The focus of this study is to evaluate the problem of electricity in Australia. In spite of being a developed country, Australia has been facing problems in its energy sector due to plethora of reasons. There is a need for the Government and stakeholders to take steps to make changes in the sector so that the rising uncertainty of the electricity market can be reduced. The study helps in providing an explanation of various challenges in the electricity industry of the country.
The motivation of this study is taken from the rising problem of electricity in Australia. With Australia being a developed country, there needs to be a focus on the country to strengthen its electricity as well and reduce the uncertainty. The focus has to be reducing the dependency of the country on coal for its major power production and influx the renewable energy sources for power production. However, this use of renewable energy sources should not be immediately but a gradual process such that the power generated from the renewable energy sources should be enough to meet the needs of the people in Australia.
Qualitative research methodology is adopted by the researcher for this study. In qualitative research methodology, the researcher has used primary as well as secondary data collection for the study. The researcher has used the existing literature on the topic and also considered Government records for getting information about the electricity problem in Australia. The researcher has also conducted a survey among 100 participants through social media for understanding their opinion on the electricity problem in Australia.
The study has explored certain issues in the electricity market. The first key challenge is lack of investment in the gas peaking plants. There is a rising use of renewable energy sources for the production of power in the Australian electricity market but it is a creating a huge volatility in the industry as security of supply is constantly impacted by the weather. The gas generators are cha[ear and easy to be installed. Also, the cost associated with its operation is nil provided the plant has to target peak spot prices in the electricity market. Another issue with the electricity market is the presence of NEM as the price driven market. In this situation, the generators are paid only for the electricity they generate. As far as the capacity market is concerned, it has a high appeal of providing huge certainty for generator availability and also dependability of the supply. But in certain states of Australia, the capacity markets are considered for over-procurement of capacity. There is a review started by the Energy Security Board in Australia about the near market design for the electricity market. This design should consider the affordability of the electricity. The third challenge of electricity market in Australia is the transition to the renewable energy sources. There is a need for the Government and stakeholders to avoid the mistakes done in past so that there is high generation of electricity. However, the Government has not considered the cost for consumers imposed by the transmission. The focus should not be only on subsiding new generation without considering crucial factors.
To these challenges, there are various recommendations provided in the study. The first recommendation which is provided is the investment in the renewable energy sources and producing power from them. There is a need to create awareness among Australians about sustainable use of energy. This study has a huge scope for the future researchers as they will be able use the knowledge of this study for exploring the strategic steps for strengthening the electricity industry of Australia.
Keywords: electricity in Australia, problem of electricity, energy issues in Australia
The electricity sector of Australia has been dominated by the coal-fired power stations and also renewable resources. However, Australia lacks a single grid covering different states due to the large size and population location. The country has a transmission grid extending from the east coast from Queensland through NWS and Victoria. However, the government of Australia has increasingly been using wind power and rooftop solar for electricity generation in the country since 2005(Australian Competition and Consumer Commission, 2017). The electricity market of Australia is depicted in the figure below.
Source: Aparicio et al. 2012
As per the diagram, the electricity in Australia is produced through various sources including transformers, generators, distributors & networks, dwelling, retailers and NEM.
In spite of the fact that Australia is extremely developed country in terms of medical, education, economy but electricity has always been a problem in the country. There are several reasons due to which this is true for Australia. Studies indicate that the inevitable retirement of the ageing, unreliable and inefficient coal-fired power stations have led to a problem for the electricity in Australia (Australian Competition and Consumer Commission, 2017). Besides this, the decreasing cost of solar, wind and battery storage is an another challenge for the electricity in Australia. The consumer preferences with regard to electricity prices and advanced technologies is changing due to which there is a need for the people to have better control on their power bills. The increasing domestic gas prices is another challenge for electricity in Australia (Aparicio et al. 2012). The uncertainty in the Energy and Climate Policy in Australia has decreased the confidence of Investors in the sector. It is due to this Government of Australia needs to take strategic actions to cope with the electricity challenges in the country.
As far as this study is concerned, the focus of the research is on exploring the problem of electricity in Australia. For this, qualitative research methodology is to be adopted such that the existing literature on the research topic can be explored and also recommendations can be provided in the study for coping with the problem.
Electricity Challenges in Australia
Studies have indicated that technological changes and a high need to use renewable energy is developing many problems for the electricity sector in Australia (Aparicio et al. 2012). There are several challenges that need to be explained so that strategic actions should be taken by the Government and concerned authorities to manage these challenges (Aparicio et al. 2012).
