Australia’s Renewable Energy Plan And Targets

Business Economics

Discuss About The Renewable Energy Means Australia Is Making?

This report revolves around the Australian renewable energy. Renewable energy in Australia means Australia is making efforts to expand its renewable energy. This report is about a ten year plan by Australia for 100 per cent renewable energy. A renewable energy target has already been set by the Australian economy that is around 33000 GWh by 2020. So now Australia is working hard to achieve this target (BusinessFocus, 2017). Australia is having some of the best renewable energy resources that can help it out in achieving this target. Australia is also promoting the small renewable energy sources like roof top solar plant. If we talk about business economics then for a business everything is economics because in a business we have to take decisions from time to time. The success of business depends upon the capability of business to take right decisions or to make the best choice among all the alternatives available. Business economics is a combination of economics and business administration.

There are different boards that are formed by Australian government to compete with this target. These committees include Australian renewable energy agency (ARENA), Clean Energy Finance Corporation (CEFC), Australian Energy Regulator (AER), Australian energy statistics etc. and this report also explains many projects that were pre-planned by Australia which are related to this renewable energy target. Some of the projects were completed but some are still pending because of higher cost. This report also includes how the fiscal decentralization affects the growth of the economy. When this renewable energy target was set then it was around 41000 GWh by 2020 but in 2015 this target was revised. This report explains the contribution of coal, hydro-electric power, wind power solar power , wave power, nuclear power, geothermal and biomass in the country’s total electricity production (Robinson, Nguyen and Wang, 2017).

Business economics means applying economic theory to business. Business involves decision-making. Decision-making means selection of best alternative among all the alternatives available. The decision of choice occurs because resources are limited in an economy. Economics for business includes four major decisions. First decision is demand analysis and forecast. It means the business is transforming the raw material into consumable goods. So for this a proper estimate of demand is required (MacroBusiness, 2017). The business needs to properly forecast about the future demand then the make the quantity of goods to avoid wastage. This decision requires a proper understanding of consumer’s tastes and preferences. The second major decision is about cost and production analysis. This is a most critical decision and the decision of pricing and profit depends upon this. The business is required to analyse in advance the total budget required for the production. Production of goods can only be possible if there is profit margin in the produced goods.

Economic Theory of Consumer Behaviour- Utility

Next decision is about pricing. The business is required to price its goods in such a way that it is not too high and not too low. Sometimes the selling of a product is based on its pricing. Consumer buys goods according to their prices. Goods other than basic needs can only be bought by consumers on the basis of two factors i.e. price and quality. The fourth decision is related to profit management. The main objective of each and every business organization is profit. Profit depends upon the cost of the product. If the cost to the company is higher then it will earn less profit and if they produce goods at lower cost then there is a chance of higher profit margin (Pandya and Sisombat, 2017).

Economic theory of consumer behaviour is related to utility analysis. Utility refers to the satisfaction that a consumer gains from the purchased product. Law of utility analysis includes law of diminishing marginal utility and law of equi-marginal utility. Law of diminishing marginal utility says that the more we have a thing the less is its utility. For example: if a person is hungry then when he eats first chapatti its marginal utility is very high then when he eats the second chapatti then third chapatti so with every chapatti he is eating its marginal utility becomes decreasing. Law of equi-marginal utility states that the consumer in this case is spending his money on the goods in such a way that the utility he get on his first purchase and the utility he will get on spending the last rupee of his money is equal. So in the diminishing marginal utility, the utility goes on decreasing and in case of equi-marginal utility, the utility remains equalTayal and Rauland, 2016).

Australian economy is considered as an attractive destination for investment. Australia is not affected by the international financial crises because of controlled inflation and strong banking system. Its banking system is strong and organized enough that it remains unaffected at the time of financial crises (Ahmed and Ozturk, 2016). The market of Australia works as an open market which means there are not many restrictions on the imports of goods and services in Australia. This idea of opening up has made the Australian economy grow and change as per the dynamic environment. An economy is required to be dynamic if it wants a positive growth (Bloch and Bhattacharya, 2016). The Australian economy attracts foreign direct investments because of its open market. Similarly this renewable energy projects will increase employment opportunities for the Australian people and also attract other countries to invest in industry sector of Australia.

Australian Economy

Australian renewable energy target is that at least 33000 gigawatt-hour of its electricity comes from renewable sources by 2020. This contains two main schemes: First is large scale renewable energy target (LRET). This scheme is related to financial incentives for energy power stations. Second is small-scale renewable energy scheme (SRES). This scheme attracts the people towards small-scale renewable energy systems such as solar system (Theguardian, 2017). In 2016, Australian renewable energy was generated around 17000 gigawat-hours. About half of the projects which are under renewable energy target are still pending because of large amount of finance requirement. So the Australian renewable energy agency (ARENA) and Clean Energy Finance Corporation (CEFC) have pushed down the cost of large – scale solar as it was few years ago (Kim  and Gray, 2017). This renewable energy project will be beneficial for the Australian economy in three ways i.e. it will create job opportunities for the unemployed people, the people living in Australia will save money on power bills after the completion of this target and it also generates investment in the Australian industry. This RET target was reduced from 41000 GWh to 33000 GWh in June 2015.

