Do nonrenewable-energy prices affect renewable-energy volatility? The case of wood pellets

Over the past decade, the U.S. Southeast has experienced a rapid expansion of wood-pellet biomass production for European export. This renewable wood-pellet supply requires nonrenewable-energy inputs in its manufacturing and logistics, which suggests possible price-volatility spillovers between renewable and nonrenewable markets. A BEKK-MGARCH model is employed for investigating these possible price-volatility spillovers. Overall, results suggest a limited negative effect of past volatile nonrenewable-energy prices influencing current wood-pellet price volatility. Specifically, high volatilities in nonrenewable-energy prices do not affect the volatility of wood-pellet prices. Thus, any stability concerns in terms of nonrenewable-input prices affecting the wood-pellet market are not warranted.