Local energy businesses in the United Kingdom: Clusters and localism determinants based on financial ratios

Fuentes González, Fabián and Webb, Janette and Sharmina, Maria and Hannon, Matthew and Braunholtz-Speight, Timothy and Pappas, Dimitrios (2022) Local energy businesses in the United Kingdom: Clusters and localism determinants based on financial ratios. Energy, 239. ISSN 0360-5442

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Abstract

This paper presents the first financial analysis of the United Kingdom's local energy business sector. This analysis relies on financial ratios and degrees of localism as inputs for descriptive statistics, cluster, and canonical discriminant analyses. Our findings suggest that privately-owned energy businesses, typically with limited commitments to localities, account for the great majority of sectoral assets and turnover, and are in comparatively good financial condition. Highly-local energy businesses typically have low profitability and high reliance on debt. The latter is the key variable differentiating them from other less local energy businesses. Moreover, we find financial commonalities within different groups of local energy businesses, which correlate with their specific level of localism. In the context of increasing digitalisation in energy markets, more technological innovation may help strengthen local energy businesses' revenue sources and value creation. Further research is needed in terms of investability, specific financing terms and conditions, and geographical aspects of value creation, retention, and delivery to localities. This work can improve the understanding of sectoral dynamics and development needs, with value for policy making to incentivise investment in this emerging sector.

Item Type: Article
Additional Information and Comments: NOTICE: this is the author’s version of a work that was accepted for publication in Energy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Energy, Vol 239 Part B, January 2022, https://doi.org/10.1016/j.energy.2021.122119
Keywords: Local energy businesses; Cluster analysis; Canonical discriminant analysis; Degrees of localism; Financial ratios
Faculty / Department: Faculty of Business, Law and Criminology > Liverpool Hope Business School
Depositing User: Dimitrios Pappas
Date Deposited: 30 Sep 2022 12:28
Last Modified: 03 Oct 2022 11:06
URI: https://hira.hope.ac.uk/id/eprint/3630

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