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

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.

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

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 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 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:

Figure 1. Trend of business model research.

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.

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:

Figure 2. Sustainable business model framework.

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.

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:

Figure 3. Step of Delphi method.

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 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.

Table 1. Delphi Likert scale.

Scale	Important/influential intensity
1	Not important/not influential
2	Less important/less influential
3	Moderately important/has moderate influence
4	Important/influential
5	Very important/very influential

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:

Figure 4. Mapping influence factors to sustainable business model strategies in renewable energy electricity supply.

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 and collaborate with one another, and adopt a holistic approach towards the business model (Ryou & Lee, 2016). Detailed definitions of the factors that influence the newest energy electricity supply business are as shown in Table 2 below:

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

In understanding the value to be created, renewable energy companies must fully understand customer needs and desires. This is the foundation for creating products and services that meet customer expectations and ensure revenue and value for the business. Identifying and understanding customer segments are very important initial step in succeeding in the renewable energy market. It helps the company tailor its offerings to diverse customer needs and ensures that their products and services are highly desired in the market. Good interaction with customers is the basis of the Value Creation dimension. By building strong relationships and ensuring customer satisfaction through loyalty, renewable energy companies can ensure the sustainability of their business. Finding effective ways to deliver products and services to customers are the focus of this dimension. Providing direct sales, collaborating for sustainability, and utilizing organizations with a sustainability focus are important strategies to ensure effective distribution.

The Value Proposition is the foundation of how a company communicates the unique benefits of its products and services. It is the factor that differentiates the company from its competitors and ensures that customers choose their products and services over other alternatives in the market. The economic aspect of the Value Proposition is about how the company creates financial added value through its products and services. This includes offering competitive prices to customers, improving energy efficiency, and providing indirect benefits that reduce operational costs. The socio-cultural aspect of the Value Proposition is about how the company’s products and services provide benefits and positive impacts to society. This includes providing better energy accessibility, ensuring affordable energy prices, and contributing to improved social welfare. The ecological aspect of the Value Proposition is about how the company’s products and services help preserve the environment and the surroundings. This includes helping achieve sustainability goals, reducing negative environmental impacts, and ensuring compliance with environmental regulations.

Value Capture is a crucial dimension in formulating a company’s business strategy, especially in the context of renewable energy in Indonesia. This concept refers to how a company can effectively generate revenue while managing costs efficiently, ultimately forming the foundation for long-term success. It’s important for renewable energy companies to have a deep understanding of an effective cost structure. This cost structure consists of three key elements: production cost, investment cost, and attributes cost. First, production cost encompasses operational costs related to providing electricity supply, including day-to-day operations and maintenance of supporting infrastructure. Next, investment cost discusses the costs involved in the development and construction of renewable energy infrastructure. This includes investments in equipment, technology, and the development of renewable resources such as solar panels, wind turbines, or hydroelectric power plants. Attributes cost refers to the costs associated with owning specific rights and attributes that validate energy as renewable. This could include certifications, permits, or green labels that provide certainty to customers that the energy they use is environmentally friendly and sustainable. To achieve success, companies must ensure consistent and profitable revenue. This can be achieved through competitive pricing that considers the added value of renewable energy, energy usage efficiency, and market needs. Increasing sales is also a primary focus, with efforts to expand reach and build strong partnerships in response to increasing demand. High sales volume is one of the indicators of success in the Value Capture strategy. Through increased sales, companies can maximize revenue and achieve the financial sustainability necessary to continue contributing to the growth of the renewable energy sector in Indonesia.

7. Summary and conclusion

The research findings contribute valuable insights into the factors influencing the electricity supply business from renewable energy in Indonesia. The identified 33 sub-criteria underscore the multifaceted nature of considerations in this context. Key dimensions such as value delivery, creation, proposition, and capture are elucidated, emphasizing the importance of establishing strong relationships, adapting offerings, and generating efficient revenue. The implications of the research extend to the strategic guidance provided for developing renewable energy supply business strategies. The prioritization of factors, with profitability, global market requirements, and recurring income leading the list, offers actionable insights for businesses. The success of the value capture strategy, particularly in achieving high sales volume, underscores its significance in ensuring financial sustainability for the sector’s development in Indonesia.

