Transitioning to sustainable energy by incumbent utilities: insights from M&As, alliances, and divestments

Abstract

Energy utilities play an important role in transitioning to a sustainable energy industry. Data on 8967 transactions by 19 European energy utilities from 1990 to 2019 illustrate when and how utilities invest in sustainable resources and divest traditional resources such as fossil-fuel plants. Utilities transitioning to sustainable energy have greater financial resources and experience with sustainability, are publicly owned, and access sustainable resources of international and inter-industry partners. Utilities adopt a diversified strategy of balancing sustainable and traditional resources.

1. Introduction

Achieving net zero greatly depends on the energy industry reconfiguring its business model from one reliant on fossil fuels to one built on sustainable energy. Coal-fired electricity generation alone is responsible for 30% of global CO₂ emissions (IEA, 2019), which highlights the importance of significantly reducing the energy industry’s impact on the environment (Kang et al., 2020). Incumbent energy utilities can play a central role in delivering on net zero. They are positioned at the intersection of a well-established energy supply chain, which is built on centralized generation and a large network infrastructure, and an evolving sustainable energy system, which combines renewable energy (RE) and smart grid technologies. Beyond the societal benefits of achieving net zero, utilities have started pursuing sustainable energy, such as utility-scale and community-shared solar projects (Horváth and Szabó, 2018) and demand-side management services (Hannon et al., 2013; Behrangrad, 2015), to unlock novel sources of value and generate additional revenue streams (Pereira et al., 2022).

Incumbent utilities are gradually reconfiguring their business model by integrating sustainable energy (Richter, 2013), driven by changes in consumer behavior, policy and regulatory environment, technology landscape, and future strategy (Kind, 2013; MIT Energy Initiative, 2016; Tayal, 2016; Weigelt et al., 2021). Consumers are connecting new distributed energy resources including electric vehicles and rooftop solar panels (Weigelt et al., 2021). Government policy is mandating long-term greenhouse gas (GHG) emission reductions and supporting RE generation. Sustainable energy technologies such as wind, solar, and smart grids are now cost competitive. All these changes are pushing utilities to invest in sustainable energy—reaching new markets and launching new services—as a way to reinvent their traditional business model and capture value in a changing energy industry (Kind, 2013; Steen and Weaver, 2017).

Despite incumbent utilities’ increasing attention for sustainable energy, a significant part of their investments continues to concentrate on strengthening their traditional business model, which is built on fossil fuels (Bryant et al., 2018; Alova, 2020). This pervasiveness is not surprising, but it is concerning given its delaying effect on achieving net zero. Incumbent utilities find themselves torn between competing choices for the future: they realize the need for playing their part in the energy transition by delivering on net zero, yet they remain reliant on fossil fuels to maintain steady revenue streams and provide baseload to deal with fluctuation in energy demand. It is important to understand how incumbent utilities manage this conundrum; that is, under what conditions are they more likely to reconfigure their business model by investing in sustainable energy and divesting traditional energy—even if this creates uncertainty for their long-term financial stability—and how does such a reconfiguration affect their overall commitment to fossil fuels.

Existing literature has unpacked how incumbents pursue sustainable energy, focusing on specific utilities, technologies, geographies, and business model alternatives (Hannon et al., 2013; Shah et al., 2013; Tayal, 2016; Wadin et al., 2017; Horváth and Szabó, 2018). Studies provide rich qualitative and case-specific insights into how incumbent utilities navigate the energy transition. They have shown that utilities find it difficult to respond to the external changes (i.e., consumer, policy, and technology) driving the energy transition due to their lock-in to traditional energy activities (Richter, 2013; Mah et al., 2017). Although utilities are investing in sustainable energy, we lack a good understanding of the drivers of such investments and whether it results in a new business model for the industry. Moreover, there is much less research on how incumbent utilities divest from fossil fuels. While there is literature about fossil fuel divestment, these studies tend to take a financial investor perspective, focusing on investors such as pension funds (Henriques and Sadorsky, 2018; Hunt and Weber, 2019), rather than a utility perspective. For financial investors, divesting involves making changes to their portfolio, but for utilities, divesting is more complex because it requires a change in business model too.

Making sustainable energy an integral part of the business model and leaving fossil fuels behind is challenging for incumbent utilities. It requires utilities to navigate a new technology landscape for which they often lack the necessary knowledge and resources (Mah et al., 2017), as sustainable energy differs from traditional energy (Markard and Truffer, 2006; Ratinen and Lund, 2014). Utilities need to learn how to operate low-carbon, decentralized, and digital technologies and use them to reconfigure their existing business model (Strong, 2019). While incumbents can use organic growth to pursue sustainable energy, the novelty of the technologies and the urgency to achieve net zero drive utilities to reach beyond their organizational boundaries and engage in mergers, acquisitions, joint ventures, alliances, and divestments (Pereira et al., 2022). They engage in such boundary-spanning transactions to access resources needed to operate in the sustainable energy space and transition more rapidly (Richter, 2013). It allows them to partly bypass the arduous task of identifying and structuring in-house resources around new technologies and service offerings (Apajalahti et al., 2015).

Since we lack a good understanding of what drives utilities to engage in sustainable energy and leave traditional energy behind, we aim to address the following research question: What determines how incumbent utilities use boundary-spanning transactions to reconfigure their business model for the integration of sustainable energy and what is the impact on their engagement in traditional energy? By studying what drives the likelihood for utilities to undertake investments and divestments of sustainable and traditional energy, we aim to explain how they use boundary-spanning transactions to reconfigure their business model. We approach this question through the lens of George and Bock’s (2011) business model framework which considers the interplay between value, resources, and transactions as the foundation of any business model. Our case is one where external policy pressure to deliver new value (sustainable value) drives an industry to use boundary-spanning transactions to change its resources from non-renewable (fossil fuels) to renewable (sustainable energy) resources.

We address our research question through quantitative analyses to complement the extant qualitative literature. We built a novel dataset, which includes the boundary-spanning transactions of utilities that relate to traditional energy (i.e., fossil fuel generation, transmission, distribution, and retail) and sustainable energy (i.e., RE generation, smart energy distribution, emerging technologies, and sustainable mobility), and combine these with data on utilities’ internal RE production. The study builds on a comprehensive set of utilities’ investments and divestments, thus going beyond existing literature which only focuses on incumbents’ efforts to become more sustainable (with some exceptions, such as Alova (2020) and Bryant et al. (2018)). We analyze utilities’ corporate deals from 1990 to 2019 using data on 8967 transactions from mergers and acquisitions (M&As), joint ventures and contractual agreements (i.e., investments) and divestments, which represent a substantive commitment by 19 large European utilities to reconfigure their business model.

