How Power Relations Influence the Growth of the Renewable Energy Industry - Case Study Example

Renewable Energy Professor (Tutor) The Name of the School (University) The City and State 4 October, 2014 Executive Summary The following paper aims at illustrating the challenges faced by Australia in embracing renewable energy while offering options and recommendations for businesses. The paper will compare Australia to China in terms of effectiveness in producing and embracing renewable energy. Issues for Consideration Policy Issues in Australia Barriers In Australia, the government has been influenced by the huge fossil fuel corporates. This can be viewed as political fear based on consumer reaction against price increases in electricity. The Australian government is afraid of how consumers might react if they turn to renewable energy that would see an increase in electricity bills. According to Luke’s Lukes, (2005) third dimension of the public is still being convinced that RE is unsustainable, intermittent, and expensive without offering evidence to support these assumptions. Nonetheless, their power and capabilities may be threatened if any competition is to arise (Lukes 2005 p. 222). Corporates and investors in the fossil fuels are a new class of super citizens who encourage and demonstrate their benefits through natural, human, political, or human resources that were once only reserved for nations. Furthermore, the huge fossil fuel corporates are known to hire lobbyists while pulling their resources together to highlight their political agendas to the extent that RE advocates cannot compete. Disharmony between Federal and State Government Australia also faces challenges in terms of government support for businesses in the RE industry. Most of the government programs are aimed at making coal and gas production cleaner unlike investing in renewable energy. This has shifted the focus on embracing RE to that of enhancing the current energy sources including coal, gas, and oil. Clean Energy Finance Corporation The previous ruling party had established the Clean Energy Finance Corporation to support renewable energy projects. Nonetheless, the current ruling party has cut on investment or support for renewable energy. This has created increased challenges for the businesses in the RE industry to grow. Policy Barriers in China China has a significant policy through the Renewable Energy Act of 2005 that has seen increased expansion of energy capacity through renewable sources. Nonetheless, uncontrolled and overinvestment has transpired in biomass energy and hydro power. Another major policy barrier is witnessed in the underinvestment on alternative renewable energies such as solar. The Chinese government illustrates unwillingness in prioritizing on RE projects based on the financial benefits accompanied. Financial institutions are mostly unwilling to invest in RE where government subsidies are limited. Again, pricing systems for RE in China face numerous challenges especially in the development of effective models for encouraging investment (Zhao, Zuo, Fan & Zillante 2011 p. 28). Moreover, management of energy resources remains fragmented with numerous institutional having uncoordinated and inconsistent regulations and policies. Market Challenges China has enjoyed effective policy implementation in the area of renewable energy. Nonetheless, the success of RE depends on the market which must compete with existing energy resources. China continues to face immense challenges based on variations from market demands and resources that create a distorted pricing model. Finance Issues Moreover China faces increased financial challenges in funding RE projects. Businesses consider the risk of RE and use this as a basis for reduced investments in RE. Governmental and private capital is limited in the area of advancing renewable energy. Options for Expansion Option 1: Australia has an option by investing in solar and wind energy as well as tapping CEFC if required. The Bureau of Resources and Energy Economics has illustrated a wide-ranging forecast of energy that can be generated from RE. This assumption is based on Australia’s abundant resources, policies, production costs, and current projects among others. Benefits The benefits of investing in wind and solar energy are based on the increased abundance of these resources in Australia. Australia has unlimited solar and wind (Australian Government 2013, p. 3). Moreover, the initial investments costs are high while operating costs remain relatively low. This means that Australia has the ability to produce renewable energy to support its energy demands. In solar energy, Australia has the ability to meet its needs through the sun’s energy with only three percent of the country’s land dedicated to solar power generation (Australian Government 2013, p. 3). Risks The main risk associated with investing in wind and solar power is in terms of logistics and technological barriers. Australia may face numerous challenges as technologies for solar and power generation have to be imported abroad. This means that initial costs may be overwhelming based on increased technological and logistics costs. Such challenges are likely to impact the overall effectiveness of achieving RE in Australia. Option 2: China should also adopt or increase its investment in solar and wind production. Benefits