Entrepreneurship ecosystem for renewable energy in South Africa

Abstract

The purpose of this research was to identify barriers to renewable energy growth and to recommend measures to accelerate business start-up in the renewable energy sector in South Africa. An entrepreneurship ecosystem model was developed by (Isenberg, 2011). However, it is a general model developed in a different context from that of South Africa. Therefore, this research intended to develop a similar model of ecosystem to enable business start-ups of renewable energy in South Africa. The identification of barriers to renewable energy was achieved by applying the Isenberg model together with Porter’s supply chain model. The approach to the research was to gather and analyse secondary data and thereafter established a questionnaire to gather additional information that was not available. Eighty five questions were sent to a focus group, specialists, in renewable energy industry. Questionnaire was based on the Likert scale of 7 points to determine the weights of each phrase. Descriptive and analytical statistical techniques such as variable clustering; Cronbach alpha; one way ANOVA; and standard deviation, means and percentages were applied to reduce number of variables; to test for data reliability; to test for data validity and to simplify analysis, respectively. Eighty seven specialists responded. Cronbach alpha analysis indicated a high level of data reliability. Furthermore, variables were reduced from 85 to 20 through variable clustering method. The study exposed the following barriers in various areas of the supply chain: 2 • National planning – lack of coordination between stakeholders (i.e. finance, human capital, infrastructure development, RE producers) result in misplaced priorities. • Policies content – the energy policy has many priorities and some are not supported through the supply chain. For example, renewable energy is a priority at a national level but not at municipalities and at Eskom regional level. • Policy institutions – there is inadequate regulatory / legal frame work as a result renewable energy producers are challenged with market and financial barrier. Inadequate professional institution has led to energy producer’s problems not reaching policy makers. • Local planning – lack of local planning and coordination; lack of alignment with the national requirement. There are no binding targets that ought to be reached by local municipalities and Eskom. • Funding – Some (i.e. independent power producers) renewable generation establishment are funded and others are not (i.e. small scale generation). • Tariffs – Some (i.e. independent power producers) renewable generation receive better rates and others not (i.e. small scale generation). Renewable energy tariff differs from one municipality to another and it does not favour investment on small scale renewable energy technologies. • Personal sustainability – Consumers are aware of the advantages of using renewable energy over fossil energy. However there is lack of support of investment in renewable energy. • Self-generation – Consumers are aware of methods to produce and to save energy but are not encouraged, by government and utilities, to do so. 3 • General awareness – Plans, processes and procedures to connect renewable generation are not well known to many people. • Education system – Inadequate emphasis on entrepreneurship and business start-ups. • Consumer empowerment – Lack of consumer empowerment with regard to information on renewables technology, renewable local plans and ease of participating in markets. • Market attractiveness – the industry is highly controlled and not attractive to new entrant. • Market entry for residential – the cost of market entry is very high. The energy policy has contradictory requirement in many areas of the supply chain. Therefore it was recommended that the Isenberg model be adjusted to include supply chain as an extra support pillar to avoid inconsistences in the ecosystem. Furthermore, small scale renewable energy generation should be supported in the same manner as bulk or IPP generation.