Influence factors on sustainable business models for renewable energy supply: Indonesian electricity industry

Effendi, Prahara Lukito; Wirjodirdjo, Budisantoso; Rosdaniah, Sitta Izza Article Influence factors on sustainable business models for renewable energy supply: Indonesian electricity industry Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Effendi, Prahara Lukito; Wirjodirdjo, Budisantoso; Rosdaniah, Sitta Izza (2024) : Influence factors on sustainable business models for renewable energy supply: Indonesian electricity industry, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 11, Iss. 1, pp. 1-11, https://doi.org/10.1080/23311975.2023.2293303 This Version is available at: https://hdl.handle.net/10419/325928 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Cogent Business & Management ISSN: 2331-1975 (Online) Journal homepage: www.tandfonline.com/journals/oabm20 Influence factors on sustainable business models for renewable energy supply: Indonesian electricity industry Prahara Lukito Effendi, Budisantoso Wirjodirdjo & Sitta Izza Rosdaniah To cite this article: Prahara Lukito Effendi, Budisantoso Wirjodirdjo & Sitta Izza Rosdaniah (2024) Influence factors on sustainable business models for renewable energy supply: Indonesian electricity industry, Cogent Business & Management, 11:1, 2293303, DOI: 10.1080/23311975.2023.2293303 To link to this article: https://doi.org/10.1080/23311975.2023.2293303 © 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group Published online: 09 Feb 2024. Submit your article to this journal Article views: 1481 View related articles View Crossmark data Citing articles: 4 View citing articles Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=oabm20 ACCOUNTING, CORPORATE GOVERNANCE & BUSINESS ETHICS | REVIEW ARTICLE Cogent Business & ManageMent 2024, VoL. 11, no. 1, 2293303 Influence factors on sustainable business models for renewable energy supply: Indonesian electricity industry Prahara Lukito Effendi , Budisantoso Wirjodirdjo and Sitta Izza Rosdaniah institut teknologi sepuluh nopember, surabaya, indonesia ABSTRACT The Indonesian electricity industry was under the management of PLN, presenting a significant opportunity to embrace renewable energy sources in response to tightening green energy regulations. This study utilized the sustainable business model concept, deconstructing the value economic, socio-cultural, and ecological. The goal was to pinpoint critical factors influencing business strategies for supplying renewable energy electricity to customers. Employing the Delphi method, which compiles expert consensus from PLN, was the subject of this study. In achieving a value delivery, collaboration with the government, suppliers, and technology partners played a vital role to achieving business objectives. Understanding customer requirements and desires was imperative for renewable energy companies in Indonesia to meet customer expectations. The value creation dimension emphasized establishing strong relationships and ensuring consumer satisfaction to foster loyalty. The value proposition served as the bedrock for articulating the distinct benefits of products and services, setting the company apart from competitors. Within the Indonesian renewable energy context, value capture stood as a crucial component in shaping a company’s business strategy. This involved efficiently managing production costs, investment costs, and attribute costs to guarantee consistent and profitable revenue. Future research should explore priority factors in-depth and craft intricate business models tailored to meticulously analyzed priorities. 1. Introduction The global challenge of transitioning the electricity sector plays a pivotal role in achieving energy resilience on a worldwide scale. Many developing nations, including Indonesia, are grappling with the dual task of addressing growing electricity demands while simultaneously shifting towards renewable energy sources to reduce carbon emissions. Despite Indonesia’s abundant natural resources for renewable energy, the country faces geographical, institutional, and investment risks in its pursuit of a sustainable energy transition (Maulidia et al., 2019). Within the framework of this energy revolution, the power sector has exerted a substantial influence. The utilization of energy resources in contemporary power generation has a substantial influence on both the environment and long-term economic advantages. The significance of constructing power plants that rely on renewable energy sources cannot be understated in light of the escalating demand for energy. This imperative arises from the pressing need to address current and prospective energy deficits (Kumar & Pansari, 2016). Therefore, this research developed a business model that was suitable for facing the challenges of the energy transition and meeting clean energy needs in Indonesia. This research contributes to electricity supply utility companies being able to use sustainable business models in building future businesses that require renewable energy electricity supplies. In addition, the results of this sustainable business © 2024 the author(s). Published by informa uK Limited, trading as taylor & Francis group CONTACT Prahara Lukito effendi [email protected] institut teknologi sepuluh nopember, surabaya, indonesia. https://doi.org/10.1080/23311975.2023.2293303 this is an open access article distributed under the terms of the Creative Commons attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. the terms on which this article has been published allow the posting of the accepted Manuscript in a repository by the author(s) or with their consent. ARTICLE HISTORY Received 10 October 2023 Revised 4 December 2023 Accepted 4 December 2023 KEYWORDS Energy business; renewable energy transition; sustainable business model; electricity supply REVIEW EDITOR Collins Ntim, University of Southampton, United Kingdom of Great Britain and Northern Ireland JEL CLASSIFICATION D40; L94; M21; O32 2 P. L. EFFENDI ETAL. model can become a reference model for various industrial sectors, especially industries that focus on contributing to achieving sustainable development and the energy transition. 