Understanding Of Renewable Energy Systems - Myassignmenthelp.Com

Question: Discuss about the Understanding Of Renewable Energy Systems. Answer: Introduction Progress of the modern world is impossible without support from energy resources. Industrial development, transport and communication and in every aspect of life there is need for energy resources. There are two sources of energy- renewable energy and non-renewable. The supply of renewable energy is unlimited while non-renewable resources are limited with by the long time taken for re-creation (Twidell and Weir 2015). Because of massive pressure on renewable resources, there is a possible threat that it will end in near future. To preserve exhaustible resources for future generation Australia has shifted its focus on renewable energy sources for generating powers and in other areas. Summary of the article discussion Given the current state of electricity market, focus of government and energy ministry is to ensure an uninterrupted power supply and brings electricity price at an affordable level. In the last few years, people in Australia are suffering from a high electricity price with a severe shortage of power supply (Cludius, Forrest and MacGill 2014). Electricity is an integral part of daily life. Therefore, problem in the energy market need serious attention and should be solved permanently. The reliance on renewable energy is expected to achieve the first round reduction of electricity prices as opined by Prime Minister Turnbull. In the modelling commission, proposition has been also made to government intervention and prevent the growing concentration in the electricity market. A plan is designed to achieve capacity of 6,000 MW renewable energy. This will boost power supply leading to a sharp decline of electricity prices in the wholesale market. In order to achieve this goal, capacity of renewable energy has been incentivized with modification of existing clean energy target (theguardian.com 2017). The proposed policy imposes new restrictions on energy retailers and users of large-scale energy in the coming years of 2020. Both the uses and retailers need to fulfill the target of reliability and reduction of emission to targeted low levels. There are chances that the new emission targets and reliability requirement lead to further market concentration in few states like that in South Australia (Azad et al. 2014). Under National Energy Guarantee or NEG, the energy retailers need to guarantee two main aspects that is reliable supply and reduction in emission (abc.net.au 2017) To attain a reliable supply retailers are required to use only a certain percentage of electricity obtained from sources like gas, coal and batteries. To achieve targeted reduction of emission the retailers can grab assistances in form of subsidies and other form of incentives. In order to achieve the set policy goals under Neg, the energy retailers makes external contraction of supply. However, this is costly for them. Instead of contracting supply externally, they chose to involve in vertical integration with the generators. The means of vertical integration more cost effective as compared to external contraction (Quaschning 2016). South Australia already has both high degree of vertical integration and market concentration. The state policy makers are left with three options for intervening in energy market at the national level. Restriction regarding the choice of parties that can operate, control or own new generation. Put restriction on who can be retailers of electricity Restriction on parties for becoming both an owner, retailers or operate generation. Article evaluation with economic theory and concepts Increased supply and price The high electricity price has become a major problem in citizens of many Australia state. Price in the market is determined from the forces of demand and supply (Rader 2014). Demand in the market cannot be restricted. Therefore, supply side solution should be adapted to control price. With increasing reliance on renewable energy, the energy ministry aims at raising supply in the market and reduce electricity price. Figure 1: Increased supply and expected price reduction (Source: as created by Author) External supply contraction In any economic activity, externality implies external cost or benefit of the activity that are imposed on a third party not involved directly or indirectly. The new frontier of energy emission target requires the supplier to achieve a certain amount of reduction in emission. In order to achieve the policy goal under national energy guarantee, suppliers chose to restrict their supply externally (Weitemeyer et al. 2015). The reduction in supply creates supply shortage in the market leading to an unreasonably high price. This is the reason why vertical integration of retailer with generators is considered as a cost effective means of achieving reliable supply and emission targets. Figure 2: Supply contraction and increased price in electricity market (Source: As created by Author) Vertical Integration Vertical integration is the alternative strategy that energy suppliers adapts to fulfill their emission targets. In economics, integration refers to the strategy of where one establishes relation with other firms either in the same industry or with firms operating in different stages of production. The former is called horizontal integration while later is called vertical integration. Different inputs are required to produce final goods. One firm integrate with suppliers of inputs, it becomes easier for them to access inputs and produce more goods (Cowen and Tabarrok 2015). The clean energy target requires energy retailers to produce energy with a minimal emission. When retailers vertically integrate with generators then emission target can be achieved without contracting their supply much. Recommendation Policy based on renewable energy target helps to reduce the pressure on electricity prices by increasing supply in the market. However, the emission and reliability target imposed under this policy leads to market concentration. When retailers vertically integrate with generators then this strengthens the position of large retailers. Concentration in the market gives power to few retailers to manipulate market outcome. Such concentration should be restricted. Instead, government should encourage competition and help the retailers to achieve their energy target with providing subsidies whenever needed. Conclusion The report discusses Australias stand on renewable energy resources. In order to maintain an uninterrupted power supply and control price, Australian government is increasingly focusing on power generation using renewable sources. The new energy frontier requires energy retailers to maintain a reliable supply within the set emission target. The new policy aims at relaxing government intervention to reduce market concentration. However, the suppliers to achieve their policy goal either contract their supply or integrate vertically. The stand on renewable energy is expected to solve problem in energy frontier. References ABC News. (2017).What is the National Energy Guarantee and what does it mean for consumers?. [online] Available at: https://www.abc.net.au/news/2017-10-17/explainer-energy-policy-what-is-the-coalitions-new-plan/9057158 [Accessed 9 Jan. 2018]. Azad, A.K., Khan, M.M.K., Ahasan, T. and Ahmed, S.F., 2014. 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Weitemeyer, S., Kleinhans, D., Vogt, T. and Agert, C., 2015. Integration of Renewable Energy Sources in future power systems: The role of storage.Renewable Energy,75, pp.14-20.