Managing the generation problem: The first challenge which is associated with electricity sector of Australia is managing the generation transition. Studies have indicated that UK had experienced a huge power crunch (Apergis& Lau, 2017). The key reason for this power crunch was that generators that run from ageing coal have become unreliable. It is due to this renewable energy sources have been used increasingly for electricity generation (Apergis& Lau, 2017). This problem is likely to be developed in Australia as well due to the fact that coal-fired power generators are becoming uncertain and inefficient in the country. Although renewable energy sources have been started using for generating electricity but these sources cannot be managed at short notice as there is a high probability that coal plants might stop producing electricity. On the contrary, gas fired plants might be used in Australia for electricity generation but these are expensive. Therefore, gas fired plants are not an economic option for generating electricity provided coal plants fail to manage the system. On the other hand, there is diesel generation available for coping with the electricity problem in Australia but this option is not feasible. This option is like a back-up and considered polluter. Hence, the transition to renewable energy sources in the long-term is extremely challenging for meeting the electricity needs of the country (Apergis& Lau, 2017). There is a need for the Government to consider strategic options for providing cheap, reliable and flexible generation for coping with transition from the electricity generating sources dependent on the use of cleaner sources.
Cost can be a challenge: Another challenge for electricity sector in Australia is the pricing of networks. The official reports indicate that the NSW Government has sold its key electricity transmission business. Although it was sold at a good price but this is a challenge. The local generation of electricity such as solar and battery storage has decreased the amount of power needed for the transmission network (Bae et al. 2014). However, the prices are set for the networks through a defined procedure. This procedure is by dividing the Regulated Asset Base by the volume of power. Hence, the decrease in demand leads to increase in the price. As a result of this, the people use more and more local solutions so that they do not have to pay network charges. This reduces the volumes further and develops a cycle. Therefore, there is a need for the government to cope with this problem by changing the prices. As transmission network is like an asset so there is a need to fix efficient prices as per the usage of the energy for the consumers. Reports have indicated that Western Australia is adopting this model and there is a need for rest of the Australia as well to adopt it (Bae et al. 2014). This can help in making network prices like Australia Post. This can lead to fall in demand, high prices which will lead to more falling demand and more high prices.
But scholars indicate that pricing cannot help in managing the issue for the long-term (Elliston, Macgill& Diesendorf, 2013). The local generation and storage can imply that there is low need of long distance transmission. The transmission networks are likely to get high competition if this situation arises. In such cases, it is vital for the Government to make appropriate regulations and focus on less RAB. This will help in allowing competition between various sources of power.
Smart pricing for the consumers: the third challenge for the consumers is to focus on smart pricing and products for the people. The electricity market of Australia is extremely uncertain. Reports suggest that for many consumers, the retail price paid for power is not as appropriate as the wholesale price. The wholesale price of electricity in Australia during summer months can be as much as $12 Kwh (Elliston, Macgill& Diesendorf, 2013). However, the consumers pay the average prices and do not consider peaks. Hence, there is a led need to conserve power during the peak seasons. There is a need for the Australian Government to focus on building better networks and efficient power stations such that the consumers can get incentives during anytime of the year irrespective of the seasons. One of the recommendations for such a problem is to enable the consumers to consider high prices and respond to those prices well (Elliston, Macgill& Diesendorf, 2013). They should focus on using smart meters that can allow retailers to develop products for saving the money of the people and manage peak loads. However, there is a need for the market rules such that smart meters can be used efficiently as the progress in this field is extremely low.
Although only three problems have been discussed here, there are various problems at the grassroot level. All these problems must be resolved by the stakeholders including government, regulators and companies doing business in the energy industry.
Factors for rising electricity problem in Australia
So far the focus had been on discussing the major challenges in the electricity sector of Australia but there is a need to focus on factors that have led to electricity problem in the country (Gu, Yan& Saha, 2013). There is a huge debate conducted about the factors of the existing problems in the electricity sector of Australia. The debate makes it tough for the Government and stakeholders to get to the solutions. The studies suggest that the cause of uncertainty of electricity sector of Australia is inefficient government policies. The policies indicate a huge diversion due to which these are inefficient. There is a need for developing efficient strategies so that Government can focus on removing the uncertainty from the sector (Gu, Yan& Saha, 2019). There is a need for the energy policy to be developed which caters to the crucial objectives. The solutions have to aligned with the objectives else these will be inefficient only. In case there are different issues to cope then there should be separate solutions for them and not just one solution to cope with all issues.
