Mitigating energy risk through energy sources diversification

This article assesses the effect of energy diversity on energy risk across 64 countries over the period of 2000-2018. Employing methodologies including threshold regression, Method of Moments of Quantile Regression (MMQR), partially linear functional-coefficient (PLFC) panel models and instrumental variable (IV) estimation, our findings suggest that energy diversity plays a significant role in reducing energy risk. Panel threshold and partially linear functional-coefficient models highlight the importance of energy diversification in mitigating energy risk, particularly in countries with higher levels of economic development. These results suggest that energy diversification is beneficial for managing energy risk, but its effectiveness is contingent upon the economic condition of the country. The Panel Threshold and Method of Moments Quantile Regression results indicate that efficient governance and government expenditures may have a significant impact on reducing the countries' energy risk, whereas increasing population density is associated with an increase in energy risk.