Energy Production And Regulation Policy In Australia

What market deficiencies (problem) is the government trying to rectify?

How successful is the current policy in rectifying the problem?

What changes would you enact to enhance the effectiveness of the policy?

Importance of environment conservation for economic growth

Environment conservation forms part of the vital concerns towards improvement of a country’s economy. As a country works towards improving its economic growth, it should check the effects of the production activities undertaken by the resident companies. Every country should work towards minimizing or even eliminating all the hazardous production waste if possible. An environment which is subjected to pollution will gradually be degraded and this in long term basis will lower a country’s economic performance. Protection of the environment should go hand in hand with the country’s production activities.

The current policy of choice is the energy production policy and regulation in Australia. Energy is one of the basic needs in any nation. It is used in various activities most of which are the productive activities and hence contributes much towards improving a nation’s economic growth (Cherni & Kentish, 2009, p.3616). The major issue of concern is to find out how energy production can be regulated so that it can be made reliable and affordable and ensure its production does not harm the environment. The government of Australia is doing its best to regulate the energy production sector to improve its productivity as well as conserve the environment in the best way possible. This step has seen the government formulating various laws and regulations to encourage the production of affordable clean energy which does not negatively affect the environment. Majority of the companies in the energy production sector have complied and adjusted to the formulated government energy regulations. The territory governments have also made an agreement with the government of Australia to improve the efficiency in energy production. The estimates indicate that by 2030 the efficiency in energy production will be improved by almost more than 39%.

Energy production and regulation policy refers to the manner in which an entity which may be the government itself sets regulations in order to deal with all the activities involved in the development of energy.  These activities include the production and distribution of energy as well as its consumption. The energy production and regulation policy includes the strategies for the conservation of energy, investment incentives to investors, level of taxation in the energy sector, international treaties, techniques addressed by the public policy and also legislation. The energy sector of Australia has been undergoing reforms and still much needs to be done to achieve the desired targets in energy production. Some of the deficiencies which have been witnessed in the Australian energy sector include:

Energy production and regulation policy in Australia

The Australian wholesale energy market sector involves stiff competition and is also unregulated. The price caps are put in place but they are very high (Buckman, Sibley & Bourne, 2014, p.14). The National Electricity Market (NEM) wholesale energy prices were witnessed to rise by a large proportion between the years 2015 to 2017. The estimates indicated that the wholesale prices rose on average by more than 129% for the period of the mentioned two years whereby the households alone contributed more than 19% to the increase in the wholesale prices during the year 2017. The increase in wholesale energy prices consequently transformed to the rise in retail prices and thus this goes without say that the energy prices to the final consumer also increased. This is due to the fact that the retail energy sellers have to sell their electricity at a price that gives them profit which is inclusive of all the expenses incurred by the time the final consumer purchases the electricity. The rise in the wholesale prices resulted due to the following factors management:

1. Two very big coal-fired energy producers which located in Victoria and Northern of South Australia closed down. This reduced energy supply in Australia by a huge amount and thus contributed towards the increased wholesale prices in energy supply. This resulted to more than 60% increase in the value of the energy in the National Electricity Market.
2. The increase in demand for gas and the black coal by the dependant plants led to increase in their cost hence increasing the prices further. Estimates showed that this contributed more than 39% rise in the wholesale prices.
3. Improper use of energy produced by the final consumer

The manner in which the produced energy is used by the final consumer and also in production activities is one of the major issues of concern. It has been witnessed that energy consumption in Australia has been rising from the year 2015. Estimates show that during the year 2015 to 2016, energy consumption in Australia rose by 2% which is very huge. On average, it has been witnessed that energy consumption in Australia has been rising by more than 0.5% per annum for the period of the last ten years. Significant rise in energy consumption has been witnessed in three sectors namely the electricity generation, mining and the transport sectors. Energy consumption in the mining sector has been witnessed to rise by almost more than 13% due increased use of natural gas and electricity in a bid to cater for the liquefied natural gas exports. Energy use associated with the generation of electricity has been rising with estimates showing almost a rise by 3% for the past three years due to the increase in generation of the black coal fired. The transport sector also has been witnessed to increase its energy consumption by more than 2%. It is ranked number two after the generation of electricity in terms of energy consumption. Generally the energy consumption from all the sectors has increased by 2% which is high and needs to be rectified as soon as possible (Jaccard, 2014, p.413).

