Status Quo Bias in Energy Investment Strategies and Its Performance Implications for Incumbent Utilities: Cross-Case Analysis of Expected and Realised Returns on Gas and Wind Projects

Traditional energy companies often have high cost of capital, which limits their investment choices to the big projects promising high returns, but also subject to significant risks. In Swiss case, this led to extensive investment in gas projects and wind projects abroad. The objective of this paper is to find out: a) whether Swiss utilities stick to status quo and only invest in projects with high return/high risk profile; b) whether realised returns correspond to expected ones, and if not – what are the reasons for mismatch. Nineteen fossil and renewable energy investment projects of Swiss utilities implemented between 2004 and 2014 serve as case studies for the analysis. The results show negative realised rates of return for fossil fuel projects, while the patterns of renewable energy plants performance vary across countries. Market, currency and policy risk all play a role in explaining the gap between expected and realised returns of the analysed projects.