The major issues with the electricity industry of Australia include reliability, sustainability and affordability. There can be many arguments about which objectives are crucial and which not but the Government has to prioritise the objectives. For instance, for the affordability, there is a need to develop direct measures. When the affordability is addressed, it can make it easy for the Government to cope with other issues that are sustainability and reliability. The gains in affordability will help in achieving other objectives as it has direct relation with achieving sustainability and getting reliability (King, 2015).
In Australia, the electricity and gas prices are considered more than rest of the world. For instance, Retail Electricity Pricing Inquiry of 2018 indicate that electricity prices in Australia have become expensive as it is the fourth expensive country in terms of electricity. So electricity prices have increased in all these years. In certain instances, it can be indicated that increase in gas prices is one of the reasons for the increase in the electricity prices. As far as electricity is concerned, an average household in the NEM had paid a price of 29 cents for every KWh of electricity. This is a huge price which indicates the expensiveness of the electricity in Australia. The components that have increased in terms of price include networks, wholesale, retail and green schemes (Lu, Dong& Li, 2018). The reason for the increase of individual component is different.
The network and distribution cost has increased significantly due to the fact that network businesses had wanted it. Also, due to inefficient regulations, this has to happen. In States such as Queensland and NSW, the reliability standards were high to specific blackouts. As a result, there was network investment without any consideration for the consumers to pay for the increased price (Lu, Dong& Li, 2018).
An official report by the Government indicated that there was an increase in the wholesale prices. These prices have been caused by the loss of cheap detachable power. With respect to retail cost, the customers were disengaged and confused due to which they got only uncompetitive offers and ended up paying high. The analysis in the report indicated that customer acquisition and retention cost add up to $50 to the annual bill of every customer irrespective of the fact if they have switched (MacGill, 2016). The confusing nature of the cost of electricity did not make it clear the reason for switching of the customers due to acquisition and retention offers.
The green schemes led to unnecessary costs for the consumers which did not do any good to them and not even fulfilled their purpose. For instance, the initial feed-in tariffs for rooftop solar did not do any good. Instead the price for the consumers increased significantly. There is unfortunate allocation of costs as the price paid for this energy went too excess. The decision of the Queensland Government took various green scheme costs to cut out the bills of consumers. They paid them through the Budget set for the state. Hence, it led to the reduction of electricity prices in Queensland. So the model of Queensland should be effectively replicated in other parts of Australia so that the issues associated with the electricity sector can be decreased significantly.
Solutions to cope with electricity problem in Australia
In order to cope with the electricity problems in Australia, there is a need to take strategic steps. The focus has to be on the generation mix and also on the need for investing in the electricity generation sector. There are certain reports that suggests that if the emissions reduction policy is settled or executed the emissions reductions, it can cope with the affordability issue of the electricity in an appropriate way (MacGill, 2016). But in case the reliability and emissions issues of the wholesale market are resolved, there can be several electricity affordability issues. There is a need to develop strategic mechanisms for different issues and ensure that these are clear. Also, when adopting any solution, there is a need to ensure that these do not develop any issues. Hence, the Government and other stakeholders have to be extremely careful when developing solutions for increasing the reliability or decreasing the emissions. A report published by ACCC, a Government organisation has indicated that there has been ample research conducted about the causes of the affordability crises (Srivastava et al. 2019). There is also a need for providing various ways for lowering the prices in an appropriate way. Another report by the organisation indicate that an enquiry was conducted in 2018 about the uncertainty in the electricity sector. There were many problems indicated, for which various recommendations were provided for enhancing the affordability of the electricity in Australia. For instance, one of the recommendations was to focus on regulating the network and distribution costs and also restricting the merits review of the decisions. This will help in increasing the cost and introducing the market offer as a cap on various offers. There is also a need for the retailers to offer discounts besides a reference price due to which it is easy for the consumers to compare various offers. This also helps in enhancing the retail competition.
The report also suggested various other reforms to cope with the uncertainty of the sector (Srivastava et al. 2019). For instance, the Australian Energy Market Commission is taking steps to manage the demand response which is for major price benefits. The ACCC is also introducing various changes to ensure that the retailers can switch effectively and efficiently. This can help in ensuring that the retailers can provide deals effectively. This Government body has started a scheme for hedge contracts. This is specifically true for South Australia where liquidity is a key problem.
There are several reforms that should be taken for getting significant advantages and providing benefits to the consumers. The largest component of bills for majority of consumers in Australia is the cost of networks. It also includes past over-investment. However, if this significant investment is removed from the regulatory asset bases, it can help in enhancing the affordability. This will remove the uncertainty in the Australian electricity sector. However, studies have indicated that there is a need for the Government to learn from their past mistakes and not focus on revenue always. There should be several government schemes introduced for promotion of small scale renewable generation. This can help in getting rid of the uncertainty of the electricity sector in Australia. These schemes can help in providing huge value and be considered as government subsidies by the people and strengthen their trust (Aparicio et al. 2017). The Governments can also use the decision made by the Queensland Government to consider the cost of these schemes in the State budgets. These should not force the people who do not have solar to get it.
