SUSTAINABLE BUSINESS DEVELOPMENT PERSPECTIVES

Renewable Energy Sources and Its Impact on Employment in Slovakia

Mária Kmety Barteková ¹ & Daniela Rybárová ¹

¹ University of Economics in Bratislava, Faculty of Business Management

https://doi.org/10.5817/CZ.MUNI.P280-0197-2022-11

Abstract

Today, sustainable energy is the centre of attention in climatic change agenda and economic growth, attracting concerns from around the globe about approaches of designing pathways for a sustainable transition of energy and energy transitions are being carried out with different processes. With respect to resources and technologies, different methods of energy production including geothermal energy, wind technology, electricity and salinity gradient technologies, and solar heating and cooling have been considered. Sustainable energy policies also contribute a significant part in energy transitions as they can act as the driving force behind innovations in renewable energy. Additionally, they are a prerequisite in assembling finance that is an essential factor in achieving climate goals. Thus, the use of policies and regulations can have a positive impact on the outcomes of sustainable energy in the long run. The aim of the paper is to assess the impact of renewable energy sources on employment in Slovakia and its sustainability. Results of the regression analysis showed that there is a strong correlation between the overall employment in Slovakia and the employment in Renewable energy sources in Slovakia (0.864).

Keywords : Renewable energy sources, sustainable employment, Slovakia, European union

1 Introduction

Increasing the EU economy’s energy efficiency is one of the main pillars for reaching an affordable, reliable, sustainable and modern energy system as envisaged in SDG 7. Efficient energy systems reduce consumption and costs, decrease energy dependencies and diminish the environmental and climate impacts linked to energy supply and use ( Augutis et al., 2014; Baranes, Jacqmin & Poudou, 2017 ). As a consequence, the EU aims to improve energy efficiency along the whole energy supply chain.

Renewables are an important part of a country's energy mix as they are an alternative to fossil fuels that contributes to reducing greenhouse gas emissions, diversifying energy supplies and reducing dependence on unreliable and volatile fossil fuel markets, especially oil and gas, as the energy produced from RES is sourced from within the country's own territory. Some technologies (e.g. water, solar, wind, etc.) do not even produce any emissions during operation. Increasing the share of RES thus contributes to reducing environmental pressures and thus also to reducing negative impacts on human health. In addition to the benefits mentioned above, the use of RES also entails certain risks. The most significant risk stems from the nature of these sources. The generation of electricity from solar and wind energy is characterised by fluctuations in production which negatively affect the security and reliability of the operation of the electricity system ( Sher, Curnick & Azizan, 2021 ). Another risk is that electricity becomes significantly more expensive. In addition to these risks, there are also negative environmental impacts adversely affecting the appearance of the landscape, the impact on habitats and ecosystems, watercourses, etc. These negative impacts can be minimised by careful site selection and consideration of all possible negative impacts of the RES technology. The positives of using RES outweigh the negatives and the use of RES is one of the priorities of the energy policy of the Slovak Republic.

EU legislation on the promotion of renewable energy sources has evolved significantly over the last 15 years. The 2009 Renewable Energy Directive stipulated that 20% of the EU's energy consumption must be covered by RES by 2020. In addition, all Member States were obliged to achieve a 10% share of RES in transport. In addition to the common target, the Directive set binding national targets for the overall share of RES in gross final energy consumption for each EU country, taking into account their baseline situation and overall RES potential. Member States were obliged to prepare National Renewable Energy Action Plans setting their national targets for the share of RES in three sectors: electricity generation, heating and cooling and transport. Progress towards the national targets was measured every two years when EU Member States published progress reports on RES energy. In order to promote electricity production from RES, Act No 309/2009 Coll. on the Promotion of Renewable Energy Sources and High Efficiency Combined Production was adopted in the Slovak Republic in 2009. The Act improved the functioning of the electricity market in the RES sector and created a stable business environment. It ensured a long-term guarantee of feed-in tariffs for 15 years and also set a direction for electricity production from RES, as it favoured the construction of small and decentralised plants. The law also guarantees priority transmission and priority distribution of electricity from RES. Since 2014, a change in legislation has significantly simplified the process of connecting small sources up to 10 kW for households that cover a large part of their energy consumption with the electricity they generate.

In 2018, the revised Renewable Energy Directive came into force as part of the Clean Energy for All Europeans package, which aims to help meet emission reduction commitments under the Paris Agreement. The Directive sets a new binding EU RES energy target for 2030 of at least 32% of final energy consumption and includes a clause allowing for an upward adjustment of this share by 2023 and an increased target of 14% for the share of renewable fuels in transport by 2030.

