An enabling environment for independent power producers in renewable electricity

The increasing demand for electricity, the rising price of energy from conventional sources and limited electricity supply are a global concern. The demand on electricity generation could be alleviated by diversifying the sources from which electricity is obtained to achieve the goals of long-term electricity supply. Diversification implies finding alternative sources of energy such as renewable energy for the production of electricity. The South African electricity system is under increased pressure to provide and maintain electricity supply to its users. Electricity production may be regarded as a key contributor to the social and economic development of South Africa. The challenges are so serious that it will gradually become increasingly difficult to extract sufficient resources to satisfy increasing electricity demand. Growth in the electricity and industrial sectors signifies profound changes in the entire energy industry. The South African power utility Eskom, supplies 94% of South Africa’s electricity but the risk of inadequate supply because of increasing electricity demand is mitigated through the employment of Independent Power Producers (IPPs) which supply to the grid. However, although a limited number of IPP entrepreneurs sell electricity to the Eskom grid, there is no enabling entrepreneurial environment in which they can thrive. There is no positive movement to inaugurate policies and processes. This has created an opportunity for Smart Grid access as a viable option to accommodate IPP entrepreneurs into the grid. Investing in renewable electricity sources may provide feasible alternatives for the electricity industry, it would alleviate pressure on current supply whilst creating an enabling entrepreneurial environment for IPP entrepreneurs and increase entrepreneurial activity. This study investigates a proposed model for an enabling entrepreneurial environment for IPPs in the RE sector that can be utilised to ensure increased entrepreneurial activity within the electricity industry. Establishing such an enabling environment would contribute positively to the alleviation of the electricity demand crisis, result in lower carbon emissions and create a sustainable, more diverse electricity generation mix. This proposed IPP industry model for an enabling entrepreneurial environment is presented to address the problems experienced at the different levels of the electricity industry. The model can be utilised to increase entrepreneurial activity while eradicating major electricity challenges at different levels in the South African electricity industry. The results indicate that that RE, in the form of solar and wind, has the potential to expand the South African electricity industry significantly. Therefore, in order to reform the South African electricity industry, stakeholders need to embrace entrepreneurship as IPP entrepreneurs. This can be done effectively by the incorporation of IPP entrepreneurs into the electricity network. However, an enabling entrepreneurial environment in which to operate must be ensured. In this study, five important variables support the establishment of an enabling entrepreneurial environment for IPP entrepreneurs. These have been identified as; Smart Grids, Entrepreneurship, Renewable electricity environment, SA policy and Stakeholder theory. An important contribution has been made towards Stakeholder Theory. This has proven to be instrumental within the RE sector of the electricity industry in South Africa, as the mentioned role players have a reciprocal role to play. Three surveys were conducted at three levels of the electricity industry, namely, at organisational, legislative and entrepreneurial levels and included Eskom Management, National Energy Regulator (NERSA) Management and Approved and Non-approved IPPs. Both qualitative and quantitative research methods were utilised in this research study. The results indicate that SA Policy is instrumental in assisting stakeholders to facilitate the IPP process and feed the power from RE generation into the network. Most respondents were positive about the role of Smart Grids in future electricity generation and their contribution towards creating an enabling entrepreneurial environment for IPP entrepreneurs. Respondents indicated that by policy decisions, greater emphasis can be placed on the results of climate change and environmental challenges. Emphasis on the incorporation of stakeholders proved imperative to this group (IPPs). The results indicated that stakeholder management is a key factor contributing to the establishment of an enabling entrepreneurial environment. The major contribution of this study is a proposed entrepreneurial model that can improve future sustainability of the electricity supply