2. Background The state-owned company PT PLN (Persero), which held the General Electricity Supply License, was in charge of managing Indonesia’s electricity supply, which included everything from power generation to electricity sales. PLN realized the imperative for clean and environmentally friendly energy had gained prominence across various sectors. PLN and other large-scale industries also adapted to these changes and embraced eco-friendly technologies, aligning with ESG principles and contributing to carbon emission reduction. An emerging trend involved industries replacing fossil energy with renewable sources, either through independent initiatives or collaborations with electricity providers. Given tightening regulations on carbon emissions, PLN held a significant opportunity in the renewable energy sector. To navigate this evolving landscape, PLN had to develop innovative and sustainable business models. These models encompassed transaction configurations involving diverse stakeholders, such as customers, suppliers, and vendors, integrating technology to create economic value (Chesbrough, 2002; Zott et al., 2011). The business model essentially dictated how a company delivered value to customers and translated these transactions into profits through an optimized value chain (Teece, 2010). This business model had to continue evolving to maintain the sustainability of the company. The concept of value in business literature proved its usefulness in innovation and business strategies across various sectors (Apajalahti et al., 2015). The business model could provide an analytical framework to create a sustainable energy utility business (Helms, 2016) and keep up with technological advancements (Huijben & Verbong, 2013). In the pursuit of sustainable development, the business model had to holistically integrate economic, social, and environmental aspects (Cardeal etal., 2020; Joyce & Paquin, 2016). To achieve this integration, the research adopted the concept of the sustainable business model canvas, delineating the value proposition into economic, social-culture, and ecological values. This study endeavored to identify the factors influencing business strategies aimed at meeting the renewable energy electricity supply needs of customers. These strategies not only addressed immediate requirements but also aspired to formulate a sustainable business model that optimally utilized renewable energy, maintaining equilibrium among economic, social, and environmental considerations in line with the principles of a green economy. 3.Theoretical literature review A business model could be defined as the organizational logic of how an organization could create and capture customer value and could be encapsulated in a concept aimed at meeting customer expectations, providing value to the organization, and delivering economic benefits. This perspective focused on how a business model provided room for the organization to think about customer loyalty (Guidat et al., 2014). Another opinion stated that a business model was a structured design of an organization to create commercial opportunities Geissdoerfer etal., 2020). Another important aspect to consider was how an organization could create its own value to enhance consumers’ perceptions of the uniqueness of the goods or services being marketed. Finally, a business model was designed to create economic value; hence, a business model had to consider all the benefits and costs that would be incurred and expended during operations (Fielt et al., 2018). A business model could be seen as a reference on how a company conducted its business, how a policy would affect stakeholders (e.g. contractors, customers, and partners, etc.), and how a system within the company related to meeting its operational needs (Birkin et al., 2009). This perspective emphasized the essence of the business methods used by the company, whether it aimed for future expansion, acquisition, or maintaining the current conditions. Policies made for stakeholders also needed to be considered because stakeholders had power and a voice in the business being conducted. The policies made had to be able to accommodate all the interests of the stakeholders to avoid jealousy among stakeholders who felt that their rights and voices were not being COGENT BUSINESS & MANAGEMENT 3 acknowledged and heard. The business model was recognized as a tool to analyze and describe how an organization operated and provided direction, viewing the business model as a framework that encompassed all organizational activities, including external and internal stakeholders (Zott et al., 2011). The business model also needed to meet the financial aspects