Sustainable energy systems in the making: A study on business model adaptation in incumbent utilities

Delivering a low-carbon future depends significantly on the decarbonization of the electricity industry. Increasingly, electric utilities have experienced pressure to redefine their business model amid the need to transition to a sustainable energy system. In this study, we focus on how utilities have changed their business model to adapt to the emergence of sustainable energy innovations in the energy system and which value creation drivers they draw on. By framing the business model as an activity system, we capture how utilities expand the boundaries of their business to integrate sustainable energy activities. We analyze 756 boundary-spanning transactions (mergers and acquisitions, joint ventures, and strategic alliances) of 20 European utilities from 1990 to 2019. We find that utilities pursued 20 distinct sustainable energy activities across renewable electricity generation, smart electricity management, emerging technologies, and sustainable mobility. Preference for renewable energy activities, particularly wind generation is observed. The combination of renewable electricity generation and smart electricity management indicates a focus on systems integration. We also find preference for integrating activities through mergers and acquisitions. Utilities focus on acquiring sustainable energy activities leading to a novel bundling of activities contributing to decarbonization while reinforcing the efficiency and lock-in of their traditional business model.