The Widening Profitability Gap between Renewable and Fossil Power Firms in Europe
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| Autores principales: | , |
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| Formato: | Preprint |
| Publicado: |
2026
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| _version_ | 1866911408374939648 |
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| author | Fischer, Robin Pichler, Anton |
| author_facet | Fischer, Robin Pichler, Anton |
| contents | Mobilising private capital is a critical bottleneck of the energy transition, yet recent crisis-driven windfall profits for fossil power firms suggest that market signals may still favour carbon-intensive assets. Here we analyse a panel of 900 European power firms (2001-2023) to resolve whether these profits reflect a durable profitability advantage or a crisis-driven anomaly. Using machine-learning clustering and Bayesian model averaging, we identify a structural divergence: wind and solar portfolios exhibit rising profitability, with return on assets among wind-dominated firms increasing by over 6% between 2014 and 2023. Conversely, higher fossil portfolio shares are increasingly associated with lower profitability, with marginal effects reaching -4% by 2023, while renewable-dominated firms match or outperform their fossil-heavy counterparts across most European regions. These findings suggest that the record profits of fossil incumbents were distinct outliers, masking an ongoing decline in the profitability of carbon-intensive business models. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2601_22167 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | The Widening Profitability Gap between Renewable and Fossil Power Firms in Europe Fischer, Robin Pichler, Anton General Finance General Economics Economics Mobilising private capital is a critical bottleneck of the energy transition, yet recent crisis-driven windfall profits for fossil power firms suggest that market signals may still favour carbon-intensive assets. Here we analyse a panel of 900 European power firms (2001-2023) to resolve whether these profits reflect a durable profitability advantage or a crisis-driven anomaly. Using machine-learning clustering and Bayesian model averaging, we identify a structural divergence: wind and solar portfolios exhibit rising profitability, with return on assets among wind-dominated firms increasing by over 6% between 2014 and 2023. Conversely, higher fossil portfolio shares are increasingly associated with lower profitability, with marginal effects reaching -4% by 2023, while renewable-dominated firms match or outperform their fossil-heavy counterparts across most European regions. These findings suggest that the record profits of fossil incumbents were distinct outliers, masking an ongoing decline in the profitability of carbon-intensive business models. |
| title | The Widening Profitability Gap between Renewable and Fossil Power Firms in Europe |
| topic | General Finance General Economics Economics |
| url | https://arxiv.org/abs/2601.22167 |