Australia is considered as one of the most coal dependent country. Main source of Australia’s electricity production is coal. 38% of Australia’s greenhouse gas emissions are produced by the coal industry. Now, the growth of Australian economy depends upon this renewable energy project and it will also reduce its coal consumption.The usage of electricity in Australia is also very high. Australians are using the energy more productively as they have new technology. The usage of electricity will increase from year by year. The second most energy use in Australia is transport (Jones, 2017).

Australian Renewable Energy Agency is an agency developed by Australian federal government. ARENA was established in the year 2012. The aim objective behind the development of this agency is to manage and control the government’s renewable energy policies (Tam, Le, Zeng, Wang and Illankoon, 2017). The main responsibility of this agency it to estimate the financial budget of the renewable energy sources programs and to review the programs from time to time to analyse whether the programs is on the right direction to meet the renewable energy target. The fund allocated to Australian renewable energy agency was $3.2 billion out to 2020. The projects that are covered under ARENA include solar thermal, wave energy, solar photovoltaics, geothermal projects and biofuel projects (Duffy, Rogers and Ayompe, 2015). The estimated budget for these projects is around $1 billion.

Australian Renewable Energy Agency (ARENA)

The Clean energy finance corporation is established by Australian government as a Green bank. The main responsibility of this green bank is to manage the increases in the finance flows of clean energy sector. The total funding for clean energy finance corporation is about $10 billion. Clean energy finance corporation is managed by a board and the board is responsible for the functioning of the corporations then the board will be answerable to the parliament through the ministers (Cornish, 2017). Clean Energy Finance Corporation’s investment objective is to generate more funds that can be used for the Australia’s renewable energy project.

The main contributors of Australia’s electricity generation is coal, hydro-electric power, wind power solar power , wave power, nuclear power, geothermal and biomass (Bundschuh, Chen, Chandrasekharam, and Piechocki, 2017). All of them play a very important role in the production of renewable energy in Australia. Coal contributes 77.2% of the country’s total electricity production. For hydro-electric power, one scheme is created known as Snowy mountains scheme. This scheme helps in the division and storage of water. Two artificial lakes are created under this scheme i.e. Lake Eucumbene and Lake Jindabyne (FutureSuper, 2017). Under this scheme the water is shifted from the Australian Alps into dams through tunnels or pipes for use in hydro-electric power. The electricity supplied by wind power during a year is 4.2% of Australia’s total electricity. Only less than 1% of electricity is coming from solar power in Australia. The contribution from solar power is too less because of higher cost per kW.

The Australian energy regulator regulates the wholesale electricity and gas market in of Australia. The main role of Australian energy regulator is the distribution and transmission of revenues to the service providers and taking take of national electricity laws and regulations. Australian energy regulator is a committee of three members (Herbes and Friege, 2017). One is full-time chair, one member must be a commissioner of the ACCC and one member of AER must be selected by the state and territories. 

Currently, fiscal decentralization is a controversial aspect of debate in Australia. There is a dispute running in the relationship between Australia’s federal government and state government. The dispute is related to the lack of control over the issues such as education, health, infrastructure etc. The states are complaining about the shortage of money and on the other hand according to the federal government, the states are inefficient (Letelier, 2016). So in this kind of controversies, special attention is needed to understand the influence of government on the Australian economy. The relations among the federal state government will affect the functioning of the economy.

There is not a direct relationship between fiscal decentralization and economic growth. But the countries having high income will have a positive relationship between growth and fiscal decentralization when decentralization is increasing from low levels and then it reaches peaks and then it turns negative. Though it is not having direct relationship with economic growth but it indirectly affects the growth of the economy. Fiscal decentralization will have impact on the economy in two ways i.e. revenue decentralization and expenditure decentralization. Revenue decentralization maintains a balance in the budget, increases medium term economic growth and does not affect the size of public sector. In case of expenditure decentralization, it unbalances the budget, decreases medium-term economic growth and increases the size of public sector. Fiscal decentralization affects the stability of macroeconomics in Australian economy (Nair, Flew, Harrington and Swift, 2017). 

Renewable energy target is having so many advantages but at the same time it also has some disadvantages. Renewable energy target will increase cost because it requires a huge financial budget for the completion of the scheme. Second criticism is policy uncertainty. Renewable energy target includes proper review and the negotiation in the power purchase agreements. Third is interaction with laws. Renewable energy target does not want the interference of laws in the policy because planning laws will make the policy more difficult and costlier (Hua, Oliphant and Hu, 2016).

