Challenges of the Green Transition: Implications for the Operation of Energy Companies

Abstract

The effects of climate change are being felt in all parts of the world. Ways to predict future climate change and reduce the impact of humans on the climate have been the subject of numerous studies. The transition towards climate neutrality at EU level is the backbone of the European Green Deal. It is about the goal of reducing greenhouse gas emissions by 55% by 2030 and achieving a climate neutral Europe by 2050. Energy companies are responsible for three quarters of greenhouse gas emissions in the European Union, especially those that produce energy from fossil fuels. The paper examines the impact of efforts to reduce greenhouse gas emissions through investments in renewable energy sources, implemented as a result of the adoption of the regulatory framework, on the business and financial performance of three energy companies (Hrvatska elektroprivreda – the HEP Group, Holding Slovenske elektrarne – the HSE Group, and the Slovenské elektrárne a.s. – the SE Group) from the European Union over a three-year period (2017-2019). The main objective of this paper is to determine how adapting to the new European Union regulatory framework in terms of the green transition affects the operation of energy companies, focusing on profitability, liquidity, and financial stability. The paper revealed that the companies observed plan to invest in renewable energy sources and reduce or abandon the use of fossil fuels in electricity generation in line with the European Union’s objectives. The analysis of their businesses showed that they approach changes in business models differently with regard to the specifics of the business environment and the development of energy infrastructure, which affects success and stability of their businesses.