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International Energy Policies: Management Add in library

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Question:

Using the Strength-Weakness-Opportunity-Threat (SWOT) analytical tool, critically discuss the impact of advancements in renewable energy technologies on the direction of energy policy of the United Kingdom.

 

Answer:

Introduction:

Fossil fuels like crude oil, coal and natural gas are that kind of energy which has developed within the earth surface over millions of years. These kinds of energy are required all the time in today’s life. This kind of energy is non-renewable in nature. There are many pros and cons of this kind of energy. One of the disadvantages is the usage of these fossil fuels emit a huge amount of carbon-dioxide and, therefore, create environment pollution. On the other hand, the renewable energy is that energy that comes from mainly automatically replenished natural sources like wind, rain, sunlight, tides, waves and geothermal heat (Davison). This type of energy does not create any pollution or spread any harmful element in the surrounding environment (ScienceDaily).

During the usage of the fossil fuel, a huge amount of carbon is released into the atmosphere that in turn causes “greenhouse effect” on the environment. This increases the temperature of the earth that is popular as “Global Warming”. This warming leads to the change in the normal weather trends known as “climate change” and causes a frequent occurrence of natural calamity in different parts of the world. In this context, most of the nations in the world now tend to the use of renewable energy instead of the use of fuel fossil. This article deals with the impact of advancements in renewable energy technologies on the energy policy of United Kingdom (Energy).

Objectives:

One of the most critical challenges that U.K has been facing recently is a drastic climate change due to the constantly increasing carbon-dioxide. This change affects the economic development and also the ecosystem negatively. Therefore to keep the emission of this CO2 at the moderate level, the govt. of United Kingdom has started to increase the use of renewable energy. One of the main advantages of the adaptation of renewable energy is it offers a positive externality on the surrounding environment as well as helps to reduce the dependency on the import of fuel fossil by the U.K government. Another important advantage of following renewable energy is that it is a low production cost technology. Therefore, the economy can produce large-scale energy at relatively low cost than it would produce using fuel fossils. However, adaptation of renewable energy by the United Kingdom’s government is not a simple task. The govt. has been facing several barriers like unfavourable price mechanism, market failure, and high uncertainty involved in the energy production process. But, at the same time the United Kingdom has some strength and opportunity in following the renewable energy process. The main objective of this report is to provide a critical analysis of the effect of the adaptation of renewable energy technologies on the energy policies using strength-weakness-opportunity-threat (SWOT) analysis (Carbonbrief.org).

 

Energy policies set by the govt.:

   To make the economy of United Kingdom, a cleaner and low-carbon economy, the govt. of U.K has set some policies and strategies. These are pointed out in the following paragraph.

  1)  Imposition of a restriction on the amount of CO2 emission within a given period.

  2) Continuous analysis of the data regarding the greenhouse gas emission to understand the future impact on the climate by these gases (Gshp.org.uk).

  3) Design and implementation of a strategic plan to meet the target reduction of CO2 emission within 2050.

  4) Continuous encouragement to both household and business firm to reduce their energy demand through the use of smart meter and some other energy efficient measures.

 5) Provision of some incentive to the household and business units which start to follow energy efficient technology.

6) Reduction of the emission of greenhouse gases from the agriculture (Energy Policies Of IEA Countries 2012Review The United Kingdom).

7) Adoption of low carbon technologies in the industrial sector.

8) Public reporting of the amount of greenhouse gas emission by the business organization that in turn force these units to lower the release amount.

9) Adoption of action to lower the drastic climate change due to the global warming.             

 

Swot analysis:

Strength:

