The traditional utility business model of selling electricity from large-scale thermal power plants and expanding grids to meet rising demand historically has supported strong balance sheets. With this financial strength, utility retained earnings served as the primary financing source for the electricity sector.
In many markets, utilities serve as reliable purchasers of power, facilitating investments by independent power producers. But as the role of electricity in the world economy expands, technology innovation creates new opportunities and governments simultaneously prioritize electricity security and a transition toward more sustainable energy use, investment decisions are becoming more complex.
The economic performance of utilities will have crucial impacts on financing for investments needed in the transition. How their business models interact with policies and market design will have strong implications for meeting energy goals. In Europe, these changes started decades ago with the unbundling of vertically integrated companies and the establishment of wholesale markets...