The Slovak Republic has signed up to the commitment to achieve carbon neutrality by 2050. This has led to the adoption of the Integrated National Energy and Climate Plan, which updates the 2014 Energy Policy of the Slovak Republic and defines the 2030 targets. The optimal use of RES is one of the key factors for achieving a low-carbon economy, and the focus will be on the development of RES, especially in heat production. The planned SR target for 2030 is 19.2%.

In December 2019, the European Green Deal was adopted as the overarching framework for EU clean energy policy. It is a new growth strategy that aims to make Europe the world's first climate-neutral continent in a fair, resource-efficient, cost-effective and competitive way. Energy production and use is responsible for more than 75% of greenhouse gas emissions in the EU. Decarbonising the EU's energy system is therefore crucial to achieving the 2030 climate targets and the EU's long-term strategy to achieve carbon neutrality by 2050.

As part of the implementation of the European Green Deal package of measures, in July 2021 the Commission published a new legislative package on climate and energy entitled "Fit for 55": meeting the EU's 2030 climate target on the road to climate neutrality. The package represents one of the most comprehensive sets of proposals on climate and energy ever put forward by the Commission. Among other things, it will contribute to the development of the clean energy system over the next decade by stimulating innovation, investment and creating new market demand in the EU, while ensuring a socially just transition ( Pekaslan et al., 2020; Radzka, Rymuza & Michalak, 2019 ). The package also includes a proposal to revise the RES Directive in order to align its RES energy targets with the new climate ambitions. In order to reach the 2030 target, the Directive proposes to increase the overall binding target from the current 32% to a new level of 40% RES energy in the EU energy mix. This effort will be complemented by indicative national contributions showing how each Member State should contribute to the collective target. The post-2030 energy policy framework is currently under negotiation.

The share of energy from RES has increased slowly since 2005. As a share, the increasing share has not always reflected the actual increase in RES energy, expressed as gross total RES consumption or gross final RES consumption in the case of the RES energy share in the sectors. Over the period 2005-2019, the total share of RES energy produced increased to 16.9%. Slovakia is thus on track to meet the target of a 14% share of RES in final energy consumption in 2020, as the share of RES was already higher in 2019. However, the share of RES stagnated around 10-12% in 2010-2018 and meeting the national commitment seemed unlikely.

This was mainly due to the year-on-year increase, where the share of RES increased by 5.0 percentage points in 2018 compared to the previous year. This overall increase reflected a significant increase in the share of RES in the heating and cooling sector, where gross biomass consumption almost doubled. While in 2018 renewables accounted for 10.6% of heat and cooling production, in 2019 the share was already 19.7%. On the other hand, the share of RES in the other two sectors under review grew relatively less significantly: in the transport sector by 1.3 percentage points to 8.3% and in electricity generation by 0.5 percentage points to 21.9%.

SR was very likely to meet the 14% target in previous years as well. However, incomplete data were sent to Eurostat, which did not include, for example, energy produced by heat pumps in households in addition to biomass consumption in households.

The increase in the share of renewable energy over the period under review is a positive signal for meeting the renewable energy targets ( Praene et al., 2021 ). Another positive development is the increasing diversity of RES used. Nevertheless, the amount of energy from RES in the Slovak Republic is largely dependent on suitable hydropower conditions and biomass consumption.

The European Union’s binding target for the share of energy from renewable sources in gross final energy consumption is at least 32% by 2030. In order to achieve this binding target, Member States’ contributions for 2030 to this target from 2021 are in line with the indicative trajectory of this contribution. The directional trajectory reaches a reference point of at least

1. 18% by 2022,

2. 43% by 2025,

3. 65% by 2027 of the total increase in the share of energy from renewable sources between that Member State’s binding 2020 national target and its contribution to the 2030 target.

The Slovak Republic proposes a target of 19.2% in 2030, which is an increase of 5.2 percentage points compared to the target set for 2020. Based on the requirements in Article 4(2) of the Regulation, the reference points in the indicative trajectory for 2022, 2025 and 2027 are set at 14.94%, 16.24% and 17.38% for the 19.2% target.

The total investment costs to achieve the RES targets are estimated at EUR 4.3 billion. These investment costs include the electricity and heating sectors. They are based on the estimated increase in installed capacity for generating electricity and heat from RES and the investment intensity per unit of output.

Slovakia had a target for renewable energy sources set at a minimum of 14 %. According to Eurostat data, the share in gross final consumption in 2020 was at 17.35 % (Fig. 1). This means that Slovakia has comfortably met the target. However, this was preceded by an adjustment of the data on biomass consumption in households. Thanks to this change, the share of renewable energy increased from 11.9 to 16.9 % between 2018 and 2019.

Figure 1

Development of Energy from Renewable Energy Sources

Source : Eurostat

2 Methods

The aim of the paper is to assess the impact of renewable energy sources on employment in Slovakia and its sustainability.