The sustainable business model framework outlined in the study highlights critical factors such as value creation, capture, delivery, and proposition. Key elements, including revenue streams, customer relationships, and partnerships, are emphasized, aligning with the broader objectives of meeting global regulatory standards and fostering collaboration with Indonesia and the private sector. However, it is crucial to acknowledge the study’s limitations. These include a limited sample size, subjectivity in priority assessment, and the dynamic nature of the business environment. The focus on a single industry, coupled with constraints related to data availability and quality, necessitates caution in generalizing findings beyond the renewable energy sector in Indonesia.

Future research avenues should delve deeper into specific aspects, aiming for a more comprehensive understanding of priority factors requiring careful consideration. The hope is that this expanded understanding will serve as the groundwork for developing complex business models tailored to analyzed priorities. Additionally, practical aspects of sustainable business models in the renewable energy sector could be explored further, incorporating additional methods comprehensively to enhance the robustness of the research. In conclusion, while the study provides valuable insights for the renewable energy sector in Indonesia, recognizing its industry-specific focus and limitations is crucial. The research serves as a foundation for future efforts to refine and expand our understanding of sustainable business models, fostering the growth and sustainability of the renewable energy sector not only in Indonesia but potentially across diverse industries and regulatory landscapes.

Authors’ contributions

Prahara Lukito Effendi: Conception and design, methodology, intellectual Content, analysis and interpretation data, original draft preparation. Budisantoso Wirjodirdjo: Conception, Supervision, Reviewing. Sitta Izza Rosdaniah: Supervision. All authors discussed the results and contributed to the final manuscript. All authors agreed to be accountable for all aspects of the work and approved the version to be published.

Disclosure statement

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this article. The authors declare the following financial interests/personal relationships which may be considered as potential competing interests: (a) Financial interests: Any financial support received for the research (grants, funding, sponsorships). Stocks, shares, or ownership in companies relevant to the research. Consulting fees or honoraria from organizations related to the research. Patents, royalties, or licensing agreements. (b) Personal relationships: Collaborations with individuals or organizations that might be affected by the research outcome. Family relationships or friendships that could introduce bias. (c) Non-financial interests: Intellectual biases, academic rivalries, or personal beliefs that could influence the research.

Data availability statement

The data that support the findings of this study are available from the corresponding author, upon reasonable request.

Additional information

Funding

The author(s) received no funding for the research, authorship, and/or publication of this article.

Notes on contributors

Prahara Lukito Effendi

Prahara Lukito Effendi, a practitioner in business and commercial in the Indonesian electricity sector, completed his undergraduate education at Jenderal Sedirman University and a master’s degree at Trisakti University. Now, as a doctoral candidate at Sepuluh Nopember Institute of Technology (ITS) Surabaya, he is also a member of the Asian Marketing Federation.

Budisantoso Wirjodirdjo

Prof. Dr. Ir. Budisantoso Wirjodirdjo M. Eng, professor at the Faculty of Industrial Engineering at ITS Surabaya, holds a doctorate from the French Universite de Rennes I, a master’s degree from the Asian Institute of Technology Bangkok, and a bachelor’s degree from ITB. His areas of competence include industrial systems policy engineering and analysis, systems modeling, system dynamics, and operation research.

Sitta Izza Rosdaniah

Dr. Sitta Izza Rosdaniah, senior practitioner lecturer at the Faculty of Industrial Engineering at ITS Surabaya, completed her education at ITS Surabaya, Strathclyde University UK (master of Business & Economics), and Australian National University (doctorate in Economic Public Policy).