doi.org/10.1016/j.resourpol.2020... )
Covid19	Dummy that takes the value 1 for the year influenced by the COVID-19 pandemic (2020)		(Amorim et al., 2022Amorim, J. Q., Sales, G. A. W., & Grecco, M. C. P. (2022). Covid-19 e os impactos nas políticas de financiamento e investimento. RAM Revista de Administração Mackenzie, 23(2), eRAMF220225. https://doi.org/10.1590/1678-6971/eramf220225.pt https://doi.org/10.1590/1678-6971/eramf2... )
Sector	Dummy that takes the value 1 for companies that work 100% with power generation		(Yang et al., 2019Yang, X., He, L., Xia, Y., & Chen, Y. (2019). Effect of government subsidies on renewable energy investments: The threshold effect. Energy Policy, 132, 156-166. https://doi.org/10.1016/j.enpol.2019.05.039 https://doi.org/10.1016/j.enpol.2019.05.... )

n=13
Variables	Mean	Standard deviation	Median	Minimum	Maximum
RE	399,986,212	906,222,934	114,743,000	0	5,538,100,000
RandD	35,907,083	32,908,505	35,717,961	930,430	137,090,000
Asset	26,177,797,135	21,330,080,023	21,690,011,500	1,245,025,000	80,082,694,000
Concentration	0.667	0.217	0.625	0.277	0.993
ROE	0.169	0.103	0.154	-0.023	0.515
Growth	0.128	0.184	0.093	-0.476	0.667

Variable	VIF	1/VIF
RandD	3.08	0.33
Asset	3.82	0.26
Concentration	1.75	0.57
ROE	1.44	0.69
Growth	1.19	0.84
Covid19	2.24	0.45
Sector	2.23	0.45
Year
2018	1.57	0.64
2019	1.75	0.57
VIF (average)	2.12

RE	Coefficients	Robust Standard Error	t-value	P>\|t\|	95% Confidence interval
RandD	1.00E+01	4.57E+00	2.190	0.034**	7.85E-01	1.92E+01
Asset	-8.38E-03	7.23E-03	-1.160	0.253	-2.30E-02	6.20E-03
Concentration	7.04E+08	5.18E+08	1.360	0.182	-3.42E+08	1.75E+09
ROE	5.17E+09	2.39E+09	2.160	0.036**	3.45E+08	9.90E+08
Growth	-1.82E+08	5.63E+08	-0.320	0.748	-1.32E+09	9.55E+08
Covid19	-1.14E+09	6.59E+08	-1.730	0.091*	-2.47E+09	1.89E+08
Sector	-6.11E+08	3.62E+08	-1.690	0.099*	-1.34E+09	1.19E+08
Year
2018	-2.29E+08	4.18E+08	-0.550	0.587	-1.07E+09	6.16E+08
2019	-8.28E+08	5.12E+08	-1.620	0.113	-1.86E+09	2.05E+08
2020	0	(omitted)
Constant	3.22E+08	3.21E+08	-1.000	0.322	-9.70E+08	3.26E+08
R-Squared	0.377
Root MSE	7.90E+08

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