| Keywords [eng] |
Renewable Energy, Return on Equity, Financial Performance, Capital Structure, Leverage, Interest Rate Sensitivity, Creative Destruction, Energy Transition, Market Displacement, Panel data analysis. |
| Abstract [eng] |
The global energy sector is undergoing a profound structural transformation driven by climate change policy, technological progress, and the rapid expansion of renewable energy sources. While renewable energy companies play a central role in the transition toward a low-carbon economy, their financial performance relative to traditional fossil fuel energy firms remains a subject of debate. This study examines whether renewable energy companies systematically underperform conventional energy firms and identifies the financial and macroeconomic factors that explain observed performance differences. The research focuses on a comparative analysis of large publicly listed renewable and traditional energy companies over the period from 2011 to 2024 third quarter, using quarterly firm-level data. Profitability is measured by return on equity (ROE), while explanatory variables include leverage, firm size, liquidity, capital investment, R&D expenditure. Other macroeconomic indicators analyzed are oil prices, interest rates, world stock market index and carbon pricing. The analysis applies panel regression to analyze drivers’ importance. The findings show that renewable energy firms display lower profitability than traditional energy firms in unadjusted comparisons. Once firm size, capital structure, and macroeconomic conditions are controlled for, the sectoral profitability gap disappears. The results indicate that lower profitability of renewable firms is explained by differences in leverage, as renewable firms operate with substantially higher debt levels. Further analysis highlights a structural contrast between the two sectors: traditional energy firms are primarily influenced by macroeconomic factors such as oil prices, whereas renewable firms are more sensitive to financial structure and interest rate conditions. Despite this vulnerability, the expansion of the renewable sector is associated with a statistically significant displacement effect on the profitability of incumbent fossil fuel firms, providing evidence consistent with Schumpeter’s creative destruction. Overall, the findings suggest that the lower profitability of renewable energy firms is driven by financial structure and macroeconomic exposure. From a policy perspective, the results highlight the importance of stable financing conditions and targeted financial support mechanisms to improve the competitiveness of renewable energy companies. For investors, the study underscores the need to account for interest rate risk and leverage when evaluating renewable energy investments. |