Deficiencies in the Australian energy sector

Inefficiency in energy production as well as the production activities by various resident companies has been witnessed in Australia (Byrnes, Brown, Foster & Wagner, 2013, p.711). Air pollution results when air pollutants such as harmful gases and chemicals are released into the air. Most of production activities release harmful gases into the air which has severe long term consequences. This has led to the increase in greenhouse and some other harmful gases like carbon dioxide. The concentration and imbalance of the gases in the atmosphere raise temperatures severely and also increase the risk of people suffering from respiratory diseases such as the lung cancer and dangerous heart diseases.

Most of the companies which embrace the use of improvised technology in energy production lack adequate support to continue doing so cheaply. Much of research mostly which has been finding ways in which energy can be produced without harming the environment has not been receiving full support from the government (Hua, Oliphant & Hu, 2016, p.1044).

The government of Australia through the Australian Energy Market Commission (AEMC), Australian Energy Market Operator (AEMO), Australian Energy Regulator (AER) and Council of Australian Governments (COAG) has come up with policies and regulations in a bid to reform and improve the Australian’s energy sector in order to encourage production of clean energy and hence improve the Australian economy. Most of the policies and regulations have been successful and the future in the Australian energy sector is anticipated to be great.

Price reforms: The government of Australia has come up with a policy in the energy sector in attempt to lower the rising costs in energy production. This will enable the provision of reliable and affordable energy in Australia. The government has come up with a policy which has opened up the electricity as well as the gas markets to competition (Sharma & Bartels, 2011, p.17). The competition in the market sector gives the consumers the power to choose a retailer who offers the best price which is reflective of their purchasing power. The government further has chosen to protect the consumers by regulating the electricity prices of the largest electricity retailers. The policy has also led to reduction in the electricity tariff which is regulated. Reduction or even total removal of this kind of tariff has led to innovation in productivity and the pricing mechanisms (Zahedi, 2010, p.3252). This has intensified the competition in the energy retail sector and hence retailers have no choice than to offer reasonable prices to their customers. The policy also encourages investment in energy production efficient measures which are likely to aid in reducing energy costs considering the cost of living of the households. To sum up, the government of Australia policies in reduction of energy prices has been successful and is expected better in future.

Government policies and regulations to reform the energy sector

Energy utilization reforms: The government of Australia has come up with policies in the energy sector which encourage proper utilization of the available energy both by the households and the business organizations. The three major sectors in Australia which have been witnessed to increase energy usage are namely the mining, generation of electricity and the transport sector. The government policy in the energy sector is focused on minimizing the energy usage in as much as possible so as to improve the economy of Australia by minimizing the production costs (Wilson, Trieu & Bowen, 2014, p.287). The policy encourages the manufacture of equipments which effectively utilize energy through the Minimum Energy Performance Standards scheme and also encourages the labeling of the of the electrical and gas equipment requirements. The policy also aims at minimizing the energy usage in the transport sector by encouraging cycling and the public means of transport as well as improving the efficiency of the vehicles. The policy also aims at encouraging the purchase of vehicles which consume less energy and also towards the manufacturing of electric vehicles.