that would be incurred throughout the business process, from the early stages of business formation and operational activities to dealing with unwanted events or incidents that required financial handling. Based on several definitions and perspectives above, the business model is a pattern and guide used by a company to create, manage, and optimize its business activities, considering customer value, economic benefits, stakeholder interests, and financial aspects in a holistic way. Thus, the business model was a flexible guide, but the company needed to continuously develop business model strategies to meet market needs and organizational goals. In light of these comprehensive perspectives on the business model and its continuous evolution, the energy sector has increasingly turned to intricate and sustainable business models. These models proved essential in navigating the complexities of the sector, where stakeholder decisions were intricately woven into the fabric of the triple-bottom-line context. Complex and sustainable business models were increasingly used to address issues in the energy sector, where stakeholders and their decisions were embedded in a triple-bottom-line context. Modeling approaches for complex systems offer many advantages and insights. First, it allowed the representation of interdisciplinary systems consisting of physical infrastructure, actor behavior and interactions, and related policy environments. Second, it went beyond the usual economic assumptions of rational choices made by homogeneous people and markets that are driven by demand. It is highly probable that new sustainable business models will need to resolve issues that appear to be in opposition to business interests (Schoneveld, 2020). It included complex behaviors and interactions between different agents on both the demand and supply sides, such as those with the different values and motivations listed above. Finally, the triple bottom-line business model enabled us to investigate the emergence of different systemic behavior patterns and coevolutionary trends in response to different policy regimes. 4. Empirical literature review Research on Sustainable Business Models (SBMC) continues to evolve to explore more sustainable ways of designing and implementing business models. SBMC research focuses on integrating sustainability aspects into all elements of the Business Model Canvas (BMC). This includes identifying sustainable business opportunities, managing resources more efficiently, reducing carbon emissions, considering social and environmental impacts, and paying attention to social justice. SBMC research seeks better methods and indicators to measure sustainable business performance. This involves developing frameworks and measurement tools that enable companies to identify, track, and report on social, economic, and environmental impacts. The exploration of sustainable business models reveals a diverse range of concepts pertaining to potential approaches for addressing ecological, social, and economic challenges. This approach facilitates the spread of novel technologies, innovations, and organizational structures (Boons & Lüdeke-Freund, 2013). Based on the development of previous research on the business model canvas, which was carried out from 2010 to 2023, trend analysis was carried out using publish or perish software, so that research developments can be seen as shown in the Figure 1 below: Based on the Figure 1, it can be seen that research on BMC has increased significantly, especially in 2022, when as many as 177 research topics have been published. BMC has been used widely in various business and industrial sectors. However, research continues to be conducted to examine the effectiveness and application of BMC in new sectors. Research on sustainable business models continues to develop to explore more sustainable ways of designing and implementing business models. SBMC research focuses on integrating aspects of sustainability, including identifying sustainable business opportunities, managing resources more efficiently, reducing carbon emissions, and considering social and environmental impacts. SBMC research seeks better methods and indicators to measure sustainable business performance. This involves developing frameworks and measurement tools that enable companies to identify, track, and report social, economic, and environmental impacts. 4 P. L. EFFENDI ETAL. In the energy sector, particularly related to electricity supply, environmental or ecological aspects play a significant role because energy provisioning needs to consider sustainability in the surrounding environment. Similarly, on the social aspect, which is related to community welfare. This is a crucial point where government policies closely control this industry. Based on the aforementioned business model developments, this research will use a new framework as a tool to design sustainable business models that can be used in the energy sector, especially related to the development of renewable energy businesses in Indonesia. This framework is illustrated in Figure 2 below: Value capture is a crucial aspect of a company’s business model, focusing on evaluating financial and cash flow impacts. It involves integrating sustainable practices into cash flow, closely tracking progress in cost management and revenue. In value delivery and creation, companies must consider customer context, resource indicators, and