The Perspectives of Pawambeo - the Company Intending to Bridge the Gap in the Australian Renewable Energy Sector - Example

Title Name Professor Course Institution Date Table of Contents Introduction 4 Executive summary 5 Company description 6 Product description 7 Customer analysis 8 Primary target customer 8 Competitor analysis 9 Direct and indirect 9 The industry size 11 Trends and future development 11 Business strategy 13 Product attribute map 13 SWOT analysis 13 Strength 13 Weakness 13 Opportunities 13 Threats 13 Competitive advantage 14 Operations plan 14 Responsible staff 14 Product delivery and payment 14 Quality control 14 Marketing strategy 15 Pricing strategy 15 Product strategy 16 Distribution and sales strategy 16 Starting capital plan 16 Entry barriers 16 Feasibility of product 17 Product financing 17 Target Customers & Competitors 17 Development plan 18 Conclusion 20 References 21 Introduction Australia is among the top twenty largest consumers of non-renewable energy and 18th position per person basis. Australia’s energy production is mainly from nonrenewable energy resources (coal, gas, oil, and related products), this represents 96% of the total energy consumption. Renewable (biogas and biomass, wood and wood waste), account for the 4% in energy consumption. Though renewable energy consumption has been low, its usage has been growing strongly in recent years. The past five decades have seen a decrease in energy consumption despite the growing energy sector, the annual growth in 1960’s was 5% then it fell to around 4% in the 70’s due to the two oil price shocks in that period. In the 1980’s, an economic recession caused rising energy prices which resulted in a decrease in annual energy consumption to about 2.3%, the 1990’s was not spared either since an early recession that decade contributed to the slower energy consumption. However, low energy prices and a shift in the economic growth led to a constant 2.3% in energy consumption for a whole decade. Over the past 5 years, energy consumption has averaged 0.8%; this is attributed to the ongoing decline in energy intensity of the Australian economy, which is by growth in commercial and services as compared to the higher intensity sectors such as manufacturing. Executive summary Australia’s bulk of energy generation is from non-renewable chiefly from the coal, as such, the resources are prone to be diminishing as time goes by. A probable alternative for this massive industry is to diversify into other energy forms mainly the renewable resources, currently the 4% of renewable energy is from the hydropower 23%, biofuels, solar and wind energy 24% with relatively a large input from the biomass sector 53%. The renewable our are set to provide a steady and yet clean energy in Australia for the time to come, this is the reason the company startup company has to exist in driving the economy forward and offering sustainable energy for this consumer market. Global demand for Australian energy our has led to an increase in domestic production, that alone is not the reason to venture into this market BREE’s 2012 energy projection for Australia-to 2050 give a possible scenario of what to expect in energy development. Their projections were based on the assumptions of latest energy cost estimates for electricity generation (Australian Energy Technology Assessment 2012) and the development in the government policy key among them the carbon price projection as articulated by the Australian Treasury. The growth in total primary energy consumption is projected to about 21 % (0.5 per annum) in the period of 2012-2013 to 2049-2050, equivalent to 7369 petajoules in the period 2049-2050. BREE’s outlook for this projection is pegged on two significant parameters in the economy. First, is the long-term decline in energy intensive economy in the country and secondly the increase in the use of renewable in electricity generation that decreased cost and policy measures designed to boost their competitive edge. Company description Pawambeo is the company we intend to bridge the gap in the renewable energy sector. We will use biogas to generate electricity from biogas generators that will produce 60kw on the lower side and as the years advance the company intent to increase the company output with the resources that will be available. The company initial plan is to be based in the province of Victoria; this province heavily relies on brown coal for energy generation and a very mere percentage on renewable energy. The company niche is to install a generator that will convert the company biogas into electricity and use the sludge as fertilizer on the nearby farms. Pawambeo is looking forward to be a prospective employer and be at the forefront to push for the use of renewable energy in the country. The company mission is to see a country generating electricity from renewable and sustainable for the common household and industries consumption, 2050 will be the company year of gauging how successful we would have achieved the company targets and projections. The company vision is to be a leading company in a reliable energy generation and distribution in the country and for export. The management team will comprise of mechanical and electrical engineers who will operate and execute electricity generation and managers to direct and manage the assets of the company. We believe we will produce the best offer for energy consumers at an affordable and reliable supply. Product description Electricity is one among many forms energy (chemical, mechanical and thermal energy). Energy is being created and used everywhere in nature, the sun gives off heat that warms the earth, the winds bring a cooling effect, and lightning is natural electricity,(Mahaney,2007,p.g4). The