The Government should focus on developing a program for encouraging the investments in the generation. They also shortlisted as many as 12 projects. The Government organisation, ACCC had recommended that the government should consider the credit risk of certain new power generation projects for coping with the challenges (Apergis& Lau, 2017). The program is likely to be beneficial so that there is a better competition and also results in the wholesale market. The Government should encourage the investment from small players for getting rid of the uncertainty of the sector. The new and small players may face problems in getting enough contracts but the Government needs to encourage them.
Statement of Problem
The key problems with the electricity sector is the price of the energy, environment, changes in climate and also saving the planet due to unsustainable use of the energy. These challenges of electricity sector of the country have made the field extremely worse. In spite of the fact that these issues are crucial but no major steps have been taken by the Government and Energy companies so far to cope with them. Studies have indicated that Australians are known to use the energy unsustainability due to which most electricity problems have taken over (Apergis& Lau, 2017). Figures indicate that the every Australian use around 5.7 tonnes of oil energy on a yearly basis. It is vital that Australians use less energy so that electricity can be made accessible to everyone at a reasonable price. Also, Australians must focus on using efficient materials and machines and make several changes in their lifestyle.
The consumption of energy in Australia and rest of the world as of 2017 is depicted in the image below.
Source: Apergis& Lau, 2017
The high bills of Australians is another key challenges for electricity sector in the country. As coal is considered the primary source for producing power in Australia so the cost of production is high. Besides Australia, other countries that depend upon on production of power through coal include South Africa, China, India etc. the use of renewable energy sources for power productions is less including wind and solar.
The figure below indicates the power production in Australia through different sources such as coal and renewable sources of energy in 2017 are as follows.
Source: Nelson, 2020
Although Government and Energy companies in Australia have started to focus on reducing the dependency on coal for power production but this is still not enough to meet the power needs of Australians.
To cope with this, there is a high need for increasing investment in renewable energy sources such as wind and solar power at various levels including federal and state.
Purpose of the Study
The purpose of this study is to examine the electricity market in Australia and determine the problems faced. The research aims at providing strategic steps to cope with the challenges faced by the organisation.
The research question for the study is as follows.
What is the problem of electricity in Australia and how they are able to cope it?
The sub-research questions are as follows.
- What is the problem of electricity of Australia?
- What are the recommendations for the resolving the electricity problem in Australia?
There are several research methods that can be taken by the researchers. However, the type of research methodology to be taken is dependent on the research topic. Researchers use two different research methodologies depending upon their need including qualitative and quantitative research methodology (Noor, 2018). As far as quantitative method is concerned, it includes collecting the information and analysing it in an appropriate way by using mathematical strategies. On the other hand, qualitative research method includes gathering information from various sources including journals, online libraries, books. For this study, qualitative research methodology is selected. The major benefit of using this research method for this particular topic is that that it can help in observing the data effectively. The researcher has focussed on getting information from various scholarly journals and official records of the Government indicating about the uncertainty of the electricity in Australia.
The researcher will be using different data collection methods including primary and secondary data collection. The primary data collection is about conducting surveys and focus-groups. Another data collection method is secondary research which is about referring to the journals and scholarly material.
As far as the research philosophy is concerned, it is interpretivist. As per Noor (2018), interpretivism is a type of research philosophy which is about comprehending the elements of the study. The qualitative study used in this study will enable the researcher to study the electricity market of Australia and also assess the factors evaluating its uncertainty and how it can be managed.
In this study, the researcher has selected qualitative research methodology. This methodology will enable the researcher to comprehend the importance of reforming electricity sector of Australia. The researcher can acquire its research objectives efficiently. The findings of the research can be used by Government and energy companies to cope with the uncertainty of the sector. As part of the primary research, a group of 100 consumers is to be selected from Western Australia through social media to understand the problems of electricity in Australia. The researcher will focus on using random sampling as the sampling technique. As per this technique, the participants of the study will have no probability to be selected. There should be no bias in the conclusion of the study. For the primary research, the researcher has focussed on developing open-ended questionnaire. This can help in providing effective opinion of the participants for the research topic. For this, the researcher is expected to contact the participants through his Facebook page.