At present, one of the most significant environmental problems that affect the economic condition of a country also is “Global Warming”. To get rid of this problem, the main objective of most of the countries in the world, especially the western countries is to reduce the release of the carbon dioxide and other greenhouse gas as much as possible. The western countries pay much attention to this factor because these countries are mainly industry oriented country. Therefore, a high proportion of carbon emits from these countries. The main goals of these countries are now to move from the usage of fossil fuel to the adaptation of renewable energy oriented technology to make the surrounding environment a clear and pollution free environment. The govt. of United Kingdom plays a significant role in this transition process. The different strategies that are designed and followed by the govt. are made mainly to attract the private investors to invest in the research and development of Research and Technology. Another important strength of this country is favourable geographic location. This location is very much appropriate for the set up of different kind of renewable energy. The United Kingdom has best wind and wave power resources. The windy environment and its long offshore location help this country to produce the highest amount of renewable energy. Also, the United Kingdom is popular for the building of infrastructure sufficient for industrial production. The production of renewable energy is of high complexity job. There is a lot of skilled labour in the United Kingdom. Since the last decade, the renewable energy sector is the booming sector of the United Kingdom. The energy production from the renewable energy is increasing continuously over the years, and this sector contributes the GDP growth rate of the U.K economy also through the continuous creation of employment opportunity. The population of United Kingdom is increasing over time. This leads to the increase in the requirement of energy. Since the domestic production of oil and natural gas energy has fallen during the last some years, therefore the U.K economy has to rely on the import of oil and natural gas from foreign countries. But high oil pricing, political disturbance in the Middle East countries sometimes make uncertain the import of crude oil and natural gas (Http://Ec.Europa.Eu/Research/Energy/Pdf/Swot_En.Pdf). This uncertainty in turn creates issues in the development of the economy. In this context, the transition made by the U.K govt. creates high internal demand for the renewable energy. Recently, the U.K govt has been facing high inflation rate. This high inflation leads to the increase in the price level in almost all the sector, since the production cost of renewable energy is comparatively very low and can be available therefore at a low price than the fuel fossils. This low price makes the producers tends to follow renewable energy technology in their production process. This leads to the increase in domestic demand for the renewable energy. Due to the global warming and climate change, people now want to move to some environment-friendly energy use. These also make a rise in the demand for renewable energy. These are the strengths of the renewable energy sector of the United Kingdom (Iea.org).    

 

Opportunity:

The United Kingdom is a technologically and also infrastructural developed economy. Therefore, this economy can set up a large scale energy production process from the renewable sources as this setup pre-requires technologically improved infrastructure. The United Kingdom has a large number of high class and good quality university, especially in London. These universities help the renewable energy sector through the provision of high skilled expertise efficient for the production process. The development of renewable energy sector needs an intensive research and development in this domain. These universities in the United Kingdom can provide that Research and Development service. The production growth of oil and natural gas industry has declined over last years. Due to this continuous decline, many oil and natural gas producing country now express interest to invest in the production of renewable energy. They try to enter into this sector either as a stakeholder or as a new entrant. Since, this renewable sector is the booming sector in the United Kingdom, therefore it is expected that the investors may get a high return on the investment in this sector. This high credibility of the renewable sector attracts many foreign investors also into this sector that in turn supports the development process of this sector. This can be seen as a big opportunity for the renewable energy production industry as this industry needs a huge amount of capital for the proper establishment. Another important opportunity is the United Kingdom plays a leading role in this transition process. Though many countries try to replace their traditional energy system with the renewable energy system, but due to lack of technological improvement they are not able to meet this goal. The renewable energy producing countries in the United Kingdom can utilize this opportunity and make a lot of profit by offering these foreign countries the continuous supply of renewable energy so that they can meet their domestic demand. Another important opportunity is the United Kingdom has a stable political environment, which is always described as a favourable condition for any industry to form the initial business process. Moreover, the legal structure prevailing in the economy of United Kingdom also helps this renewable energy sector to improve better (Keay et al.).

 

Threats:

The renewable energy sector in the United Kingdom often faces a lot of threats. The production process of energy from the renewable sources is a bit complex. Therefore, this production process needs an up to date modern technology and huge capital. The government sometimes is not able to provide that much capital. Therefore, it can be said that this renewable energy sector has to depend on private domestic and foreign investors. Though this sector is succeeding to prove itself as a high return sector, some big energy producing companies give a low rate to this sector. These big companies have reviewed the entire energy sector (including oil and natural gas sectors) in the world. According to them, though all the economies try to move from the fossil fuel energy system, this non-renewable sector in some countries especially in the Middle East countries has profitability than the renewable energy sector in United Kingdom. Dependence on oil and natural gas for the industrial development by many underdeveloped and developing countries can be marked as a reason behind this high profitability. These developing countries still prefer the oil and natural gas energy system than others energy system. For these, big investment companies often do not show any interest to invest in renewable energy sector in the United Kingdom. Another threat that the domestic companies of United Kingdom often face is intense competition. There are many domestic and multinational companies operate in this industry. All of them follow modern technology and high skilled labour. Moreover, the financial condition of these industries is almost same. Since all the companies’ main aim is to acquire larger market share and gain high profit as much as possible, this emerges a high competition in the renewable energy sector of United Kingdom. This high competition in turn affects the pricing mechanism in the related market. This high competition and the resulting price mechanism is a big threat to each of the operating countries. The establishment cost of this sector is very high. Therefore, a low price may force some producers to incur a loss and exists from the domain. This in turn may hamper the future development process of this industry. The govt. of United Kingdom offers tax exemption and different kind of subsidy to attract the potential business man into this sector. This creates another threat in this renewable energy sector.

