Friends or foes? Exploring the performance of incumbent energy providers and the expansion of renewable energy in five European countries

Abstract

Societies at large are increasingly accepting the need for a transition to a lower-carbon energy system. How this transition is conducted and its final results, however, are matters of concern. In fact, there is already some available evidence based on qualitative and case-study research showing that, in some cases, costly and uncertain technologies are being promoted instead of cheaper small-scale alternatives.

This research intends to shed some quantitative light on this issue by looking at the stock market performance of electric utilities in the major European economies and their behavior in the face of increasing renewable energy deployments. The main result is that their performance has not worsened due to those deployments, except for the photovoltaic energy, which shows a consistent and negative impact across all countries, with Spain's remarkable exception. This is due to this energy source's characteristics, particularly its scalability, unabated cost declines, and technical simplicity, paving the way for decentralized and distributed energy markets instead of the current unique and centralized distribution system. The paper also discusses the shortcomings of the creative-destruction paradigm when applied in this context, showing that even an active 'exnovation' policy might not be enough to ensure this outcome. An active political stance supporting the appropriate kind of regulation to enable the right environment for these efficient developments to be realized is therefore required.