Renewable Electricity Penetration and Retail Price Dynamics: Global Evidence on Transitional Costs of the Energy Transition

. The global expansion of renewable energy represents a structural transformation with profound macroeconomic and financial implications. This study investigates the impact of renewable electricity penetration on retail electricity prices using a multi-country panel. The study employs a comprehensive multi-layered empirical framework to address endogeneity, dynamic adjustment, and cross-country structural heterogeneity. The results reveal that renewable penetration is associated with statistically significant short- to medium-term increases in residential electricity prices. However, this effect is nonlinear and conditional on fossil fuel dependence. Once fossil reliance falls below a critical threshold, the marginal price impact weakens substantially. Distributional evidence shows that renewable price effects are amplified in high-price electricity markets. These findings suggest that renewable expansion generates transitional system costs rather than permanent inefficiencies, highlighting the importance of structural conditions in shaping energy transition outcomes and broader economic stability.

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