2. Background

2.1 Business model reconfiguration by energy utilities

Research has shown that utilities tend to struggle with understanding the long-term impacts of technological and societal change and rather stay close to their traditional business model (Richter, 2013; Shah et al., 2013). Alova (2020) found, for example, that while some utilities prioritize RE investments, most keep reinforcing their fossil-fuel generation assets, with a preference for natural gas. The study found that only 10% of more than 3000 utilities worldwide prioritize growth of renewable capacity over fossil-fuel capacity. Studying 50 utilities in Asia, Australia, and Europe, Bryant et al. (2018) found that although the utilities are shifting to sustainable energy, this represents less than 5% of their revenue streams. However, changes in consumer behavior, policy and regulatory environment, technology landscape, and future strategy push incumbent utilities to reconfigure their business model towards a more sustainable one.

To better comprehend how utilities change their business model, we use George and Bock’s (2011) framework which sees a business model’s foundation as the interplay between value, resources, and transactions. It considers a business model as an opportunity-centric structure for value creation that connects resources through transactions within the organization as well as spanning organizational boundaries (George and Bock, 2011). In the framework, value revolves around expectations about what kind of value is created for stakeholders, resources refer to the configuration of resources and capabilities leveraged to serve stakeholders, while transactions reflect what kind of transactions, i.e., boundary-spanning and intra-firm transactions, govern relations between a firm and its stakeholders. Applying this framework reveals that the traditional business model creates the value of low-cost, reliable energy, and revenues depend on the volume of energy sold (Hannon et al., 2013). As utilities combust fossil fuels in large generation plants, located away from demand, and transport electricity to consumers via transmission and distribution networks, resources comprise fossil fuels, large generation plants, and network infrastructure. The business model uses a vertically integrated structure of generation, transmission, distribution, and retail and favors intra-firm over boundary-spanning transactions.

During the energy transition, utilities must question what value needs to be created (i.e., continue a traditional focus on low-cost and reliability or expand it to sustainability and flexibility), which resources are leveraged (fossil fuels or renewables and smart grids), and which transactions are used (expand intra-firm to boundary-spanning). In the following, we discuss under what conditions we expect utilities to reconfigure their business model by engaging in boundary-spanning transactions to access and build up resources for sustainable energy. We discuss which external drivers, attributes of utilities, and attributes of transactions facilitate changes in the value, resources, and transactions of utilities’ business models towards more sustainable ones.

2.2 Value changes to utilities’ business models

An important external driver that impacts the type of value created in the energy sector is energy policy. In the European Union, two categories of energy policy have been pivotal: (i) policies for liberalization and competition, and (ii) policies for RE adoption and progress on energy efficiency (see Figure 1). Policies driving liberalization and competition include three policy packages implemented in 1996, 2003, and 2009, through EU Directives 96/92/EC, 2003/54/EC, and 2009/72/EC, respectively. These packages transformed the electricity industry across the European Union that was generally comprised of vertically integrated utilities with regional or national monopolies. Directive 96/92/EC reformed the supply side by introducing competition for electricity generation and the retail side by bringing competition for large consumers such as industrial facilities. It also established transmission and distribution network monopolies. Directive 2003/54/EC expanded retail competition to small electricity consumers, such as households, and established national regulatory bodies. Directive 2009/72/EC expanded the rules for retail-side competition with requirements on electricity supplier switching, and for distribution grids in facilitating the energy transition, also allowing firms selling sustainable energy to enter the market (Pereira et al., 2018).

Policies promoting RE adoption were implemented in 2001, 2009, and 2018, through EU Directives 2001/77/EC, 2009/28/EC, and (EU)2018/2001, respectively. Directive 2001/77/EC promoted renewable electricity generation by setting indicative national targets that had to contribute to an overall EU target of 12% of RE for energy consumption by 2010. Directive 2009/28/EC moved from indicative to mandatory national targets and expanded the previous target to 20% by 2020 and required EU countries to adopt national RE action plans. Directive (EU)2018/2001 expanded the previous goal to a binding EU target of 32% by 2030. In this directive, EU countries had no mandatory country-level targets. However, the national targets set in Directive 2009/28/EC were the minimum contribution countries could make to the 32% target. Policies driving progress on energy efficiency were implemented in 2006, 2012, and 2018, through EU Directives 2006/32/EC, 2012/27/EU, and (EU)2018/2002, respectively. These directives implemented energy efficiency obligation schemes and included requirements for energy distributors and retailers to supply energy services.

These EU energy policies change expectations about value. The policies on liberalization introduce competition into the energy sector enabling utilities to not only compete on price but also on how green their energy offering is, targeting consumers that favor sustainable value. In addition, they alter the ownership structure of utilities, transforming them from monopolies to predominantly publicly listed firms. Public firms are more exposed to expectations from shareholders and other stakeholders regarding their sustainable strategies, practices, and investments, and hence face greater pressure to contribute to sustainable value (Yang et al., 2018). The EU energy policies aimed at RE adoption, and energy efficiency also create expectations to deliver sustainable value, and hence to reconfigure the utilities’ business models to include more sustainable resources.

2.3 Resource changes to utilities’ business models

While incumbent utilities are all impacted by similar external forces, such as energy policies and consumer expectations, they differ in their ability to change the resources needed for more sustainable business models. We argue that their abilities to transform to more sustainable resources depend on their financial performance, experience with sustainable resources, and size.

Firms with good financial performance have slack financial assets available that support investment in new resource development and contribute to greater freedom for experimentation and learning (Fredrich et al., 2019). Huang and Li (2012) discuss how financial slack lets firms experiment with new products and enter new markets. Voss et al. (2008) discuss how available financial slack, such as retained earnings or other liquid assets held by firms, support exploration into novel technologies. As they face fewer capital restrictions, firms can more easily pursue novel technologies with less clear investment requirements and unclear short-term returns. Mah et al. (2017) found that a stronger financial performance was beneficial for utilities when investing in smart grid and smart meter technology. Hence, strong financial performance frees up the financial assets needed to engage in boundary-spanning transactions that change the resource base. Considering these findings of existing literature, we expect that utilities with high financial performance are more likely to experiment with various sustainable energy resources, and hence reconfigure to more sustainable business models by engaging in sustainable energy investments and divestments while reducing their commitment to traditional resources.