partnerships from various stakeholders. Resources, such as employees, the environment, and flexibility, play a vital role in achieving sustainability goals. Collaboration with government, suppliers, academics, media, external institutions, and the community can accelerate innovation implementation. The value proposition aligns the company’s goals and governance with sustainability principles, focusing on core values such as social culture, ecological, and economic. This business model canvas proposes integrating aspects of the value proposition and values from the triple bottom line, such as social culture, ecological, and economic, to strengthen the business towards long-term and sustainable goals. This framework is tailored to businesses in the energy sector, particularly in renewable energy supply. Figure 1. trend of business model research. Figure 2. sustainable business model framework. COGENT BUSINESS & MANAGEMENT 5 5. Research design This research utilizes various sources of data, both primary and secondary, through a questionnaire. The questionnaire consists of a set of written questions used to gather information from respondents regarding the discussed topic. The questionnaire is a set of written questions formulated to elicit responses or answers from respondents, whether in an open-ended or closed-ended manner. This technique can use checklists and scales as research instruments. Its purpose is to collect information related to the variables being investigated and to compare data between different groups or populations. The development of the questionnaire is based on the Delphi technique, a method of compiling consensus from experts. The Delphi procedure is a widely recognized structured communication strategy that involves the participation of a panel of experts in order to address intricate challenges (Landeta, 2006). A Delphi method does not rely on a statistical sample that aims to achieve representativeness within a given community. The decision-making process necessitates the involvement of competent professionals possessing extensive knowledge and expertise in the relevant subject matter. The process of selecting experts holds significant importance within the methodology (Okoli & Pawlowski, 2004). The criteria for determining an expert using the Delphi method is that it consists of PT PLN (Persero) employees who have worked for more than 10 years and have a minimum position level of basic management or specialist positions. The sample size consisted of 10 experts from various PLN business functions. The given text, the user expresses their thoughts or ideas in a casual or informal manner. The perspectives of the experts are summarized and then provided to related expert specialists to obtain feedback. This process is repeated until consensus is reached among the experts. The data in this method comprise various pieces of information that can form a model from various different sources. In preparing the list of questions for the questionnaire, interviews were conducted with experts, including experts from PLN. These experts come from various fields of expertise such as renewable energy, energy transition, business development, power systems, environment, and sustainable energy. Delphi Method is illustrated in Figure 3 below: First of all, the initial stage in this research is to determine the experts who will be involved. These experts are employees of PT PLN (Persero) with over 10 years of work experience and hold at least basic management positions or specialized functional positions. They come from various functions within PLN such as Commerce, Power System Planning, Renewable Energy, Energy Transition, and Law. After selecting the experts, the next step is to prepare interviews with them to discuss the factors influencing the Figure 3. step of Delphi method. 6 P. L. EFFENDI ETAL. renewable energy-based electricity supply business in an abstract manner. These interviews are designed to gain a deep understanding from the experts’ perspective regarding these factors. The results of the interviews are used to develop the questionnaire. The questionnaire is systematically structured based on the interview results regarding the factors influencing the renewable energy-based electricity supply business. This questionnaire is designed with an open-ended structure to accommodate the possibility of new factors. Furthermore, the questionnaire is designed on a 5-point Likert scale to facilitate assessment and analysis, as seen in the following Table 1. After the questionnaire is designed, the next stage is to distribute the questionnaire to the involved experts. The experts are asked to fill out the questionnaire according to their assessment of the provided factors. The obtained questionnaire results will be compiled by incorporating the three most important factors in each criterion. These results will be validated once again by the experts to ensure the accuracy and relevance of the identified factors. In the final round of the Delphi method, the ultimate results of this research will be generated and presented back to the experts. This process ensures that the final results of the study reflect the perspectives and evaluations of the experts involved in this research. Subsequently, obtaining agreement and consensus from the experts. 