Weakness:

The production in this sector has possessed economies of scale. This implies at the initial stage of production; the production process requires a high cost. However, as the production of output increases, the cost requirement decreases also. This indicates that the establishment of renewable energy process needs a huge amount of capital in the short run. Therefore, the producers have to charge high price from the consumers initially. However, the energy production from the fossil fuel does not need that much cost. Therefore, it can be supplied at a relatively much lower price, and consumers, therefore, prefer to buy the latter in the short run. This uncertainty in the sale in the short run can be identified as an important weakness of this sector. Moreover, there sometimes happen market failure in this sector and then the govt. has to intervene in this sector that in turn curtails the freedom of the energy producing companies.

 

Conclusion:

From the above SWOT analysis, it can be concluded that there exist many factors in the U.K economy that are responsible for the faster growth in the renewable energy sector.  Among these high oil pricing, climate change and the geographical location are the important ones. However, the sources of the renewable energy production are a natural product like air, sunlight, water, etc. These natural sources cannot be controlled. Therefore, there exists an uncertainty regarding the supply of resources. Moreover, there prevail some threats and weakness in this sector which may impede the future development process. Hence, at the end it can be said the govt. of United Kingdom should not fully rely on the renewable energy. The objective behind the recent energy policy of the U.K govt is appreciable, but full dependence may hamper the future GDP growth of the U.K economy.

 

References

Carbonbrief.org,. 'Will The UK Meet Its 2020 Renewables Target? | Carbon Brief'. N.p., 2015. Web. 7 Aug. 2015.

Davison, Alan. 'Renewable Energy, Forms And Types Of Renewable Energy'. Altenergy.org. N.p., 2015. Web. 7 Aug. 2015.

Energy Policies Of IEA Countries 2012Review The United Kingdom. 1st ed. 2015. Print.

Energy, Renewable. 'Renewable Energy'. Elsevier. N.p., 2015. Web. 7 Aug. 2015.

Gov.uk,. 'Department Of Energy & Climate Change - GOV.UK'. N.p., 2015. Web. 7 Aug. 2015.

Gshp.org.uk,. 'UK Renewable Energy Policy'. N.p., 2015. Web. 7 Aug. 2015.

Harvey, Fiona. 'UK On Track To Meet Its Renewable Energy Targets'. the Guardian. N.p., 2015. Web. 7 Aug. 2015.

Http://Ec.Europa.Eu/Research/Energy/Pdf/Swot_En.Pdf. 1st ed. 2015. Print.

Http://Www.Euroqualityfiles.Net/Agripolicy/Report%202.2/Agripolicy%20WP2D2%20Estonia%20Final.Pdf. 1st ed. 2015. Print.

Http://Www.Vis-Nova.Eu/Pdf/Swot_Analysis_-_Tullnerfeld_West.Pdf. 1st ed. 2015. Print.

Iea.org,. 'IEA - Renewable Energy'. N.p., 2015. Web. 7 Aug. 2015.

Impact Of Renewable Energy Policy And Use On Innovation. 1st ed. 2015. Print.

Keay, Malcolm et al. 'Government Energy Policy Archives - Oxford Institute For Energy Studies'.Oxford Institute for Energy Studies. N.p., 2015. Web. 7 Aug. 2015.

ScienceDaily,. 'Fossil Fuel'. N.p., 2015. Web. 7 Aug. 2015.

the Guardian,. 'The Guardian View On UK Energy Policy: The Limits Of The Market | Editorial'. N.p., 2015. Web. 7 Aug. 2015.

Transforming The UK’S Energy System. 1st ed. 2015. Print.

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