In the past, utilities’ investments and technology were associated with a path dependency that resulted in a preference for reinforcing the traditional business such as large-scale, fossil-fuel plants (Barazza and Strachan, 2021). Stern and Valero (2021: 3) argue that “the incentives to deploy products or technologies that use existing infrastructure are higher than for those where the infrastructure is not yet rolled out at scale.” Given utilities’ continued reliance on resources related to centralized generation and network infrastructure, sustainable energy investments would face an uphill battle. However, as utilities increasingly engage in sustainable energy, similar self-reinforcing effects and positive feedback loops might be taking place when experience with sustainable energy increases (Jacobsson and Bergek, 2004). There are also dynamic forces that shape investment behavior, such as expected growth in demand, long-term shifts in policy support, and changing investor norms for fear of being left with stranded assets (Ekins and Zenghelis, 2021; Stern and Valero, 2021). While investing in sustainable energy might still look risky to those without experience, Vernay et al. (2022: 415) found that firms that had taken the leap were more successful than the industry anticipated, thus disconfirming “that only the industry’s [traditional] business model can bring economic success.” More generally, Ekins and Zenghelis (2021) found evidence for increasing returns to scale for green technologies, as witnessed by the fast-decreasing costs of solar and wind power (Stern and Valero, 2021).

Having experience with new resources stimulates further investments when positive feedback loops develop due to firms learning how to change their resource base and best exploit new resources. Levitt and March (1988) suggest that learning is the result of an iterative process in which firms repeatedly perform an activity, accumulating experience, and then draw on that learning to perform that activity in the future. Increased experience has also been seen as leading to routines; that is, future decisions tend to replicate similar previous decisions (Reuer et al., 2002). Kelley and Helper (1999) found that previous experience with a technology stimulates future investment decisions in that technology, due to experience lowering the costs of adoption. Burger and Weinmann (2016) suggest that utilities with expertise in RE are in a better position to invest in sustainability compared to incumbents that remain focused on traditional energy. Experience thus stimulates firms learning how to transform their resource base and find new ways to exploit new resources. Considering these previous studies’ findings, we propose that experience with sustainable energy has a positive impact on sustainable energy investments and divestments. When utilities start investing in sustainable energy, they do not only learn about what works for them but also what opportunities they struggle to exploit, thereby leading to a higher volume of sustainable boundary-spanning transactions overall. We also expect that experience with sustainable energy has a positive impact on divesting traditional resources as part of utilities’ effort to reconfigure towards more sustainable business models.

Positive feedback loops from previous experience might not materialize for each sustainable energy resource in the same way. The price for wind and solar has decreased, but batteries and electric vehicles are still considered expensive. Moreover, distinct sustainable energy resources require distinct capabilities for utilities to exploit them. While existing resources can be leveraged to exploit opportunities related to sustainable energy such as wind and solar, moving into sustainable mobility constitutes a more radical move away from the traditional business model (Pereira et al., 2022). However, there are considerable complementarities between various sustainable energy resources (Ekins and Zenghelis, 2021; Stern and Valero, 2021). Barbieri et al. (2020) found that knowledge spillovers between sustainable technologies are stronger than for their traditional counterparts. Developing such technologies involves a knowledge recombination process which combines “a higher number of technological components,” relies “on more diverse knowledge,” and is “based on unique combinations of knowledge” (Barbieri et al., 2020: 12). Hence, once firms start investing in one sustainable energy resource, the positive knowledge spillovers that derive from these investments will also be valuable for exploiting other sustainable resources. For example, data analysis capabilities for smart energy management can be leveraged for handling the intermittency of renewables and optimizing electric vehicle charging. Because of these positive knowledge spillovers between sustainable energy resources, we expect utilities with a diverse experience across the sustainable energy space to invest in sustainable energy and divest traditional resources. Since this diversity in experience also helps utilities to learn which resources they struggle to exploit, we expect diversity in experience to have a positive impact on sustainable energy divestments as well.

A large body of literature exists on how the size of firms impacts their ability to radically innovate and to adjust to industries undergoing radical transformations. Chandy and Tellis (2000: 12) study both firm size and incumbency and find that large firms and incumbents are slightly less likely to introduce radical innovations than small firms and non-incumbents, but this relation does not hold for all time periods in their sample. Ettlie and Rubenstein (1987: 100–101) find that the largest of firms, those with more than 45,000 employees, were unlikely to introduce innovations, because they have developed vested interests in routinized technologies. Roy and Sarkar (2016: 845) argue that the size of firms affects their strategy: larger firms have organizational processes that might become sources of inertia during technological change. We expect that larger utilities are less likely to transition to the more novel business model using boundary-spanning transactions for sustainable resources, and hence we expect them to invest and divest less in sustainable resources and to divest less traditional resources, while preferring investments in traditional resources.

2.4 Transaction changes to utilities’ business models

The need for utilities to create sustainable value and change their resource base has been an important driver for boundary-spanning transactions. Moving into renewables, smart grids, and other sustainable energy technologies requires access to resources that are not readily available within utilities and can only be accessed from external partners (Richter, 2013; Smink et al., 2015; Tayal and Rauland, 2017). When utilities pursue boundary-spanning transactions, they can do so through transactions with partners in the same industry or from different industries as well as in the same country or from abroad. Historically, incumbents have mainly engaged in transactions with fellow utilities, relying on M&As (Burger and Weinmann, 2016) to reinforce their traditional business model, and have focused on partners in the same country to create “national champions” and increase market concentration (Domanico, 2007). However, sustainable energy requires incumbents to access resources residing outside the energy industry and work with partners from other industries such as in software development or start-ups working on emerging energy technologies (Tayal and Rauland, 2017). For example, utilities have been expanding their business through boundary-spanning transactions with solar panel firms to learn about the technology, gain exposure to the solar energy market, and develop a solar offer for their customers (Wadin et al., 2017). As an inter-industry partner may help utilities to access new resources necessary for exploring and exploiting sustainable energy, often unavailable within the utilities’ industry, we expect utilities engaging in inter-industry transactions rather than intra-industry transactions to be more likely to invest and divest sustainable energy. Moreover, sustainable energy also requires incumbents to enter new markets to create sufficient scale to exploit these new resources. Research has found that utilities pursuing international expansion are more likely to do so by investing in sustainable energy rather than traditional energy (Kolk et al., 2014; Patala et al., 2021). Hence, utilities seem less affected by path dependencies when going abroad and see internationalization as an opportunity to further exploit the sustainable energy resources built up at home. We expect, therefore, that utilities which engage in international transactions are more likely to invest and divest sustainable energy.