6. Empirical results and discussion In interpreting the results of the research utilizing the Delphi method for developing a Sustainable Business Model framework, several critical dimensions, criteria, and sub-criteria were identified. The study engaged a panel of experts from diverse backgrounds related to renewable energy and sustainable business practices to ensure a comprehensive and inclusive analysis. This result is illustrated in Figure 4 below: When conducting a practical analysis of a business model, it wasn’t required to scrutinize it on a departmental basis. In contrast, it was imperative for every professional department to conduct an examination of the constituents of value creation, value proposition, value delivery, and value capture. This examination had to be carried out using a standardized analysis tool for the purpose of business model analysis and design (Kwak et al., 2019). By doing so, these departments could effectively communicate Table 1. Delphi Likert scale. scale important/influential intensity 1not important/not influential 2Less important/less influential 3Moderately important/has moderate influence 4 important/influential 5Very important/very influential Figure 4. Mapping influence factors to sustainable business model strategies in renewable energy electricity supply. COGENT BUSINESS & MANAGEMENT 7 Table 2. Definition of influence factor. Dimension Criteria sub Criteria Definition Value delivery Key partnership availability of renewable energy providers availability of PLn partners in supplying renewable energy in indonesia Renewable energy ownership Clear asset ownership and renewable energy attribution claim availability government policy for renewable energy services there is a government policy that regulates the supply of renewable energy Key activities Reliability supply availability of renewable energy sources to provide clean electricity supplies Direct distribution supply the level of possibility in direct renewable energy electricity supply green energy usage transparency availability of transparent monitoring of renewable energy electricity usage Key resources Renewable energy infrastructure availability of assets in the form of renewable energy sources and electricity network infrastructure to supply renewable electricity to customers Certification and attributes claim availability of attribution rights for renewable energy production technology and data security availability of digital technology in renewable energy devices and ensuring the security of data obtained from this technology Value creation Customer segment number of potential customer Potential market needs related to renewable energy supply for industry and business global market requirement Conformity of renewable energy products or services to global market requirements and qualifications Product / service limited the disparity between the demand and supply of renewable energy suggests that it possesses the capacity to assume a scarce commodity status and is sought after by a substantial number of consumers. Customer relationship Customer loyalty there is a program to increase consumer loyalty to use the renewable energy products or services used Co-branding opportunities to establish strategic marketing partnerships through green energy labels with customers after sales services availability of after-sales services specifically to serve renewable energy customers Channel Direct sales the marketing process involves making offers and sales directly to customers sustainability collaboration Marketing strategies delivered through collaborative actions across companies or global affiliates to customers sustainability organization Marketing strategy through organizations that focus on sustainability and green energy action activities. Value proposition economic Price competitiveness the price offered is a competitive price for customers compared to other alternatives energy efficiency the benefits provided provide efficiency value for energy use indirect benefit the products or services offered provide benefits in reducing or eliminating costs for activities resulting from operational activities such as emissions or waste produced social culture energy accessibility Providing benefits to the community so that they can also get access to electricity from clean energy energy affordability Providing benefits to the community so that they get affordable electricity prices from clean energy social welfare Providing benefits in the form of improving welfare to the surrounding community ecological sustainability goals Providing benefits for customers in achieving business sustainability goals environmental impact Providing benefits to customers in an effort to preserve the surrounding environment Regulatory compliance Providing benefits for customers in an effort to fulfill aspects of compliance with regulations regulated by the government and global markets Value capture Cost structure Production cost the expenses associated with the operation of delivering power provision investment cost the expenses associated with investment or capital expenditures (capex) that are accrued during the establishment of renewable energy facilities. attributes cost expenses incurred as a result of attribute rights or certificates granted by external entities. Revenue stream Profitability the products or services offered provide large profit contributions. Recurring income the products or services offered provide recurring revenue or continuous income Volume of sales this demand has the potential for high customer volume