Electricity Industry Reforms In Australia: Challenges And Opportunities Essay.

Discuss the unemployment rate, types, issues, and government policy of Australia and comment unemployment in various states of Australia. You need to specify in different region like NSW, WA, Tasmania, Qld or SA.  

Analysis and discussion on Electricity Industry Reforms

In the contemporary challenging scenario of the Australian economy, energy sector can be identified as one of the most crucial industries that require suitable transformation. Precisely, modern society of a developed country has largely reliant on electricity. As a result of the state of affairs, electricity can be identified as the imperative prerequisite for social affluence and economic development of an economy (Zeigler, 2015). In order to make electricity affordable, the reforms on the Australian electricity industry have been defined in this particular research study. In context to the existing circumstances, Australian Government has accorded a high precedence to the expansion of the electricity sector (Berry and Ormond, 2015). Currently, the Australian electricity industry has faced many challenges leading towards transformation, production, distribution, and transmission of electricity. Due to the growth in demand of electricity in industrial as well as household consumption, the Government of Australia has to advocate certain policy changes to improve the infrastructure of the industry ensuring growth and sustainability of the industry.

Understandably, the decisive imperative of the policy reforms directed towards Electricity industry in Australia is to certify low-carbon footing. At the same point in time, it is mandatory to control the unnecessarily soaring costs in production and distribution of electricity. In the Australian territory, the COAG Energy Council has been given the responsibility to develop energy and climate suitable for the growth of the sector as well as sustainability (Yang, 2016). Meanwhile, the emerging energy trends have caused massive uncertainties in the energy sector as low carbon footing has become the leading goal of the government. In this study, the priorities towards the industry and major reforms that have been taken to the industrial development have been illustrated providing evidence and examples. Evidently, long-term climate change policy within the electricity industry in Australia has been described that can meet the emission target of Australia by 2020.

The government of every nation plays an essential role in the development of an industry. The government uses its economic policies in order to control the balance the growth of the industry (Dornbusch, Fischer and Startz, 2014). In the same way, the Government of Australia plays a significant role in the development of the electricity sector to meet the growing needs of the people and business units in the market. Australian government increased the efficiency of the electricity industry by making huge investment and developing the infrastructure using different technologies (Yajima, 2012). Furthermore, the Australian government controls the price of electricity using tax reforms and other subsidiaries. Irrespective of the changing economic reforms of the Australian government, the electricity industry have been facing several challenges that have been discussed in details in the below section.

Electricity has played a major role in the development of Australian industries and societal affairs (Ga?rtner, 2016). Clearly, electricity can be identified as one of the leading energy resources for the target market audience for the household as well as modern businesses and industries (Bulliet et al., 2014). In modern day scenario, the major industrial factories and production houses have to add 5-9 percent of the entire operating cost for electricity purpose.  It can be seen through research that maximum proportion of the electricity in Australia is generated from traditional energy sources. According to the report of COAG, around 86 percent of the electricity is produced from the use of fossil fuels such as 13 percent from natural gas and 73 percent from coal (Originenergy.com.au, 2015). The scenario is almost same in all across the globe. On the other hand, the renewable energy sources make only 14 percent of the total electricity produced and consumed in Australia (Originenergy.com.au, 2015). Hence, the major issue faced by the electricity industry is the emission of Green House Gas, which has become a major concern for the energy sector in Australia.

Since 1949, the electricity industry in Australia had to undergo different policy reforms to restructure the facilities and system so that cost of electricity for the consumers can be checked. Apparently, the industrial growth of Australia has fuelled the surging demand of electricity forcing the industry to produce maximum electricity to meet the requisite (Weiter, 2014). Currently, the electricity industry in the Australian market has been segmented into different sections i.e. power generation, transmission, and distribution.

The businesses involve in power generation have concentrated on power station operations to produce electricity as per the surging demand. Herein, environmental concerns, climate change, and renewable energy have been identified as major obstacles for the operating companies. In the Australian market, the power generating companies have sold electricity under certain contracts (Skoufa, 2014). Alternatively, some of the electricity manufacturing companies have opted for wholesale market policy to sell electricity. Precisely, the electricity transmissions companies operate in the New South Wales, South Australia, and Victoria has their certain policies for transmission of the energy resource. On the other hand, the distributing companies operating the electricity industry have region based franchise to supply electricity to the target audience (Erdogdu, 2013).  Moreover, there are retailers associated with the distribution network and the retailers have to pay charges for transmission of electricity to the distributing firms. In terms of development in the electricity industry, the Government of Australia has promoted modern technologies to improve the infrastructure of the power grids.