3. Methods

3.1 Data collection

Our data includes a subset of European energy utilities. Utilities in the sample were identified from a combination of sources, including utility-specific investment indices, industry reports, and literature on European utilities. For the investment indices, we looked at the composition of the MSCI Europe Utilities Index and the STOXX Europe 600 Utilities Index, as of May 2019 (MSCI, 2019; STOXX, 2019). At the time of our analysis, MSCI Europe Utilities index included 23 firms and the STOXX Europe 600 Utilities Index included 29 firms. The indices mostly overlap in terms of firms listed, but not fully. We only included utilities with medium to large market capitalization based on the S&P Capital IQ database, with medium ranging from $2 to $10 US billion market capitalization, and large including firms above $10 US billion market capitalization (S&P Capital IQ, 2020). The indices include utilities in sectors beyond electricity. We excluded those outside the scope of our analysis, such as water- and gas-only utilities and transmission-only utilities. These inclusion and exclusion criteria resulted in 17 utilities for our sample.¹ In terms of industry reports, we used S&P Market Intelligence reports to identify large utilities that are not included in the indices. Three firms were added from the analysis of industry reports² (S&P Global, 2017, 2018a,b), including Swedish utility Vattenfall that is not listed on the stock market and hence not included in the indices. The indices and reports resulted in a sample of 20 utilities from 11 countries in the European Union, representing a geographically diverse range of large firms. During our data analysis, one utility (Uniper) was removed from our sample because it did not form any sustainable energy transactions in our dataset, resulting in a lack of variance in the dependent variable for this group in our panel data. The final sample consists of 19 utilities, which we compared to the research by Bryant et al. (2018). Out of the 19 utilities, only three utilities (National Grid, Naturgy, and Veolia) were absent from their study. We decided to keep these utilities because they are energy incumbents engaged in traditional utility activities, as confirmed by the S&P’s Capital IQ Company Intelligence database.

Our dataset thus includes utilities with operations in the traditional value chain of the energy industry, often combining electricity with gas, which, before the liberalization of energy industries in the European Union, was a vertically integrated structure generating energy in large-scale, predominantly fossil-fuelled power plants and supplying energy via a network infrastructure to consumers. This traditional business model focused on affordability, efficiency, and reliability (Bryant et al., 2018; Frei et al., 2018). We include utilities with historical operations in the energy industry in our dataset to better understand the role of these incumbents in the energy transition. These European utilities have experienced similar policy reforms, including those aimed at introducing competition in the energy industry and those focused on establishing a RE industry (Pereira et al., 2018).

To conduct our analysis on the boundary-spanning transactions of utilities, we collected data on M&As, joint ventures, contractual agreements, and divestments from January 1990 to June 2019. We used the Refinitiv Securities Data Company (SDC) Platinum database, which includes historical data on corporate deals obtained from the US Securities and Exchange Commission filings and their international counterparts, trade publications, and news sources (Refinitiv, 2021; Schilling, 2009: 235). We searched for transactions by the 19 European utilities and excluded transactions labeled as “rumour/intended,” “seeking buyer,” or “withdrawn,” which resulted in 8967 transactions. The SDC database includes the name of the utility and their partners, the type of transaction (M&A, joint venture, contractual agreement, divestment), a deal text describing the nature of the transaction, the date of the transaction, and the industry and country of the transaction partners.³

3.2 Variables

The dependent variable transaction type is a categorical variable with four categories: sustainable investments, sustainable divestments, traditional investments, and traditional divestments. We include the SDC data on M&As, joint ventures, and contractual agreements in our investments category. The classification into sustainable versus traditional was based on the description included in the deal text of the SDC database. When a transaction’s deal text was insufficient, more information was collected in S&P’s Capital IQ Company Intelligence database and in publicly available utility communications.  Appendix A lists the type of transactions classified as sustainable and traditional. Table 1 lists the sources that were used for our data collection.

The variable utility performance is measured by the operating income before depreciation (in million euros) of each utility in each year, using data from Compustat. We used annual average historical exchange rates to transform foreign currencies into euros (fxtop.com). To complete missing data, we relied on data from Orbis/Bureau van Dijk and on annual reports of utilities. We redefined the variable using the natural log transformation “new variable” = ln(1 + “old variable”), using the example of Zollo et al. (2002: 706) and El Ouadghiri et al. (2021: 3), because it displayed a high positive skewness (4.069). We inspected the distribution of the log transformed variable and found that the transformation reduced the skewness.

The variables experience with sustainable investments and experience with sustainable divestments are both count variables of a utility’s number of sustainable energy investments or divestments, respectively, ranging from the first year for which the utility has recorded an investment or divestment to another firm in our dataset to the final experience with a sustainable investment or divestment that precedes the date of the transaction. These variables are calculated using our data from the SDC database. We transformed these variables using different depreciation factors to account for the possibility that a recent transaction (i.e., an investment or divestment) weighs more heavily on experience than past transactions due to organizational forgetting (Macher and Boerner, 2012). |$Experienc{e_{\,i,t}}$| is the cumulative experience of utility i at time t. |$\delta $| is the depreciation factor. |$Experienc{e_{\,i,\,\,t - 1}}$| is the cumulative experience of utility i minus the last experience with a sustainable transaction. |$Transaction{\,_{i,t}}$| is the last experience with a sustainable transaction of utility i at time t.

Following Macher and Boerner (2012), we used different depreciation factors ranging between 10% and 40%. Our results in Table 4 display experience with a 40% depreciation factor, while results using other depreciation factors are discussed in the post hoc analyses.

The variables diversity of experience with sustainable investments and diversity of experience with sustainable divestments are count variables of the number of different types of sustainable investments or divestments, respectively, that the utility has experience with preceding the date of the investment or divestment. We identify different types of sustainable investments and divestments in four areas: RE generation, smart energy management, emerging technologies, and sustainable mobility.  Appendix A provides detail on each of these categories. This variable is calculated using our data from the SDC database with experience ranging from the first year for which the utility has recorded an investment or divestment to another firm in our dataset to the final experience with a sustainable investment or divestment that precedes the date of the investment or divestment.

The variable utility size is measured by the number of employees (in thousands) of each utility in each year, using data from Compustat. To complete missing data, we relied on data from Orbis/Bureau van Dijk and on annual reports of utilities. As with utility performance, we log transformed this variable due to its moderate positive skewness (0.897). We inspected the distribution of the log transformed variable and found that the transformation reduced the skewness.

