Assessment of the willingness to pay and determinants influencing the large consumers’ perspectives regarding the supply of premium green electricity in South Africa

Moller, Daniel Michiel (2018-03)

Thesis (PhD)--Stellenbosch University, 2018.


ENGLISH SUMMARY: Numerous studies have been conducted assessing the determinants influencing consumers’ willingness to pay (WTP) for a wide variety of products and services. However, there is no known study to determine the WTP of the large electricity consumers or the determinants influencing the large consumers’ perspectives regarding the supply of premium green electricity in South Africa. South Africa’s existing operational electricity-generating plants consist of various generating technologies; yet, coal-fired stations currently represent approximately 90 percent of Eskom’s total electricity-generating capacity. Because of climate change, limited natural resources, and the pollution footprint on the environment caused by fossil-fuelled power stations, it is essential for the focus to change towards cleaner electricity-generating technologies. When considering supply and demand constraints, the current cost for green electricity is higher than the cost for fossil fuels. For this reason, implementing renewable energy as the main source of electricity supply will require that consumers (especially large consumers) be willing to pay a premium for electricity generated from green electricity. Consequently, it is important to understand which aspects influence the WTP of large consumers. Previous research on residential consumers indicated that WTP is particularly influenced by attitudes towards environmental issues, towards one’s power supplier, perceptions of the evaluation of green energy by an individual’s social reference groups, and current electricity bill levels versus income. However, previous studies have failed to address the large consumers’ WTP a premium for green electricity. This research explored the different types of green electricity-generating technologies available, as well as the factors relating to green electricity production. An in-depth review was conducted on literature relating to the WTP theory, including consumer surplus and the meaning of value. In this study, an exploratory model was developed, which indicated the significance of various determinants on the large electricity users’ WTP for green electricity. This model was specifically developed to accommodate all the aspects relating to a unique South African electricity environment. The questionnaire used in this study, was rooted in current theoretical perspectives and previously-validated models. The exploratory model was analysed using partial least squares structural equation modelling (PLS-SEM). The focus of this study was on the top 500 consumers that use approximately 90 percent of the total generated electricity in South Africa. The users were categorised into mining, industry, municipalities, and others. The quantitative data was obtained by using questionnaires completed by senior management of the large electricity consumers. The outcome of this research indicated which determinants have a significant influence on the large electricity consumers’ WTP a premium for green electricity. The exploratory model indicated the most significant influence to be the need to enable the large electricity consumers to contribute, in an easy-to-use system, towards a premium for green electricity. Additionally, this study obtained a first-pass assessment of the large electricity consumers’ WTP towards the implementation of green electricity. Electricity suppliers, Eskom, independent power producers and policy-makers can use the outcome to accelerate the implementation of green electricity technologies.

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