China has the largest solar power generation plant from photovoltaic cells accounting for fifty percent of the world’s solar world production. Moreover, numerous programs and policies support investment in solar and wind power. Currently, China is exploring its coast lines to source for wind power. The government has also subsidized installation of solar power systems for domestic uses in a bid to encourage domestic consumption of solar power. Risks Even as China leads in solar power production, most raw materials such as technologies are sourced from outside illustrating the huge investments costs. Moreover, with the decrease in the global solar prices, most renewable energy firms suffered huge losses. Recommendation As a recommendation, businesses should focus on expanding in China based on their supportive regulations and polices aligned to renewable energy. This recommendation should be considered strongly unless the Australian government illustrates commitment and reforms in renewable energy regulations and policies. Analytical Essay Energy is an essential need that is required for both economic and social progress. Without energy, the world would not be able to achieve its numerous successes over time. Demand for energy is increasing by every day as new technologies emerge and the human population continues to increase. Nonetheless, the world has for long relied on natural resources for the production of energy to satisfy mankind’s quest for development. Nonetheless, the world has limited resources as the world consumer increased energy. These resources are critically reducing by the day posing a grave threat to future generation. This has introduced the idea of renewable energies that are in unlimited supply such as wind and solar power. In Australia, most of the energy is produced from natural resources such as hydro power and fossil fuels. The need to focus on renewable energy is more important than never. Australia is a large country geographical with unlimited renewable resources including biomass, solar, and wind among others. Nevertheless, the country has lagged behind in embracing renewable energies that are predicted to be the future of the world’s energy supply. Australia has faced numerous challenges in the bid to embrace renewable energies as convention energy sources dominate the energy demand in the country. However, China has already embraced renewable energy through policies and regulations that support investment in renewable energy. The following paper aims at discussing the challenges faced in Australia’s bid for embracing renewable energy. Moreover, the paper aims at justifying why it is commendable for Australian businesses to invest in China’s renewable energy industry based on its supportive framework. Most of Australia’s electricity or energy is sourced from fossil fuel with the coal being the main contributor (Bahadori, Nwaoha, Zendehboudi & Zahedi 2013, p. 585). This has seen increased investments in fossil fuels the country continues to increase its overall energy exports since nineteen eighties. Currently, huge multinational and domestic companies investing in fossil fuels pose increased challenges in adopting renewable energy. This has developed to become one of the main challenges in embracing renewable energy. Large fossil fuel companies have the financial, economic, and political influence to achieve their objectives. With their financial resources, fossil fuel businesses are increasing investment in fossil fuels that is viewed in a positive manner as it generates export revenue. Again, the establishment of fossil fuel companies offers numerous domestic advantages such as the availability of employment and community development. Moreover, through increased political powers, fossil fuel companies influence policy makers to adopt regulations and policies that support their objectives. With most of the energy being produced by private companies, the idea of changing to renewable energy remains a great challenge. Most fossil fuel companies will capitalize on their political, financial, and economic resources to discourage policies supporting renewable energy (Effendi & Courvisanos 2012 p. 247). This is based on the fear of losing economic and political resources that may compromise their ability to make profits or expand their businesses. This is based on Luke’s three dimension of power that has the ability to influence decision making in terms of policy formulation (Lukes 2005). Fossil fuel companies believe that if renewable energy receives increased support consumers may turn away from fossil fuel energy options, which translates to losses or businesses collapsing. Moreover, as new players enter the industry, fossil fuels may no longer enjoy the privilege influencing political decision especially in terms of energy regulation and policies (Effendi & Courvisanos 2012 p. 250). These barriers have contributed to Australia’s sluggish reforms in embracing renewable energy alternatives. Currently, Australia has few policies or projects on renewable energy that illustrates the extent or influence of fossil fuels in discouraging increased focus on alternative energies. Based on the current nature of the energy industry, it is impossible to invest effectively in renewable resources while in Australia. Nonetheless, unless the country adopts new and effective policies to