Development Of Renewable Energy

Discuss about the Development of Renewable Energy.

 

 

Introduction

Energy is the basis source of economic activity. Any disturbance in the supply not only affects the daily life but also hampers production activity. In Australia, this major sector is going thorough different problem. One serious problem is the excessively high price resulting from the supply shortage. Therefore, energy ministry in Australia is focusing on a security on the supply side. Alternative sources are welcomed in addition to the existing sources. In the report, a close look is made on ministry’s reliance on newly build coal plants for an undisturbed electricity supply management.

The coal based energy plants are generally considered inefficient because of huge emission of pollutant wastes and gases. However, the new coal plants are built with an advanced technology. In the new plants, advanced energy efficient technologies are installed to reduce the emission. With this improvement, these plants have become new source of energy supply and expected to solve the problem of supply shortfall.  Josh Frydenberg, the energy minister is in support of this energy mix strategy. In a recent press conference, concern is shown for the new plants and federal government even agrees to provide necessary support (theguardian.com 2017). However, any intervention is the energy market management is promised to be made without hampering its free market environment. As like supply, Australian economy can experience a mix of free and regulatory market.

Government is taking time to make any firm decision because objective of the government is to not only provide an uninterrupted power supply but also meet its target of clean energy mission (Gillingham et al. 2013). Support of the government to the new plants is subject to its support from free market forces. Policymakers in the nation are trying to make integration between the energy and climate policy under the broad policy framework. This will increase certainty in the investment environment and attract greater investment in the market. Once the investment assurance is built, then government support can be withdrawn. The new plants then yield best outcome for the energy market. Another source for secure energy supply can be renewable energy storage. The renewable energy sources are able to make significant thermal generation.

Additionally, in the report stress is given on putting pressure of domestic suppliers to increases their supply for domestic use and put a limit on rising price.

Economic theories and concept

Supply at a certain point of time represents the available quantity in the market at existing price. There are factors other than price that cause a change in the supply. Change in supply is captured by the outward or inward shift of the supply curve. In case of rise in supply, supply curve shifts outward (Mahanty 2014). With no change in demand, this results in a low price and high market output. In times of decline in supply the curve shift inward leading to high price and low output.

A leftward shift of the supply curve increase the price from P to P1 and decreases quantity from Q to Q₁

In Australia, supply shortage in the energy market causes severe problem in the power supply. One reason for shortage in supply is the supply shortage in the LNG market. The LNG generators are highly involved in export activity causing shortage of domestic supply (Hua, Oliphant and Hu 2016). Another factor behind shortfall of supply in comparison to its demand is shut down of old inefficient plant under clean energy target mission. Therefore, increasing supply from alternative sources and increasing availability of domestic supply are considered for setting right energy policy management for the state (Foran et al. 2016).

Free market is a place where sellers and buyers have equal rights to take their own decision related to buying and selling. There are no forms of regulation. The free forces of supply and demand give the best outcomes given resources (Rader 2014). Intervention in this market results in inefficiency. Realizing the importance of free market, energy ministry is making repeated thinking before doing its intervention for the new plants. Any interventionist strategy in this regard will be left open for the interest of free market. Therefore, the reliance is still on free market strategy (Dean et al. 2017)

Free market is the most efficient form of market. However, there are situation where free market fails to ensure efficiency. Presence of any type of externality is one such factor. Hence, the government needs to intervene to ensure efficiency in the market. However, government sometimes gives support to new entrants in the market. Newly build plants are often unable to compete with the existing firms (Friedman 2017). This argument is considered making the newly build plants as a secure future source of energy. However, the support is not permanent. Once the plants are fully developed they should left unregulated in the free market and this assures possibly best outcome.  

Recommendation

Making a secure energy supply at a reasonable price is the responsibility of government. However, in the last few years there are difficulty in balancing demand and supply in the energy market.  High electricity price resulted for a lack of supply is becoming a major problem for Australian residence. Government should focus on increasing the supply of resources for domestic use. Mineral resources are often export largely lagging its supply behind the demand. Fixing export quantity can be one way to increase domestic supply. Relying too much on coal-generated power plant is not a viable option. Instead, utilization of renewable energy source should be the focus.

Conclusion

The report has made an economic analysis of a news article on Australian energy policy. The policy discussed here is to provide assistance to new coal plants. The objective is to make an energy mix utilizing the old plants and new plants. The intervention will not be too much stringent. Rather the intervention decision largely depends on the support from free market. Recommendations are given to improve the energy market scenario. Australia has sufficient mineral resource. By rightly utilizing its resources and designing an appropriate policy framework Australia can resolve the problems to this vital sector.

References

Dean, E., Elardo, J., Green, M., Wilson, B. and Berger, S., 2017. Principles of Microeconomics-Scarcity and Social Provisioning. Pressbooks.

Foran, T., Fleming, D., Spandonide, B., Williams, R. and Race, D., 2016. Understanding energy-related regimes: A participatory approach from central Australia. Energy Policy, 91, pp.315-324.

Friedman, L.S., 2017. The microeconomics of public policy analysis. Princeton University Press.

Gillingham, K., Kotchen, M.J., Rapson, D.S. and Wagner, G., 2013. Energy policy: The rebound effect is overplayed. Nature, 493(7433), pp.475-476.

Hua, Y., Oliphant, M. and Hu, E.J., 2016. Development of renewable energy in Australia and China: A comparison of policies and status. Renewable Energy, 85, pp.1044-1051.

Karp, P. (2017). New coal plants have a role in Australia's energy future, Josh Frydenberg says. [online] the Guardian. Available at: https://www.theguardian.com/australia-news/2017/aug/13/new-coal-plants-have-a-role-in-australias-energy-future-josh-frydenberg-says [Accessed 22 Aug. 2017].

Mahanty, A.K., 2014. Intermediate microeconomics with applications. Academic Press.

Rader, T., 2014. Theory of microeconomics. Academic Press.