Journal of Energy Markets

Renewable energy generation capacity following the Russian invasion of Ukraine, and the stock market performance of energy firms: evidence from southern European Union countries

Maria Chondrokouki, Andrianos Tsekrekos and Konstantinos Vasileiadis

  • Countries with more investment in renewable energy capacity can better cope with the natural gas shortages since Russia’s invasion of Ukraine, and that energy firms that operate in such countries perform better in stock markets.
  • We demonstrate that energy firms from countries with higher renewable energy capacity investments have experienced statistically significant higher stock returns in the period 2012-2022 and since the Russian invasion of Ukraine, this positive relationship has become more pronounced in a statistically significant manner.
  • Our empirical findings suggest that at times of heightened energy and geopolitical risk, EU member-states’ policies and investments that accelerate the transition to renewable energy must be amplified, to decrease the Union’s dependence on energy imports and increase its resilience against energy price shocks.

Following the Russian invasion of Ukraine, European countries had to limit natural gas imports from Russia, rendering electricity generation from renewable sources even more important. In this paper, first we document the increase in investment in renewable energy generation capacity over the period from 2012 to 2022 in four southern European Union countries – Portugal, Italy, Greece and Spain – and then we investigate the association between generation capacity from renewable energy sources and the stock returns of energy firms in these countries and examine whether investments in renewable energy capacity generation have had any effect on the performance of these energy firms following Russia’s invasion of Ukraine. We report strong evidence that energy firms from countries with higher investments in renewable energy capacity exhibit statistically significant higher stock returns. Moreover, we find that the positive effect that a high percentage of energy generation capacity from renewable sources has on stock returns has become more pronounced after the invasion. The empirical findings suggest that country-wide investments and policies that accelerate the transition to renewable energy significantly contribute to the energy sector’s resilience against security-threatening geopolitical risks.

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