An evaluation of the load capacity curve hypothesis for Finland: an ARDL approach with frequency domain analysis

Purpose: The main purpose of this study is to analyze the evolution of economic and environmental factors in Finland during the period 1990–2022, exploring the complex interactions between Gross Domestic Product (GDP), nuclear energy production, innovation (measured by patents) and the electric grid load capacity factor (LCF). Design/methodology/approach: To achieve the stated purpose, econometric models such as Autoregressive Distributed Lag and cointegration tests were employed to investigate relationships and trends in the available economic and energy data for Finland. For conducting the proposed analyses, EViews was used for econometric approaches, and the Python language was utilized for constructing the Environmental Kuznets Curve. Findings: Following the conducted analyses, several relevant findings have been observed: 1) a complex relationship between GDP and LCF has been identified, noting a long-term decrease in the electricity grid LCF with GDP growth. This result emphasizes the importance of strategic planning in energy policy to maintain stability and efficiency of the grid amidst economic growth; 2) nuclear energy and innovation have shown a mixed impact on LCF, with both positive and negative effects. This finding highlights the necessity to develop policies that encourage the progressive integration of new technologies to minimize the negative impact on electricity grid efficiency; and 3) to maximize the efficient use of the energy system’s capacity, policymakers should aim to balance economic growth with responsible management of energy resources. The integration of renewable energies and continuous investments in research and development are essential for ensuring a sustainable energy transition in Finland. Originality/value: The study makes a significant contribution by identifying and analyzing in detail the interdependencies between economic growth, innovation and energy sustainability in Finland, providing new perspectives for the development of public policies and economic strategies in the current context of global climate change and energy transition.