The variable transaction industry includes two categories: intra-industry transactions, where partners are in the same industry, and inter-industry transactions, where partners are in different industries. Following Reuer and Lahiri (2014), we used the Standard Industrial Classification codes at the four-digit level of the utilities and their partners, available in the SDC database, to create this binary variable.

Using data from the SDC database, we include the variable transaction location, which includes two categories: national transactions, where partners are located in the same country, and international transactions, where partners are located in different countries.

The variable utility ownership is calculated using data from Compustat on the year that the utility had its initial public offering (IPO) and was transformed into a public firm listed on the stock market. This variable is a binary variable with utilities coded as a public utility in the years after their IPO, and before their IPO as other type of ownership, reflecting a diversity of owners including state ownership.

We also control for the effects of policy on sustainable and traditional investments and divestments by creating year dummies for the years in which the European Union implemented directives on the liberalization (96/92/EC; 2003/54/EC; 2009/72/EC), the promotion of RE (2001/77/EC; 2009/28/EC; (EU)2018/2001), and the promotion of energy efficiency (2006/32/EC; 2012/27/EU; (EU)2018/2002), discussed in Section 2.2 and Figure 1.

We also include dummy variables on the industry of the utility, which is based on North American Industry Classification System (NAICS) codes from Compustat and includes the industries electric power generation, transmission, and distribution (NAICS: 2211), electric power generation (NAICS: 22111), hydroelectric power generation (NAICS: 221111), natural gas distribution (NAICS: 221210), and water supply and irrigation systems (NAICS: 221310).

3.3 Model selection

We used random effects multinomial logit models to estimate the type of transaction formed by European energy utilities, using the xtmlogit command of Stata 17. We include utility fixed effects and order the data by specifying the date of the transaction as the time variable. More specifically, the date is the day, month, and year of the transaction, as reported in the SDC database, because utilities can form multiple transactions per month in the different years. Using this time variable thus enabled us to have unique utility-date observations necessary for the panel data analyses. Our data are unbalanced panel data, because the utilities in our sample transacted on different days of the year, and hence, the imbalance did not result from the common attrition problem in longitudinal studies or “the process of dropout from a panel study” (Lugtig, 2014: 699).

We chose to present four models due to the high correlation between four variables of interest: “experience with sustainable investments” (model 1), “diversity of experience with sustainable investments” (model 2), “experience with sustainable divestments” (model 3), and “diversity of experience with sustainable divestments” (model 4). We checked for multicollinearity of the variables in models 1–4. The variance inflation factors (VIFs) of the variables in models 1–4 range between 1.01 and 2.64, and the mean VIF of the variables in these models range between 1.25 and 1.38, indicating that there are no problems with multicollinearity between the variables (Kutner et al., 2005: 409).

Endogeneity can occur for different reasons such as omitted variables and unobserved heterogeneity. To deal with the first reason for endogeneity, we account for time-variant omitted variables by including utility performance, utility size, utility ownership, as well as different types of experience of utilities, as variables that vary over time (Krekel et al., 2016: 121). We also account for the exogenous variation over the sample period by including the European directives on liberalization, RE, and energy efficiency that were introduced in different years as year dummies, see the discussion in Section 2.2 and Figure 1. Our random effects models also allow us to account for time-invariant variables by including the industry of the utility. Second, to account for endogeneity arising from unobserved heterogeneity, we include utility-fixed effects and time-fixed effects (Torres-Reyna, 2007; Krekel et al., 2016: 121).

4. Results

4.1 Descriptive statistics

Table 1 displays the descriptive statistics. Table 2 offers more detail on the 19 utilities over three decades and includes information on their size, performance, RE production, and major operations. Table 3 displays the correlation and association coefficients of the variables. In Table 1, information on our dependent variable shows that most transactions are in traditional resources, and sustainable investments and divestments are 10.74% and 4.83% of the total, respectively. The utilities’ mean annual performance, measured by operating income, is 6231 million euro. On average, utilities have experience with almost 22 sustainable investments and 2 different types of sustainable investments. On average, they have divested almost nine sustainable resources of one type only. The most common types of sustainable transactions are RE generation and smart energy management, followed by emerging technologies and sustainable mobility (see  Appendix A). The mean size of the utilities is 81,871 employees. Inter-industry transactions (63.28%)⁴ and national transactions (63.74%) are more prevalent in our dataset than intra-industry transactions and international transactions. Most transactions (77.13%) are formed by public utilities, and utilities are most often registered in the electric power generation, transmission, and distribution industry.

4.2 Results of the multinomial logit models

Table 4 shows the results of the random-effects multinomial logit models displaying three categories of the dependent variable: sustainable investments, sustainable divestments, and traditional divestments. We chose to display the results for these categories and use traditional investments as the base category of the dependent variable to better understand how utilities use boundary-spanning transactions to transform to more sustainable business models. In models 1–4, we include the different types of experience with sustainable transactions separately, because of the high correlation between these variables.

4.2.1 Utility attributes enabling change towards sustainable resources

Model 1 shows that when utilities increase their income by the natural logarithm of one million euro, the likelihood of a sustainable investment (sustainable divestment) relative to a traditional investment increases by a factor of 2.227 (2.866). When utilities increase their income by the natural logarithm of one million euro, the likelihood of a traditional divestment relative to a traditional investment increases by a factor of 1.432. These results are consistent with the results of models 2, 3, and 4. They illustrate that when utilities have financial slack, they prefer to engage in sustainable transactions and to divest traditional resources over investing in traditional resources such as fossil-fuelled power plants. Financial slack thus enables utilities to reconfigure their business models to include more sustainable resources.

Our results also show that when utilities increase their experience with sustainable transactions (including experience with sustainable investments [model 1], diversity of experience with sustainable investments [model 2], experience with sustainable divestments [model 3], and diversity of experience with sustainable divestments [model 4]), the likelihood of a sustainable investment, a sustainable divestment, and a traditional divestment increases, relative to traditional investments. These results show that when utilities accumulate experience with sustainability and learn to transform their resources towards a more sustainable business model, they further increase their transactions in sustainable energy and divest traditional resources.

