Key risk factors affecting renewable energy independent power producer (IPP) set-up projects in developing countries

Abstract

Purpose Sustained access to efficient electricity plays an essential role in improving living conditions of people and contributes to the economic development of the nation as a whole. Volta River Authority (VRA) mainly manages the generation plants (hydropower sources and thermal plants) alongside independent power producers (IPPs). Power generation in the country has been influenced by myriads of factors. Thus, the purpose of this study is to assess the key risk factors affecting renewable energy of IPPs set-up project in Ghana. Design/methodology/approach Quantitative approach was adopted for the study. Empirical investigation was carried out using the survey approach. The likelihood of occurrence of the risk and the degree of impact of same motivated the use of risk significance index to analyze the data and make deductions from the results. Findings From the study, three key risk factors have high level of severity, which include long and complex procedures for authorization of project activities, stability of the policy environment and ease of obtaining rights to land. These risks could be found in the business/strategic risks and policy/regulatory risks categories, respectively. A total of 25 key risk factors had moderate level of severity and 12 key risk factors have low level of severity on renewable energy IPP set up projects. Practical implications Top-ranked risk factors require maximum attention. The identified risks should be alleviated with strategies to reduce levels of severity by targeting either the likelihood of occurrence or the level of impact. This will serve as a catalyze to promoting renewable energy IPP set-up projects in Ghana. Originality/value Key contribution of the paper to the body of knowledge is demonstrated by the empirical evidence of the risks IPPs are likely to encounter in setting up renewable energy plants in Ghana. The distinctive attribute of this study is further demonstrated by the fact that it focused on the set-up stage, which is a critical stage in the renewable energy provision value chain.