Marques, Fuinhas and Pereira (2018) asked, for ten European countries over 1990–2014 with annual panel data, whether renewable energy sources have actually substituted fossil-fuel electricity generation or mainly added capacity that runs alongside fossil backup. Their autoregressive distributed lag estimates showed solar PV capacity associated with lower oil- and gas-fired generation but wind capacity associated with higher oil and gas generation, and the published abstract highlights the necessity for flexible and controllable electricity production from natural gas and hydropower to back up renewable sources, with peaks of electricity an obstacle to accommodating intermittent renewables. The source's own published abstract calls the substitution effect "far from evident in the literature": its annual, associational panel evidence for a single ten-country sample reports substitution for solar PV and hydropower but not for wind, leaving unsettled whether intermittent renewables genuinely displace fossil generation across European electricity systems and by source. The later literature has extended the annual econometric framework (China, 2025); the same research group moved to daily data for one country (France, 2020) and to explicit short- versus long-run policy-instrument dynamics (2019); hourly displacement econometrics exist for a single European system (Greece, 2026); and theory plus cost-optimal scenario models cover storage and interconnection roles — but none of these settles the source's question of whether renewables genuinely substitute fossil generation in European electricity systems, characterized by source across the generation, capacity and demand perspectives the source analyses jointly. The problem, as formulated from the source, remains open.

Background

European electricity systems have seen rapid deployment of renewable energy sources (RES), above all intermittent renewables — wind power and solar photovoltaics (PV), which convert weather-driven flows into electricity and cannot be dispatched on demand; the source paper calls these RES-I. Because wind and solar output fluctuates on hourly to seasonal timescales while demand must be met at every instant, a power system that adds intermittent capacity typically also keeps dispatchable plants (historically natural gas, oil and coal units, plus reservoir hydropower) available as backup. Whether renewables therefore genuinely substitute fossil generation — each renewable megawatt-hour displacing a fossil megawatt-hour — or instead coexist with, and even sustain, fossil standby capacity is an empirical question with direct policy consequences. A key distinction is installed capacity (the megawatt rating of plants) versus actual generation (terawatt-hours produced): intermittent sources have low capacity factors, so a large gap arises between the capacity added and the electricity it delivers, a gap the source study calls idle capacity. Systems built around capacity targets can thus accumulate idle renewable capacity while fossil capacity is retained for balancing.

The source study, Marques, Fuinhas and Pereira (2018, Energy Policy), examined ten European countries over 1990–2014 using three complementary perspectives — installed capacity, generation shares, and demand-side features such as the annual peak load (the highest hourly demand of the year) and electricity intensity. Their method was a panel autoregressive distributed lag (ARDL) model — a dynamic panel specification that separates short-run year-to-year adjustments from a long-run equilibrium relation through an error-correction term — estimated with the Driscoll–Kraay fixed-effects covariance estimator, which is robust to the cross-sectional dependence, heteroskedasticity and autocorrelation typical of country panels. The source reports long-run elasticities including: solar PV capacity negatively associated with oil (-0.107) and natural gas (-0.199) generation; wind capacity positively associated with oil (+0.258) and gas (+0.227) generation, interpreted as a fossil backup requirement; hydropower substituting fossil generation in the short run; natural gas responding to annual peak demand (elasticity about 0.50), marking gas as the flexible backup technology; higher peak load associated with lower long-run RES-I generation; a higher import-to-export coverage ratio associated with lower fossil generation, suggesting cross-border electricity trade (exchange of power between national markets over interconnectors) mitigates part of the backup requirement; non-hydro renewable share substituting coal but complementing gas; and no significant long-run fossil displacement from bioenergy capacity.

A separate methodological tradition measures substitution directly at operational timescales: marginal-emissions and displacement studies estimate, hour by hour, which fossil units are backed down when wind or solar output rises (Siler-Evans, Azevedo and Morgan 2012 did this for the United States). Theoretical work has clarified the roles of electricity storage (Lazkano, Nøstbakken and Pelli 2017) and of interconnection between markets (Yang 2022), and cost-optimised capacity-expansion models have mapped the synergies and trade-offs between storage, transmission reinforcement and sector coupling in highly renewable European systems (Brown et al. 2018; Yamujala et al. 2025). What none of these delivers is a settled answer to the source study's question: whether renewables genuinely substitute fossil generation in European electricity systems, characterized by source across the generation, capacity and demand perspectives that the source analyses jointly.

Problem Statement

Determine, for European electricity systems, whether renewable energy sources — in particular intermittent renewables, wind power and solar PV — genuinely substitute fossil-fuel electricity generation, so that renewable megawatt-hours displace fossil megawatt-hours and reduce the fossil backup the system must retain, or whether they mainly add capacity that runs alongside a retained fossil backup, and characterize the substitution effect by source. The question is pursued in the source study's own framework, analysing jointly its three perspectives: the generation perspective (levels and shares of fossil generation displaced, by fossil technology — coal, oil, natural gas — and by renewable technology, including wind, solar PV, hydropower and bioenergy), the installed-capacity perspective (megawatts of capacity, including the idle-capacity gap between renewable capacity added and the electricity it delivers), and the demand perspective (including the annual peak load). The fossil backup requirement is understood as the source highlights it: the flexible, controllable dispatchable production — principally natural gas, together with controllable hydropower — that backs up intermittent renewable sources, with peaks of electricity an obstacle to the accommodation of intermittent renewables. The source's own annual, associational panel-ARDL evidence for ten European countries over 1990–2014 found substitution for solar PV and hydropower but not for wind, and its published abstract calls the substitution effect "far from evident in the literature"; a complete answer must rest on evidence spanning more than one sample, period or associational design and establish whether the effect exists and, if so, the characteristics of the effect by source for European electricity systems across these three perspectives.

References

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