Air pollution reforms: This is a major issue of concern not only in Australia but also world-wide. An environment which is well maintained and protected against pollutants provides favorable and conducive climate for businesses to thrive in. Many investors are attracted to invest in such environment and hence enable to improve the country’s economic performance (Moloney, Horne & Fien, 2010, p.7614). The government of Australia has come up with policies in the energy production sector which encourage efficient productivity to avoid not only air pollution but also other forms of pollution such as water pollution. The government has achieved much of this by the use of feed-in tariffs and the renewable portfolio standards. The feed-in tariffs guarantees the purchase of electricity produced efficiently while the renewable portfolio standards require the energy producing firms to at least produce a certain percentage of their total energy from the renewable sources of energy which do not pollute the environment management (Lewis & Wiser, 2013, p.1844).

Energy production is a major issue of concern for many nations and should be addressed appropriately (Nelson, Simshauser & Kelley, 2011, p.113). Some of the recommendations in the energy sector policies which can be undertaken by the government in addressing this issue are:

1. Coming up with programs aimed at educating people on how to utilize energy efficiently and avoid any wastage
2. Encouraging people to use the renewable environment friendly sources of energy such as the solar energy
3. The government should highly invest in the Feed-in Tariff schemes and the renewable portfolio standards as this will lead to generation of environment friendly energy at low costs.

Conclusion

Energy production plays a vital role in any nation’s economy and therefore policies should be put in place to regulate its production and distribution as well as its consumption. A nation which embraces efficient energy production and usage enjoys economic prosperity as energy contributes the greater percentage in every economy. Australian energy sector has been facing challenges which have seen the energy prices rise over the past years. Also energy consumption has risen and there has been an increment in environment pollutants resulting from production activities. The government has put in place policies to minimize these activities. The policies have been a success and they are anticipated to do better in future. The government should try to lower the energy consumption by mostly educating households and even the producers on the best ways to utilize energy. The government should also consider investing highly in Feed-in Tariff and Renewable Portfolio Standards Scheme (Wiser, Hamrin & Wingate, 2012, p.16). To conclude, the government of Australia is doing well in addressing the issue of inefficiency in the energy sector and is anticipated to do better in future.

References

Buckman, G., Sibley, J. and Bourne, R., 2014. The large-scale solar feed-in tariff reverse auction in the Australian Capital Territory, Australia. Energy Policy, 72, pp.14-22.

Byrnes, L., Brown, C., Foster, J. and Wagner, L.D., 2013. Australian renewable energy policy: Barriers and challenges. Renewable Energy, 60, pp.711-721.

Cherni, J.A. and Kentish, J., 2009. Renewable energy policy and electricity market reforms in Australia. Energy Policy, 35(7), pp.3616-3629.

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.

Jaccard, M., 2014. Renewable portfolio standard. Encyclopedia of energy, 5, pp.413-421.

Lewis, J.I. and Wiser, R.H., 2013. Fostering a renewable energy technology industry: An international comparison of wind industry policy support mechanisms. Energy policy, 35(3), pp.1844-1857.

Moloney, S., Horne, R.E. and Fien, J., 2010. Transitioning to low carbon communities—from behaviour change to systemic change: Lessons from Australia. Energy policy, 38(12), pp.7614-7623.

Nelson, T., Simshauser, P. and Kelley, S., 2011. Australian residential solar Feed-in Tariffs: industry stimulus or regressive form of taxation?. Economic Analysis and Policy, 41(2), pp.113-129.

Sharma, D. and Bartels, R., 2011. Distributed electricity generation in competitive energy markets: a case study in Australia. The Energy Journal, pp.17-39.

Wilson, B., Trieu, L.H. and Bowen, B., 2014. Energy efficiency trends in Australia. Energy Policy, 22(4), pp.287-295.

Wiser, R., Hamrin, J. and Wingate, M., 2012. Renewable energy policy options for China: A comparison of renewable portfolio standards, feed-in tariffs, and tendering policies. Center for resource solutions, 16.

Zahedi, A., 2010. A review on feed-in tariff in Australia, what it is now and what it should be. Renewable and Sustainable Energy Reviews, 14(9), pp.3252-3255.