By David Frans, Torsten Henzelmann, Marc Sauthoff and Manuel Seid

Europe’s utility stocks rallied strongly in the first half of 2026, closing much of the gap to the broad market. The financial fundamentals of 2025, however, have moved to the opposite direction: Compared to 2024, transformational power of Europe’s utilities has weakened. Roland Berger's second annual utilities study tracks how transformational power evolved over the past year, where it is concentrated today, and what the findings mean for the EUR 1 trillion investment agenda Europe's energy system requires by 2030.

A sector investing more while earning less

The megatrends reshaping the utility sector—geopolitical supply disruptions, the accelerating adoption of AI, shifting industrial load patterns, market fragmentation, and decarbonization—share a defining characteristic: each raises the capital requirements of the energy business while simultaneously compressing the margins available to fund them. In 2025, unfavorable wind and hydro generation conditions across Europe added to that pressure, and the profitability rebound that had followed the 2022 energy price shock largely faded. The financial environment facing utilities has fundamentally changed.

At current leverage levels, Europe's leading utilities retain financial headroom for an estimated EUR 221 billion in additional investment—down 24% in a single year. To contextualize this amount: The EU’s Sustainable Investment Plan aims to mobilize EUR 1 trillion to finance the Green Deal between 2020 and 2030. The transition cannot be financed by utilities alone, and their capacity to contribute is contracting.

Measuring the capacity to transform

To assess how much strategic change utilities can finance from their own operations and balance sheet, we apply the Roland Berger Transformation Indicator—a measure that combines return on capital employed (ROCE) with financial leverage into a single, comparable metric. The indicator establishes a clear threshold for sufficient transformational power. Companies that clear it retain the financial flexibility to invest, acquire, and lead the next phase of the transition; those that do not face structural constraints on their strategic options.

In 2025, the indicator weakened across the sector. Median ROCE declined sharply, returning to the range that characterized the sector before the 2022 energy price shock. Leverage remained elevated. The combined effect pushed the sector's median Transformation Indicator below the threshold—and the share of leading utilities that clear that bar fell by 11 percentage points in a single year. What the indicator reveals at the company and archetype level—who clears the threshold, who has fallen below it, and what the margin of difference means for strategic positioning—is at the core of the full study.

Four archetypes, one overarching direction

Building on the Transformation Indicator, we classify Europe's leading utilities into four archetypes along two dimensions: transformational power and investment momentum. The four archetypes—Transformation powerhouses, Reinforcers, Locked-in asset builders, and Restricted laggards—identify where each utility stands relative to its peers and what strategic options are realistically available to it.

The most significant shift in 2025 is the marked growth of one archetype, now accounting for 45% of classified utilities—up 13 percentage points year-on-year. At the same time, the archetype that represents the sector's capital reserve has halved its share. A central paradox runs through the data: roughly 80% of classified utilities continue to expand their asset bases even as their transformational power declines. That divergence defines the strategic challenge of the current moment, and portfolio optimization—rather than further expansion—has moved to the top of the agenda across the sector.

Capacity markets as a strategic resource

One policy development has the potential to shift the financial equation for a meaningful share of the sector. Regulated revenues have proven structurally more resilient in the current environment, generating predictable cash flows and more stable balance sheet conditions. Policymakers across Europe are extending contracted revenue models beyond network infrastructure to merchant generation, through capacity remuneration mechanisms and long-term contracts for difference. Several European countries already operate such mechanisms; others are still working through the design questions. Well-constructed capacity markets can convert merchant risk into contracted earnings and reopen financial headroom where Europe needs it most—but access has requirements, and the implications differ materially depending on where a utility sits in the archetype mapping.

The full study sets out the complete picture: what the Transformation Indicator means at the company and archetype level, how the four archetypes are distributed across Europe's leading utilities, and what the findings imply for the strategic choices each archetype faces in 2026 and beyond. Download the study to see where each utility stands—and what it means.