promote renewable energy and facilitate the investment in alternative energy, the country will lag behind in the adoption of renewable resources. To understand the role of policies in terms of encouraging renewable energy, it is important to compare the state of policy development between Australia and China. Overall, China is a very populous country that faces increased energy demand than Australia. Nonetheless, China does not enjoy unlimited natural and renewable resources as Australia. However, since 2005, China has adapted the Renewable Energy Law which has seen increased progress in the alternative energy industry. According to Lo, 2014 an effective and reasonable policy system is viewed as a solid foundation for the progress of renewable energy. China currently enjoys one of the diverse and effective renewable energy policies and regulations with government support for companies in the alternative energy industry. Government or political dedication to renewable energy is based on mutual objectives that seek to ensure energy demands are met through the lowest or innovative means. China enjoys the world largest solar production powerhouse with the latest technologies (Lo 2014 p. 511). Moreover, the government continues to illustrate its commitment and support for renewable energy to the extent of offering subsidizes to companies in harsh economic times. The government also encourages domestic consumption of renewable energy further increasing the market for renewable energy firms. China support in policy making is also backed by increased investment in technologies and research and development (Lo 2014 p. 514). Additionally, China has developed future targets in terms of renewable energy investments and productions (Zeng, Li & Zhou 2013 p. 39). This creates a suitable environment for entering the Chinese market for renewable energy. Nonetheless, the country has also faced numerous challenges that may not have affected the renewable energy sector that seriously. Overall, the number of achievements China has accomplished in embracing renewable energy surpasses the numerous challenges it still faces. Compared to Australia, China is a better option in terms of investing in renewable energy. Australia is one of the largest countries in the world geographically. The country has unlimited renewable resources from solar, wind, and biomass among others (Australian Government 2013, p. 3). This places the country in a better position than other countries. Australia enjoys increased sun day than other countries in the world meaning it can generate solar power all year round. Moreover, the country also enjoys increased wind as it sits in the middle of the ocean. Farm and industry waste is also another major renewable resource in unlimited resources. Australia has all the right elements of supporting sustainable renewable energy production except that of policies and frameworks. In addition, the country also enjoys increased amounts of natural energy resources that can be integrated with renewable resources to support the country’s energy demands and needs. Even with increased and unlimited resources, Australia is still in the early stages of adopting renewable energy that means it is not a good investment destination in regards to renewable energy. In conclusion, renewable energy will play a vital role in the future energy demands. The need to use alternative energy sources in the developing world is increasing. Australia can no longer afford or sustain its dependence on coal or hydro resources for energy generation. Nonetheless, the country has faced numerous challenges in adopting a clear and effective framework for developing policies and regulation in terms of renewable energy. China has already adopted an effective policy and regulation that has seen increased support for renewable energy. The country is among the largest renewable energy producers of the world accounting for fifty percent of the world’s solar power generation. Based on this assessment, Australia is not an attractive investment for renewable energy based on the poor adoption and development of policies and regulation. Businesses should focus on investing in China based on its supportive policy structure. References Australian Government 2013, Energy in Australia, Commonwealth of Australia, viewed 4 September 2014, bree.gov.au Bahadori, A, Nwaoha, C, Zendehboudi, S, & Zahedi, G 2013, 'An overview of renewable energy potential and utilization in Australia', Renewable And Sustainable Energy Reviews, pp. 582-589. Effendi, P. & Courvisanos, J. 2012, ‘Political aspects of innovation: Examining renewable energy in Australia’, Renewable Energy, vol. 38 no. 1, pp. 245-252. Lo, K. 2014. ‘A critical review of China’s rapidly developing renewable energy and energy efficiency policies’. Renewable and Sustainable Energy Reviews, vol. 29 no. 0, pp. 508–516. Lukes, S. 2005, ‘Introduction’ in S Lukes, Power, A radical view, 2nd Edition, Chapter 1, pp. 1-59, Palgrave Macmillan, Great Britain. Zeng, M, Li, C, & Zhou, L 2013, 'Progress and prospective on the police system of renewable energy in China', Renewable And Sustainable Energy Reviews, pp. 36-44. Zhao, Z. Y, Zuo, J, Fan, L. L & Zillante, G. 2011, ‘Impacts of renewable energy regulations on the structure of power generation in China–A critical analysis’, Renewable Energy, vol. 36 no. 1, pp. 24-30. Read More