Our results also indicate that when utilities increase their size by the natural logarithm of a thousand employees, the likelihood of a sustainable investment (sustainable divestment) relative to a traditional investment decreases by a factor of 0.459 (0.598) in model 1. The likelihood of a traditional divestment decreases by a factor of 0.775 in model 1. These results are consistent with models 2, 3, and 4. Larger utilities are thus more likely to use boundary-spanning transactions to stick to their traditional resources but less to transform to a business model that includes sustainable energy.

4.2.2 Transactions offering access to sustainable resources

Utilities that interact with partners from other industries are more likely to transact in sustainable resources when compared to investing in traditional resources. These results are significant and consistent across the four models with relative risk ratios ranging from 1.526 to 2.129. They illustrate that utilities need access to resources in other industries to enable the reconfiguration to more sustainable business models. Furthermore, when utilities transact with national partners, they are more likely to divest their traditional resources to these partners, rather than together investing in traditional resources. In our post hoc analyses, we use traditional divestments as a base category (instead of traditional investments as in the main models) and show that international transactions are associated with sustainable investments, sustainable divestments, and traditional investments (see  Appendix B). In the main models 1–4, we do not find a significant relation between transaction location and sustainable investments and divestments when we compare these to traditional investments as the base category, because the post hoc analyses have shown that these three types of transactions (i.e., sustainable investments, sustainable divestments, and traditional investments) are all associated with international partners.

4.2.3 Drivers of sustainable value

Our findings also show that public utilities are more likely to transact in sustainable resources, in comparison to investing in traditional resources. These results are significant and consistent across the four models with relative risk ratios ranging from 1.816 to 2.977. Public firms are more exposed to expectations from shareholders and other stakeholders regarding their sustainable strategies, practices, and investments, and hence face greater pressure to contribute to sustainable value (George and Bock, 2011; Yang et al., 2018). These external expectations to create sustainable value do not only come from shareholders or consumers, but also from policy makers implementing rules and regulations driving a transition from an energy industry dominated by fossil fuels to one powered with renewable resources. In our four models, we control for several years in which European directives for liberalization, renewable energy, and energy efficiency were introduced (see also Figure 1).

4.3 Post hoc analyses

We conducted several robustness tests to check if our results are sensitive to alternative model specifications and alternative measurements of variables. The results of the robustness tests are reported in  Appendix B. First, we used a different base category of our dependent variable and replaced traditional investments by traditional divestments. This shows that the performance of utilities, their experience with sustainability, and their inter-industry transactions are negatively related with traditional investments relative to traditional divestments. In other words, utilities with financial slack and experience with sustainability and that transact with firms in other industries are less likely to invest in traditional resources than to divest them. Utility size is positively related with traditional investments, and hence larger utilities are more likely to invest in traditional energy resources, including fossil-fuelled power plants, than to divest them (see models R1–R4 in  Appendix B). The results for sustainable investments and sustainable divestments with this altered base remain largely the same, except that the negative relation with national transactions is now significant in the four models, implying that international transactions are more likely to be sustainable investments and divestments, relative to traditional divestments.

Second, we collected data on pre-tax income and cash from Compustat, Orbis/Bureau van Dijk, and annual reports of energy utilities and used these as alternative measures of utility performance and hence their financial slack. We replaced the natural logarithm of operating income before depreciation with the natural logarithm of pre-tax income, as well as the natural logarithm of cash. We found that these alternative measures also have a positive impact on the likelihood of sustainable investments and divestments, relative to traditional investments (see  Appendix B models R6 and R7). In model R6, we also find a positive relation between increases in pre-tax income and traditional divestments. In model R7, we do not observe a significant relation between increases in cash and traditional divestments.

Third, we create a new variable “decade” with three categories (1990–1999, 2000–2009, and 2010–2019) to replace the year dummies. This variable aims to reflect different policy reform periods of the energy sector. This is valuable given that even though EU directives on the liberalization of energy industries, the promotion of RE and energy efficiency are announced at the EU level in a specific year, countries may implement them during several years with some countries taking more lengthy implementation processes (Serrallés, 2006). By using a decade as the time frame we are able to capture the effects of EU policy periods in our sample. The results show that utilities are more likely to engage in sustainable energy transactions and divest traditional resources in 2000–2009 and 2010–2019 in comparison to 1990–1999 for the four models with different types of experience (for brevity, we report only one of the models; see R8 in  Appendix B).

Fourth, we used different depreciation factors (10%, 20%, and 30%) to test whether our models remain consistent with different transformations of the variables “experience with sustainable investments” and “experience with sustainable divestments”. In our main results, we used a depreciation factor of 40%, allocating a larger role to more recent transactions than past experience, in comparison to depreciation factors of 10%, 20%, or 30%. These different transformations of the experience variables deliver results that are consistent with those reported in Table 4. For brevity, we display only the model with a 10% depreciation factor of the variable “experience with sustainable investments” (see R9 in  Appendix B).

Finally, we include RE production (in gigajoules) of each utility in each year in our models as a proxy for utilities’ internal development of sustainable resources. Model R10 in  Appendix B shows that when utilities increase their RE production, the likelihood of a sustainable investment relative to a traditional investment increases by a factor of 1.196. These findings can be interpreted with the literature on concurrent sourcing, referring to simultaneously making and buying the same good (e.g., Parmigiani, 2007: 285). This literature argues that a reason for concurrent sourcing is absorptive capacity (Sørensen et al., 2023). Firms use their internal production experience to more efficiently assimilate and exploit new knowledge from outside their boundaries (Sørensen et al., 2023: 10). Our findings thus illustrate that utilities with internal RE resources (i.e., make) are building up the competences to be able to transact in sustainable resources with others (i.e., buy). When we change the base of the dependent variable to traditional divestments (see R5 in  Appendix B), we also find a positive relation between RE production and sustainable investments, again illustrating the absorptive capacity argument for concurrent sourcing.

Figure 2 visualizes the results of our marginal analyses in which we have placed RE production (i.e., make) on the x-axis and the predicted probability of sustainable investments through external transactions (i.e., buy) on the y-axis. The positive slope of the lines illustrates an increase in concurrent sourcing: an increase in RE production is associated with an increased probability of sustainable investments. We interact RE production with high levels of experience with sustainable investments (i.e., above average) versus low levels of experience with sustainable investments (i.e., below average), while keeping all the other variables at their mean. The analysis shows that utilities with greater experience with sustainability are more likely to source concurrently, which is in line with the findings by Parmigiani (2007: 294, 303) and Parmigiani and Mitchell (2009: 1090) who show that greater firm expertise is associated with preferring concurrent sourcing over buying. We also interact RE production with inter-industry transactions versus intra-industry transactions, while keeping all the other variables at their mean. This analysis shows that firms are more likely to concurrently source when they enter inter-industry transactions, compared to intra-industry transactions. This is in line with a study by Parmigiani and Mitchell (2009: 1080) who find that a firm is more likely to concurrently source when its partners have expertise in complementary components. As in our main models, we view inter-industry transactions as a proxy for access to complementary resources. These marginal analyses thus show that firms are more likely to concurrently source when they can combine their internal RE production expertise with sustainability experience and complementary competences accessed via external transactions, illustrating the absorptive capacity argument.