Data collection is considered to be a critical aspect of the research. It is the way adopted for gathering data for a specific study relevant to its research topic. The researchers often use different data collection methods for collecting data (Ørngreen& Levinsen, 2017). As far as primary data collection is concerned, it is collected through different methods such as carrying out surveys or interviews or doing focus groups. But primary research is not considered feasible alone as it cannot help in addressing the research question (Noor, 2018). So secondary research is used along with it. Secondary research is used by the researcher for analysis of the existing material available online and offline. For this, the researcher myself use various sources such as journals, books and other material. The primary research for this study is conducted by surveying a group of 100 people in Australia who can provide their opinion about electricity in the country.
Primary data collection in a real-time data which is collected through an open-ended questionnaire for this particular research. The responses of the questionnaire are analysed for developing the results. The participants have to sign a proper consent form so that they can declare that they are not being forced to take part in the study. For this, the researcher aims at contacting the participants through social media and carrying out social media campaigning for creating awareness about this study. Primary research is time-consuming but the researcher can get raw information from the participants.
On the contrary, secondary research is about collecting data by referring to various online and offline material. However, the researcher has to ensure that the data used is authentic. For this, the researcher even focused on the official reports on the electricity problem of Australia. The reliability of data should be considered for the research.
As far as sampling is concerned, the researcher will be using random sampling for the study. This ensures that every participant can take part in the study without any bias. The sample space is small due to time management issues. The researcher will be using thematic analysis for analysing the data. This enables the researcher to analyse the data and effectively cope with the research. The researcher determines the pattern of information through this. The focus is on proper analysis and naming the themes. The themes are used for developing qualitative reports.
The researcher will be using charts and graphs for representing the findings of the study. All the findings should be presented in a good way such that the information can be managed properly else it can be difficult for the readers to evaluate it. The focus is on evaluating the authenticity of the sources. When the data is collected, it helps in developing an efficient conclusion.
Limitations & Delimitations
This study indicates that issues in electricity market of Australia are extremely important to be considered right now. There is a need for developing various solutions to cope with the affordability in every market. it is vital for the Government and stakeholders to tackle with the electricity issues and develop appropriate solutions. They should have clear focus to achieve an objective. The electricity sector of Australia will continue to suffer from various energy prices if proper reforms are not taken. In spite of the fact that the researcher has taken best efforts to make the study effective, there are still limitations in the study. The sample space taken in the primary research is small due to which the results of this qualitative study may not be applicable to a larger audience. The participants can also provide ingenuine responses due to which the results of the study can be wrong. Besides this, the use of secondary sources for the study can be a limitation for the study. The researcher needs to ensure that only authentic sources are considered for the study.
As far as delimitations are concerned, the study can be narrowed down by focussing on just electricity market in a particular State of Australia. As the electricity industry in Australia is not uniform across the country so it can be bit complicated in this study to consider the entire country. Besides this, the participants taken for the research are preferably be from medium economic background.
Contribution of the Study
Although there is a wide literature published on the challenges in the electricity market of Australia but not many researches have been able to provide any recommendations for reforming the sector or coping with the issues. So this research will help in refining the current literature on the research topic as the study tends to use the data from Government records and then providing feasible strategic actions.
This research will be useful for the Government and other stakeholders to reform the electricity sector of Australia and cope with the problems of the sector in an effective way. The study has provided several recommendations that have also published by reputed organisations like ACCC. There is a need for the Government to develop a secure electricity supply which will need an efficient system and can adapt to the changes well as per the demand and supply. The Government needs to comprehend the challenges in the sector from the grassroot level and then focus on coping with them.
In this study, different recommendations for coping with the challenges of electricity market in Australia have been discussed. There is a need for the Government and Energy companies to create awareness among the people in Australia to turn sustainable. The sustainability will definitely help in coping with challenges and ensuring that this does not lead to uncertainty in the industry.
Cost Budget and Time Schedule
This section explains the project cost budget and also timeline for the project.
Project cost Budget
|Estimated Cost ($Au)
|Open-ended questionnaire, social media marketing
|Final draft & binding (10 copies)
|Access to and acquisition of data including travel
|Software for data analysis
|Statistical and other analysis packages
|Endnote or other referencing packages
|Editing of the study
|Estimated Completion Time
|Completion Period (month)
|Research proposal – including the preliminary research: area, question, and theses
|Gathering data for the research including primary and secondary research
Secondary research include data for literature for the preliminary literature review
|Sampling for preliminary analysis
|Detailed literature review
|Sample/data selection for analysis
|Additional Data Collection and Analysis
|Editing of Project
|Submission of Project
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