company interest is on the manmade form of electricity that is used in homes and energy dependent industries in the company country by using biogas as the raw material. Biogas generation is a new technology for sustainable development. Biogas is generated from large tanks in which people place animal dung, human waste, and plant residues to rot. The rotting is known as fermentation and anaerobic bacteria that function in oxygen deficient environment facilitate the process. The fermentation results in large quantities of methane gas, which can be used for cooking, lighting and more importantly for generation of electricity by feeding into a biogas-dependent generator. When the fermentation is depleted, the animal and plant waste is removed and used as fertilizer on the farms. In developing countries ,this cycle plays an important role since the villagers no longer cut trees for firewood hence decreasing deforestation, the fertilizer lead to increase in food production and the village will grow into a healthy one,(Marten,2001,pg7). The company interest is using the methane gas to run generators, which will produce electricity for the Australian people. The company product will be unique in that unlike the conventional generators that are diesel/petroleum powered the company generators will be powered by locally available and sustainable our which are cheap and upon exhaustion become manure for the farming sector. There will be no need to import as is frequent in the import of crude oil and petroleum products for such a generator, Australia is a net importer of these products placing a critical question on the sustainability of such trade, which is majorly controlled by political interference. The company raw materials are renewable and ecofriendly. The output also is as constant as the input and is not affected by environmental changes as experienced in hydropower. Customer analysis Primary target customer The company primary target is the residential/household market before the company diversifies and expands into other energy consuming sectors in the economy. The company intends to be a retailer of electricity to be supplying electricity in the Victoria state. Target market includes the agriculture sector, services, manufacturing and mining and finally transport (Ferrel, 2012). Transport is the largest consumer, followed by manufacturing, and mining, residential and the rest in that order. The transport sector consumption decreased between the year 1989-1990 and 2010-2011. The mining sector has posted an upward trend in the same period, while the energy intensity in the commercial, manufacturing, and service sectors remained unchanged over this time. Rising fuel prices, aerodynamics and lightweight materials and technical advances in fuel efficiency can be noted as the bumps in the transport sector. Use of public transport and government policies on mandatory fuel efficiency standards are also factors that led to a decline in the transport sector. Technological advances and rise in energy prices reduced the energy demand from the manufacturing and services sector; however, increased activity in both of these sectors resulted in net growth in energy consumption from 1989-1990 to 2010-2011. Over the same time, the mining sector increased posted an increase by an average of 6.3% growth rate, this was due to increase in mining activities. The residential sector has remained unchanged in the energy consumption but it still holds a 7% share in energy consumption Competitor analysis Direct and indirect 4% of the total energy generation in Australia is from the renewable rest he companies (biomass, biofuels, hydropower, wind and solar). Biomass(wood and bagasse) , has the lion share of 53% in electricity generation,biofuels,solar and wind collectively account for 24% and hydro power makes up the 23% in the renewable . Biogas in electricity has not yet begun in Australia as of the present. Government policies in the recent years are structured in the direction favoring the use of renewable our since its clean energy and the country is positioning itself to earn from carbon credits. The other reason for use of renewable is their abundance in nature and ease of acquisition and the fact that their lifespan is limited. Biomass use is on the decline and has been partially offset by the use of other renewable energy our. New South Wales is a great consumer of renewable energy with an extensive use of biomass. Tasmania renewable energy penetration is the highest in Australia and holds a third position in consumption of renewable energy, hydropower is the main source of electricity generation accounting for two fifths of the energy production. Penetration of renewable energy in other states forms 0.3% in the Northern territory (gas and petroleum dominant) to 6% in South Australia (greatest proportion in nations wind generation). The hydropower demonstrates a high and low output depending on the water supply and levels, the heat waves affect the output from this sector. For the gas industry, Australia has rich deposits of fossils that are substantial to keep the economy running for decades to come and the country is a net importer of crude oil and finished petroleum products. Gas is the second largest source of electricity generation after coal (70%), it has a 20% share while bioenergy, hydroelectricity, and wind account for the remainder 10% in the period 2011-2012, BREE 2012. Indirect competitors Australia mainly generates electricity-using coal, which is an estimate of 70% of total electricity generation in the period 2011-2012. Coal is preferred because it is a low cost energy as compared to other resources and again because of its abundant deposits along the eastern seaboard coal