Model R10 in  Appendix B also shows that when utilities increase their RE production, the likelihood of a traditional divestment decreases by a factor of 0.934. When we change the base of the dependent variable to traditional divestments (see R5 in  Appendix B), we find that with increasing RE production, utilities are more likely to invest in traditional resources. This negative relation between RE production and traditional divestments and positive relation between RE production and traditional investments suggest an effect that is specific to the energy industry. When utilities expand their internal RE production, they hold on to their traditional resources, which may illustrate that they perceive decarbonization as involving a significant risk that can be mitigated through diversification, and hence by employing a “mixed strategy: neither fully decarbonizing nor fully sticking with business as usual” (Green et al., 2022: 2043–44).⁵

5. Conclusion

5.1 Discussion of results

With this study, we improve our understanding of what drives the reconfiguration of incumbent utilities’ business models from traditional models, relying on the centralized generation of energy with fossil fuels, towards more sustainable models. Extant literature has predominantly provided insights based on specific cases (e.g., a utility, a technology, or a country) (Hannon et al., 2013; Shah et al., 2013; Tayal, 2016; Wadin et al., 2017; Horváth and Szabó, 2018). We, instead, analyze data from 19 large and geographically diverse utilities from the EU and thus complement previous studies with a quantitative contribution on utilities’ reconfiguration to sustainable energy, drawing on a novel dataset of 8967 transactions. Analyzing this dataset, we unpack the conditions under which utilities are more likely to reconfigure their business model by engaging in boundary-spanning transactions to access and build up sustainable energy resources and create sustainable value.

A descriptive analysis of our dataset confirms previous findings that utilities still predominantly engage in boundary-spanning transactions for traditional energy (Bryant et al., 2018; Alova, 2020); we, too, find that sustainable investments and divestments are only a small part of total transactions. However, our analysis brings more nuance to the findings of Alova (2020) and Bryant et al. (2018). Our panel data analysis investigates which external drivers, attributes of utilities, and attributes of transactions facilitate sustainability-oriented changes in the value, resources, and transactions of utilities’ business models. It unearths several conditions under which utilities are significantly more inclined to reconfigure their resource base towards sustainable energy and create sustainable value. Our findings show that utilities with financial slack have the means available to invest in sustainable energy. Interestingly, slack not only facilitates utilities to invest in sustainable energy but also drives them to divest traditional energy. Deep pockets are thus essential for utilities to transform their resource base. However, having deep pockets does not have the same effect as being large. Rather, we find that size hinders utilities to transact in sustainable energy, which may confirm insights on the innovator’s dilemma that larger firms find it more challenging to innovate, and that their organizational processes and routines hinder a reconfiguration from the old to the new technology (Christensen, 1997; Roy and Sarkar, 2016). However, this may only hold for larger firms being unwilling or unable to transition to sustainability in collaboration with others. Our data show a positive correlation between firm size and RE production, meaning that larger utilities build up renewable resources internally but invest less in boundary-spanning transactions for more innovative sustainable technologies such as sustainable mobility, smart grids, and demand response management.

We also find experience and diversity in experience to be important drivers of sustainable investments and divestments. While incumbents are characterized by path dependencies and lock-ins with traditional energy (Barazza and Strachan, 2021; Stern and Valero, 2021), experience with sustainable energy helps them to further engage in sustainable energy transactions. Our findings lend support to literature arguing that investing in sustainable energy is a dynamic process with positive feedback loops (Jacobsson and Bergek, 2004; Ekins and Zenghelis, 2021; Stern and Valero, 2021). There is a significant learning effect (Levitt and March, 1988): the more utilities invest in sustainable energy and the higher the diversity of their experience across a range of sustainable energy activities, the more they learn about how to transform their resource base and which sustainable energy resources they can exploit most successfully. The positive impact of diversity in experience with sustainable energy transactions also confirms previous findings regarding the complementarities between different areas of sustainable energy (Barbieri et al., 2020; Ekins and Zenghelis, 2021; Stern and Valero, 2021). While most sustainable transactions in our dataset relate to RE generation and smart energy management, over time, there is an increase in transactions in emerging technologies and sustainable mobility, leading to a reinforcing effect for sustainable energy investments (Jacobsson and Bergek, 2004). This is not surprising because investing in sustainable energy technologies such as electricity storage, heat pumps, and electric vehicle infrastructure gives utilities the opportunity to capture more value from previous investments in RE generation and smart grids. Hence, there are not only supply-side complementarities in the knowledge base (Barbieri et al., 2020) but also demand-side complementarities in value capture (Aversa et al., 2021): gaining experience with a variety of sustainable energy resources lets utilities develop new value propositions and tap into new revenue streams (Pereira et al., 2022).

Our analyses also show that utilities that are more likely to invest in sustainable energy realize there is a need to collaborate with partners from other industries and from across country borders. These findings confirm that incumbents pursuing sustainable energy are aware that they require resources that are not readily available in their own industry or in their own country. There is a realization that changing the resource base towards sustainable energy involves casting a wider net when engaging in boundary-spanning transactions as the relevant resources are more widely dispersed across industries and countries. There is a significant divide between capabilities needed to exploit traditional resources, such as a centralized, fossil-fuelled infrastructure, and sustainable resources, such as low-carbon, decentralized, and digital technologies (Richter, 2013; Smink et al., 2015). Our findings lend support to previous case-based research showing that to bridge this divide utilities need to rely on partners in other industries that are better in creating value from sustainable energy resources (Tayal and Rauland, 2017; Wadin et al., 2017).

