Transition dynamics of electricity asset-owning firms

TL;DR

This paper analyzes over two decades of investment data to understand how energy firms adapt to technological changes, revealing low transition rates and persistent, concentrated technology portfolios, with few firms fully transitioning to renewables.

Contribution

It provides the first comprehensive quantitative analysis of global investment patterns and transition dynamics in energy firms over an extended period.

Findings

Only 10% of firms change capacity annually.

Technology portfolios are highly concentrated and persistent.

Less than 3% of fossil fuel firms significantly shift to renewables.

Abstract

Despite dramatic growth and cost improvements in renewables, existing energy companies exhibit significant inertia in adapting to the evolving technological landscape. This study examines technology transition patterns by analyzing over 140,000 investments in power assets over more than two decades, focusing on how firms expand existing technology holdings and adopt new technologies. Building on our comprehensive micro-level dataset, we provide a number of quantitative metrics on global investment dynamism and the evolution of technology portfolios. We find that only about 10\% of firms experience capacity changes in a given year, and that technology portfolios of firms are highly concentrated and persistent in time. We also identify a small subset of frequently investing firms that tend to be large and are key drivers of global technology-specific capacity expansion. Technology transitions within companies are extremely rare. Less than 3% of the more than 8,400 fossil fuel-dominated firms have substantially transformed their portfolios to a renewable focus and firms fully transitioning to renewables are, up-to-date, virtually non-existent. Notably, firms divesting into renewables do not exhibit very characteristic technology-transition patterns but rather follow idiosyncratic transition pathways. Our results quantify the complex technology diffusion dynamics and the diverse corporate responses to a changing technology landscape, highlighting the challenge of designing general policies aimed at fostering technological transitions at the level of firms.