Conclusion

From the above discussion, it was concluded that Australian economy is required to focus on this renewable energy target then only it is going to be fulfilled otherwise it will result in loss to Australia. For the smooth running of a business it is must that the business is carried out economically. Because in 2016, Australia’s renewable energy was 17000GWh so now the time remaining is only three and half years. In electricity production, renewable energy is contributing 10.7 per cent of its total capacity (Clean Energy Council, 2016). There is a disadvantage to this renewable energy target which is cost issues but it can be solved by the development of green bank. This bank is only responsible for the supply of funds as required in the projects related to renewable energy. Every year, Australia is required to increase the renewable energy by at least 4000GWh in order to achieve the target by 2020. It has already achieved 17000 GWh and its target is 33000GWh so the remaining target for Australia is 16000 GWh so if it is increasing it by 4000 GWh every year then it will be achieved. Renewable energy target requires a huge dedication towards it.

References

Ahmed, K. and Ozturk, I. (2016) The emission abatement policy paradox in Australia: evidence from energy-emission nexus, Environmental Science and Pollution Research, 23(17), pp. 17850-17856.

Bloch, H. and Bhattacharya, M. (2016) Promotion of Innovation and Job Growth in Small?and Medium?Sized Enterprises in Australia: Evidence and Policy Issues, Australian Economic Review, 49(2), pp. 192-199.

Bundschuh, Jochen., Chen, Guangnan., Chandrasekharam, D. and Piechocki J. (2017) Geothermal, Wind and Solar Energy Applications in Agriculture and Aquaculture. USA: CRC Press.

BusinessFocus (2017) The Australian economy. [Online]. Available at: https://businessfocus.westpacgroup.com.au/blog/2017/july/17/the-australian-economy-july-2017/ (Assessed:  31 August, 2017).

Clean Energy Council (2016) Clean Energy Australia Report. [Online]. Available at: https://www.cleanenergycouncil.org.au/policy-advocacy/reports/clean-energy-australia-report.html (Assessed: 31^stAugust, 2017).

Cornish, S. (2017) Inflation and the Making of Australian Macroeconomic Policy, 1945–85, by Michael Beggs (Palgrave Macmillan, Basingstoke, 2015), pp. xii+ 325. Economic Record, 93(300), pp.174-176.

Duffy, Aidan. Rogers, Martin.andAyompe, Lacour. (2015) Renewable Energy and Energy Efficiency: Assessment of Projects and Policies. USA: John Wiley & Sons.

Future Super (2017) 5 Renewable Energy Growth Trends to Watch in 2017. [Online]. Available at:  https://www.myfuturesuper.com.au/blog/5-renewable-energy-growth-trends-to-watch-in-2017 (Assessed:31 st August, 2017).

Herbes, C. and Friege, Christian (2017) Marketing Renewable Energy: Concepts, Business Models and Cases. USA: Springer.

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.

Jones, L.E. (2017) Renewable energy integration: practical management of variability, uncertainty, and flexibility in power grids. USA: Academic Press.

Kim, Y. and Gray, S.J. (2017) Internationalization strategy and the home-regionalization hypothesis: The case of Australian multinational enterprises,Australian Journal of Management, p.0312896216679215.

Letelier, L. (2016) Explaining fiscal decentralization. USA: Public Finance Review.

References

MacroBusiness (2017) Australian Economy. [Online]. Available at: https://www.macrobusiness.com.au/category/australian-economy/ (Assessed:  31 August, 2017).

Nair, B., Flew, T., Harrington, S. and Swift, A. (2017) Politics, Media and Democracy in Australia: Public and Producer Perceptions of the Political Public Sphere. UK: Routledge.

Pandya, V. and Sisombat, S. (2017) Impacts of Foreign Direct Investment on Economic Growth: Empirical Evidence from Australian Economy, International Journal of Economics and Finance, 9(5), pp. 121.

Robinson, T., Nguyen, V.H. and Wang, J. (2017) The Australian Economy in 2016–17: Looking Beyondthe Apartment Construction Boom, Australian Economic Review, 50(1), pp. 5-20.

Tam, V.W., Le, K.N., Zeng, S.X., Wang, X. and Illankoon, I.C.S. (2017) Regenerative practice of using photovoltaic solar systems for residential dwellings: An empirical study in Australia, Renewable and Sustainable Energy Reviews, 75, pp. 01-10.

Tayal, A. and Rauland, V. (2016) Barriers and Opportunities for Residential Solar PV and Storage Markets-A Western Australian Case Study, Global Journal of Research in Engineering, 16(7), pp. 44-58.

Theguardian (2017) Renewable energy generates enough power to run 70% of Australian homes. [Online]. Available at: https://www.theguardian.com/environment/2017/aug/27/renewable-energy-generates-enough-power-to-run-70-of-australian-homes (Assessed: 31^stAugust, 2017).

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order