Finally, a static picture of the number and fraction of sustainable transactions might lead to a pessimistic view that there is not much change in the utility business model. However, our analysis provides signs of hope as the policy impetus to become more competitive and to decarbonize—which the energy industry has experienced over the past decades—has led to a significant change in utilities’ investment and divestment behavior. Figure 1 visualizes a timeline of European directives for the energy industry and illustrates a change in policies from introducing competition in RE, to indicative targets for RE production, and finally to mandatory RE targets. This changing policy landscape has prompted a change in expectations from utilities regarding the nature of the value they should create for their stakeholders and stimulated them to engage in boundary-spanning transactions that change their resource base. Our findings suggest that especially public utilities are feeling pressure to invest in sustainable energy and create sustainable value. Looking at the final period in our dataset (2010–2019), there no longer seem to be incumbent utilities in the EU who believe they can step into the future without transforming to sustainable energy. Table 2 illustrates that most incumbents increase their RE production from 1990 until now, and that utilities increasingly incorporate sustainable resources in the major operations of their business.

5.2 Limitations and future research

First, a limitation of this study is that it focuses on incumbent utilities. Even though these incumbents play a central role in delivering a low-carbon future, due to their prominent position in the energy value chain, other actors such as new entrant energy retailers, energy start-ups, and incumbents and start-ups in adjacent industries (IT, energy storage, transport) contribute to the energy transition, too. These actors in the energy industry are partners of the incumbents in our dataset, but future studies could analyze these actors as focal actors to better understand their changing roles in the energy industry and their contribution to a decarbonized, decentralized, and digital industry.

Second, we study the reconfiguration of utilities’ business models through changes in their internal RE production and their boundary-spanning transactions that integrate sustainable energy. While the literature on business models has long recognized that the transformation of these models requires changes in firms’ resources and value through boundary-spanning transactions (e.g., George and Bock, 2011), more recent studies have extended this perspective towards business ecosystems in which groups of aligned firms collaborate and compete to collectively materialize a value proposition (Adner, 2017; Hannah and Eisenhardt, 2018). In the energy transition, utilities use a systems integration approach to combine the supply of RE with energy efficiency services, demand response services via a smart grid, and electric vehicle charging services (Pereira et al., 2022). Future research should therefore apply a business ecosystem perspective to the energy transition, to better understand how utilities compete and collaborate with other actors in the ecosystem to collectively create and capture value from the supply of integrated energy services.

Third, this study includes data on divestments of traditional activities by the incumbent utilities, and on whether these assets are sold to an international or national buyer, and to a buyer in the energy industry or a different industry. However, future studies could analyze and expand these data to improve our understanding of how divestments contribute to the energy transition at a sector level, and whether these divestments lead to a decommissioning of fossil-fuel energy plants or a long-term use of these plants by the acquiring firms. This type of future research will complement existing studies that take a financial investor perspective rather than a utility perspective on divestments (Henriques and Sadorsky, 2018; Hunt and Weber, 2019), and that study the financial impact of divestments rather than the consequences for the energy transition (Plantinga and Scholtens, 2021; Guo et al., 2022).

5.3 Managerial and policy implications

Our first recommendation for incumbent energy firms is to reinvest their earnings into new sustainable resources because these investments will build up the utilities’ experience with sustainable technologies, and subsequently support their ability to create and capture value in a decarbonized energy system. While building up experience, utilities should invest in a variety of sustainable technologies, as it allows them to benefit from complementarities between these technologies. For example, they may learn how to offer superior value to customers with a differentiated offer combining solar energy with energy storage, an electric vehicle connection, or a demand-response service. In addition, utilities’ experience with recombining knowledge of different sustainable technologies and their greater levels of experimentation will help them to move quicker down the learning curve giving them an advantage over other firms in the industry. Their larger knowledge base of sustainable technologies will make them more attractive partners to firms in adjacent industries, such as in automotive or ICT, giving them a further edge over competitors.

Our second suggestion concerns the larger utilities in our sample. These utilities are less likely to engage in boundary-spanning transactions for sustainability than smaller firms, but they do invest in traditional resources together with others. Larger utilities could aim for ambidexterity in their organizational structures to facilitate the use of boundary-spanning transactions for reconfiguring their business model (Markides, 2013). They could set up a separate business unit to fast track their exploration into sustainable energy resources, including sustainable mobility, smart grids, and energy efficiency innovations, while exploiting traditional resources in their existing business. Such a structural differentiation may create a decentralized business unit that is more open to new connections with other businesses for the joint exploration of new sustainable opportunities (e.g., Gilbert, 2005). A collaborative approach could help larger firms cope with the risk of decarbonization and tilt the mixed strategy of balancing fossil fuels and renewable resources more towards sustainable energy innovations over time.

A third recommendation is for policymakers who can rely on our findings to develop energy policies, particularly those impacting market structure, innovation, and collaboration. Our results on utility size should provide confidence in the ability of smaller firms to contribute to the delivery of sustainable energy policy ambitions. These smaller utilities transition the energy industry towards more sustainability by relying on boundary-spanning transactions. The EU directives on the liberalization of energy industries have contributed to the rise of smaller firms in the energy industry by breaking up the energy monopolies and allowing for new entrants to access the industry. New energy policies could build on these directives by promoting collaboration among firms in the industry to facilitate the transition to a more innovative sustainable industry. Several European regulators already incorporate innovation incentives in the electricity tariffs for transmission and distribution system operators (CEER, 2021), facilitating investments in smart electricity grids. While these are regulated tariffs for the grid, policymakers could develop additional regulations that target R&D investments in sustainable energy generation and retail. More specifically, policymakers focusing on industrial strategy and innovation could make these R&D subsidies and grant participation rules for R&D funding dependent on the extent of collaboration between energy firms and firms in adjacent industries. Adding requirements and incentives for utilities to partner with other industries may progress the development and uptake of sustainable energy innovations. Even if sustainable energy investments are increasing, they are still a fraction of total investments in the energy industry (10.74% in our sample). Policymakers should therefore implement more ambitious and stricter rules to promote a faster transition to RE production, and hence go beyond the policies that are displayed in Figure 1. This recommendation is in line with recent policy proposals in the EU. In March 2023, a provisional agreement was reached to change the (EU) 2018/2001 Directive towards a 42.5% binding target for RE by 2030 while aiming for 45%.⁶ In addition, in March 2023, an EU regulation proposal was published called the Net Zero Industry Act that promotes investment in and grants priority status to several RE technologies, such as solar photovoltaic and solar thermal technologies and biogas and biomethane technologies.⁷

Funding

This work was supported by the Alliance Manchester Business School Lord Alliance Strategic Research Investment Fund [LA-SRIF- 15033].

Footnotes

References

Appendix A Classification of the variable “transaction type” into traditional and sustainable transactions

Appendix B Post hoc analyses