In 1991, the National Grid Management Council (NGMC) was established so that the interstate power grids can be coordinated. In order to extend the power generation capacity of the grid in an eco-friendly way, the development of infrastructure has been done by the Government of Australia. Understandably, the National Grid Management Council encourages bulk trading of electricity so that the transmission and distribution of the energy resource can be done in an efficient manner meeting the demand side of electricity in the household and industrial areas (Harmsen, 2017). Precisely, low carbon footing can be identified as one of the leading statement for the electricity industry in Australia. In terms of other development, in 1992, the COAG had taken the decision to separate the electricity production, transmission, and distribution system so that each of the elements attached to electricity industry can be efficiently maintained. Thus, structural change of the electricity industry in Australia has contributed to the development of the sector. Currently, shattering change of events has influenced the challenges for the Australian electricity industry as investors are moving out towards renewable energy sector causing substantial funding issues in the electricity sector (Polemis, 2016).

In context to the contemporary scenario, the electricity industry in Australia is facing continuous challenges due to technological change and shift of focus to the renewable energy resources. As per the forecasts, coal powered electricity production grids are dealing with significant challenges related to pricing (Nagayama, 2007). The electricity industry and companies were privatised in the early 1990s in many Australian territories. Evidently, the reforms and climate policy for the electricity sector have demanded a complete restructuring of the industry that can cost a substantial amount. Therefore, the marketers and economists have believed that competitive electricity industry in Australia is losing the force due to a surge in operating costs (Harmsen, 2017).

The electricity generation transition has been identified as one of the leading issues in the electricity sector. Precisely, most of the electricity manufacturing power grids is coal-fired power producers that have been maintained since ages. As a result of the scenario, the power generators are becoming unreliable. Therefore, the production of electricity has been stopped on a regular basis due to the breakdown in the power generators. Moreover, the climate change policy has promoted low carbon footing standards for the power sector (King, 2015). Hence, to make the changeover and restructuring of the existing infrastructure, massive capital must be invested. Consequently, the electricity production will become costly and the prices of electricity will surge at a considerable rate. Meanwhile, the alternative energy resources such as wind energy and solar energy have created notable problems for electricity industry in Australia (Hattori and Tsutsui, 2014). As the public, as well as government, has transformed towards cleaner energy resources, the conventional energy sectors such as electricity industry have to face the challenges related to increasing costs and climate change policies.

Australia lacks a proper environmental conservation policy in the previous phase of the efficiency development of the electricity industry (Gordon, 2014). It can be seen through research that the increased use of coal in the electricity production to increase the efficiency of the large electricity producing companies has resulted in the enhancement of the greenhouse gas emission (Marshall, 2013). The operations of the energy sector have resulted in the highest level greenhouse gas emission in the year 2005. Recently, the initiative taken by the ERF and its new safeguard mechanism has set a target to reduce the emission level by around 5 percent by the end of 2020. On the other hand, the government aims to further reduce the emission level by around 45 percent by the end of 2030.

On the basis of the above figure, it can be seen that the environment policy introduced by the government of Australia has made it difficult for the electricity producing companies to carry on its activities using the prior techniques of electricity production. The use of coal needs to be reduced for the survival of the conventional electricity producing industry (Sioshansi, 2015). Furthermore, the government needs to make a huge level of investment and provide necessary supports to the private electricity producing firms in order to make them sustain the economic reforms.

Precisely, modern technological efficiency and electricity transmission regulatory have added further challenges for the sector. The electricity supply businesses operating in the New South Wales area have to deal with transmission related regulatory issues. For instance, solar power generators and battery storage have reduced the demand for electricity in the regional sectors. As a result of the same, the amount of transported electricity has been declined to create costing issues (Anderson, 2016). As people have started to invest in the roof-top solar panels, the demand for electricity has been reduced while the fixed cost of the operators has remained intact. Therefore, alternative energy resources have fuelled competitions for the electricity industry (King, 2015).  Effectively, the transmission network regulation and other costs have increased the pressure on the electricity industry as well.

However, the environmental concerns and carbon footing in the electricity production process can be dealt with utter responsibility. In order to reduce the carbon footing as per the environmental policy, firms operating in the industry must introduce latest technology and machinery that can control carbon emission during the production of electricity. Also, the ageing coal-burn power generators have to be replaced by modern technologies according to the regulatory directives (Outhred, 2016). As a result, the non-economic approach demands significant investment in the sector to restructure the entire power generation system. On the other hand, the shift of investment in the renewable energy sector has left very limited resources for the companies dealing in this particular sector (Wood, 2016). Therefore, recent government reforms on the sector have become mandatory to support the industry’s long-term growth and sustainability.

The concept of the pricing of electricity has become one of the fundamental challenges for electricity companies operating in the Australian markets. In the dissimilar markets, the retail price and the wholesale price of electricity have been comprehensively different (Oppenheim, 2012). Moreover, such unusual pricing of electricity has forced the distributing companies to build larger networks. Therefore, the numbers of power stations need to be set up for meeting the excessive demand in the summer’s time. Evidently, the wholesale price of electricity in summer days can soar up to AU$ 12 per kWh while the consumers have to be normal average price for the electricity irrelevant of the wholesale price surge (King, 2015). As a result of the scenario, the distributing companies have to make adjustments in their profit margins that can be an annoying thing.