The conceived research questions were following:

• Research question no. 1 – What is the impact of the renewable energy sources on overall employment in Slovakia?

• Research question no. 2 – What is the impact of the renewable energy sources on the economic development of Slovakia?

In the research paper, the descriptive statistics for all the variables were examined to make sure they fell within acceptable range and skewness is one such statistic that was carefully looked at. Histograms were obtained for all the variables whose skewness statistic was greater than 1 to have a pictorial view of the distribution of the variables.

To characterise the sector of renewable energy sources, we chose the various indicators. The indicator Energy productivity measures the amount of economic output that is produced per unit of gross available energy. The gross available energy represents the quantity of energy products necessary to satisfy all demand of entities in the geographical area under consideration (Fig. 2).

Figure 2

Development of Energy Productivity (euro per kg of oil equivalent)

Source : Eurostat

3 Results and Discussion

Transitioning toward an energy system dominated by renewable energy and energy efficiency will be imperative for achieving sustainable development and urgent climate objectives (Fig. 3). Energy transition planning must exploit the close linkages between the energy system and the wider socio-economic structures in which it is embedded. As research studies (Henriot, 2015; Kozioł & Mendecka, 2015; Kurek et al., 2021 ) have indicated, effective planning depends not only on access to good current information on job numbers and job quality, but also on continued tracking of the transition’s impact on employment so as to shape and seize opportunities to localise value chains, advance gender equity, expand energy access, and improve local livelihoods.

Figure 3

Renewable Energy Sources Ecosystem

Source : IRENA

More than 61% of employees in the Renewable energy sources sectors are employed in Solid biomass sector (Fig. 4). The second largest group of employees are working in the Liquid biofuels sector.

Figure 4

Employment by Technology in Slovakia (2020)

Source : Autor’s calculations according to IRENA

The employment trends are shaped by a multitude of factors (Figure 5). Key among them is the rate at which renewable energy equipment is manufactured, installed and put to use (largely a function of costs and overall investments). Costs, especially of solar and wind technologies, continue to decline. With relatively steady annual investments, lower costs have translated into wider deployment ( Moreno & López, 2008; Muniyoor, 2020 ). An increase in investments would boost future job creation, even allowing for growing labour productivity ( Wei, Patadia & Kammen, 2010 ). Policy guidance and support remain indispensable for establishing overall renewable energy roadmaps, driving ambition, and encouraging the adoption of transparent and consistent rules for feed-in tariffs, auctions, tax incentives, subsidies, permitting procedures and other regulations.

Figure 5

Factors influencing renewable energy employment

Source : IRENA, 2022

As one can see, the p- value is lower than 0.001 in both linear regressions. In our case it is 0.864, which is close to one. This means that there is a very strong relationship between our variables (Table 1). R Square is the coefficient of determination. 74.7% of dependent variable (Total employment) is influenced by the independent variable (RES employment). The answer to research question 2 is following: there is a very strong positive relationship between RES employment and GDP (p value under 0.001 and R coefficient is 0.939).

Table 1

Results of the linear regression

Source : Autor’s calculations according to Datacube

Despite positive trends and recent developments, skills gaps and shortages are increasing and likely widespread across countries unless proactive measures are taken. In high income countries, including those even with well-developed skills anticipation systems, a lack of both technical and transferable core skills remains a significant recruitment barrier for employers, while developing countries are especially challenged by deficiencies at higher skills levels. Many of the most significant changes in skills and occupations in the green economy are taking place at higher skill levels, requiring university education. This represents a critical barrier for many low-income countries, where university graduates and high-level skills in general tend to be in short supply. These may constitute a constraint on the net-zero transition.

4 Conclusions

Due to inertia in the dynamics of the education system, insights into the future evolution of the labour force’s occupational patterns need to be carefully considered to ensure that the appropriate skills are developed. Further, the implied fluctuations in skills demand need to be managed carefully so as not to upend people’s educational and career choices. This is one of several areas where public policy needs to be highly proactive and include a strong social protection component to ensure a just transition.

As one can see, the p- value is lower than 0.001 in both linear regressions. In first case R coefficient is 0.864, which is close to one. This means that there is a very strong relationship between our variables (RES employment and Total employment). To answer the second research question, we have identified that there is a very strong positive relationship between RES employment and GDP (p value under 0.001 and R coefficient is 0.939).

Acknowledgement

This paper is an outcome of the research project ‘Socio-economic Determinants of Sustainable Consumption and Production in Terms of Impact on Business Performance and Competitiveness 2020’, VEGA no. 1/0708/20.

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Corresponding author

Dr. Maria Kmety Bartekova

University of Economics in Bratislava, Faculty of Business Management, Department of Business Economy

Dolnozemska cesta 1, 852 35 Bratislava, Slovak Republic

maria.bartekova@euba.sk