There are several economic reforms made by the Australian government to safeguard and improve the infrastructure of the electricity industry. The primary reform that came into notice is the privatisation of the electricity industry (Yajima, 2012). It has been expected by the government to improve the efficiency and effectiveness of the electricity industry through the privatisation process. But, the economic reform made by the Australian government in during the 2010 has gone in wrong direction. A hike in the household price index of electricity can be evident after 2010 (Yang, 2016).

It can be seen through research that the economic benefits gained from the increase in the efficiency of electricity production have been primarily assumed to benefit the large electricity producing companies across the globe (Anderson, 2016). The expected benefits were not received by the end users due to the rise in the household price of electricity. In the case of Australia, it can be seen that the real household price of electricity increased by around 16 percent between 2010 and 2014 (Yang, 2016). In the same manner, the distributors as well as transmitters also faced increased in the cost due to the rise in the industry price of electricity in the Australian market.

It can be seen from the above diagram that the price of electricity in the industry increased by around 20 percent in the Australian market that increased the cost of production of the distributors and transmitters (Yang, 2016). Hence, a decline in the profit margin can be evident in the operations of the distributors and other private organisations related to the electricity sector in the Australian market (Anderson, 2016). On the basis of the above discussion, the major beneficiary of the economic reforms were the large electricity producing firms in the Australian market who got the support of the government and the economic policies.

Furthermore, the hike in household price has made it difficult for the bottom line consumers to sustain on conventional electricity production techniques. People have started using different means of renewable energy sources as a substitute to normal electricity supply (Polemis, 2016). Hence, the development of technology and changing policy of the government has influenced the electricity industry through negative implications and highly affected the distributors and transmitters who have made a huge investment in the industry.

It is expected that with development of technology and improvement of the renewable energy producing techniques, the process of electricity production will change in the upcoming years (Weiter, 2014). The falling price of substitute sources and high level of investment of the government on eco-friendly electricity sources has resulted in the fall in the demand of the non-renewable energy sources. Hence, the producers involved in the non-renewable energy production will face a high level of fall in demand by the end of 2030.

On the basis of the above discussion, the Government of Australia needs to make further changes in its economic reforms in order to support the declining growth of the electricity sector (Outhred, 2016). First of all, the Australian government must make changes in the taxation policy to reduce the growing price of electricity in the market, which is a major source of energy in the current business environment (Nagayama, 2007). Alternatively, the government can provide subsidiaries to the electricity producers and tax reliefs to the distributors in order to reduce the real household price electricity in the market.

Secondly, financial support can be provided to the electricity producers to improve the infrastructure and reduce the level of GHG emission in the environment. The government of Australia has introduced various types of subsidies such as feed in tariffs to promote the use of renewable technologies (Hattori and Tsutsui, 2014). In the same manner the government can provide subsidies and financial backups to the electricity producers to promote the use of renewable energy sources (Peerbocus, 2007).  For example, the government can sponsor new hydroelectricity projects and solar energy projects to reduce the emission level caused by the operations of traditional electricity producing companies (Samuelson, Nordhaus and Chaudhuri, 2011). Furthermore, the government can provide technical supports and introduced new reforms to develop the energy sector. Major taxes can be introduced over the use of non-renewable energy sources to influence the electricity producers to implement better technology to reduce the carbon footprint (Wood, 2016).

Thirdly, the Australian government must focus on promoting investors to invest on the development of the electricity sector. The better investment policies will help the organisations in the electricity sector to raise funds and focus on implementing new technologies for reducing the CHG emissions (Zeigler, 2015). The promotion made from the government will be helpful to meet the crisis in the electricity sector and help the electricity industry to meet the growing challenges in the upcoming future (Samuelson, Nordhaus and Chaudhuri, 2011). For example, the Australian government can take initiatives to increase foreign investment in the electricity sector to meet the financial crisis and develop the use of renewable energy sources.

Conclusion

By considering the above analysis, it can be seen that the industrial reforms introduced by the Australian Government has helped the electricity industry to improve the infrastructure of the market and support the growing demand of the consumers. On the other hand, the privatisation of the electricity sector has helped the government to improve the economic balance of the electricity industry. The government of Australia has promoted foreign investment in the electricity sector to improve the financial support for the growth of the industry. However, the changing economic policies and developing technology has made it difficult for the electricity sector to cope up with the renewable energy sources. Furthermore, the change in the pricing policy has increased the real household price and industry price of electricity that has reduced the demand and profitability margin in the electricity sector. The government needs to make further make changes in the industry policies in order to balance the demand and supply in the market. For instance, the increasing price of the household as well as the industry must be controlled to increase the demand. On the other hand, necessary policy reforms must be undertaken to promote the use of renewable energy sources in the generation of electricity.

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