reserves. Major competition in the market is that, the non-renewable resources are abundant and they are cheaply available in Australia considering the rich deposits of fossils and other renewable resources across the provinces. Renewable electricity generation still holds a small percentage in the country (4%) and the other resources like coal are preferred, this is a clear indicator of how hard it will be to compete with such a record. Gas and petroleum also present a form of renewable /nonrenewable source of energy that is available for exploitation, our biogas has to be produced in large amounts to be able to make an impact in the statistics of electricity generation. Industry analysis The electricity industry comprise of generators, distribution and transmission networks and retailers. Electricity industry is one among the largest industries in Australia and gained a 1.7% industry gross value in 2010-2011. Australia’ cumulative energy supply estimate in 2009-2010 rose by 3% to 6100 petajoules in the period of 2010-2011. Australia’s electricity generation has increased at an average of 1.2% per year in the period between 2000-2001 and 2010-2011. In 2011-2012, electricity generation took a relatively less than 1% estimate increase as compared to 20101-2011 to produce 255 terawatt hours. Domestically generated or imported energy is generally consumed by the transformation sectors (refineries and power plants) or directly used by households and industries for use as electricity or petroleum products (International Energy Agency, 2005). Australia generates electricity and other forms of energy in abundance making it a net exporter of primary energy, a greater amount of primary energy is exported than the one consumed domestically. In 2011-2012, the primary energy resources exports attained a $77 billion while providing an affordable, reliable, and secure domestic energy supply at the same time. The industry size The electricity industry is both local and beyond the borders of Australia. Of major importance is the domestic market that is a myriad of consumers from households to industries. This growing industry is expected to grow in the coming years as the demand is increasing from within and the international market. Electricity generation, manufacturing, and transport industries together account for a share of 75% of energy consumption in Australia. Transport industry is leading in consumption with an increase of 2.4% average per year during 2000-2001 to 2011-2012. Mining is the second largest energy consumer and then followed by residential, commercial and services sectors respectively (BREE 2012 estimates) Trends and future development The Australian Government is in the pipeline of implementing policies that will increase the uptake of renewable energy in the country. The policies that are of major importance include the Australian Renewable Energy Target (ARENA), carbon pricing, Clean Energy Finance Corporation (CEFC) and Renewable Energy Target (RET). Renewable Energy Target (RET) legislative scheme aims to: i. Encourage additional electricity generation from renewable resources; ii. Ensure ecological sustainability of renewable energy resources and iii. Reduce the emissions of greenhouse gases produced in the electricity sector To achieve this, RET has created a guaranteed market that favors renewable energy deployment, by a mechanism involving use of tradable certificates drafted by large-scale energy generators from renewable resources and small-scale owners of hydro, solar and wind systems. The RET has a projection of up scaling the share of renewable energy in electricity generation, atleast 20% by the year 2020with circulation of certificates equivalent to 41850 GWh worth to be surrendered. Australian Government Clean Energy Future Plan is operating in tandem with the RET. The plan is a conglomerate of measures under the umbrella of Clean Energy Future Legislative Package that will cut on pollution and increase investments. The Package in conjunction with RET targets to reduce carbon emission to 5% below 2000 levels by the year 2020. ARENA will provide financial assistance to achieve its legislative mandate in improving the competitiveness and up scaling the supply and use of renewable energy in Australia. The fund approximately $3.1billion will cater for: i. The research,demonstration,development,deployment and commercialization of renewable energy and technologies ii. The sharing and storage of knowledge and data about the technology of renewable energy The Clean Energy Finance Corporation on the other hand is mandated to overcome barriers in the capital market that hinder the financing, deployment and commercialization of renewable energy, low emissions technologies and promote energy efficiency. Business strategy Product attribute map In Victoria, the electricity market is dominated by the use of brown coal, which is attributed to high carbon emission, and hydroelectric presence is low due to limited water resources. Biogas is on insignificant in proportion creating a ripe market ready to be ventured and exploited, biogas distribution is unheard of in the province. We plan to distribute gas to the people of Melbourne and be strategic in reduction of greenhouse effect by use of clean energy. SWOT analysis A comprensive business venture has to take into consideration the SWOT analysis (Pahl, & Richter, 2009). Strength Pawambeo establishment strength is on a neglected yet productive sector of using animal dung, animal waste to generate .this is an all-round field that provides energy, and fertilizer, the biogas market is yet to be used in Australia on large scale. Weakness Biogas sale and distribution is a foreign idea yet to be accepted Opportunities The lack of biogas distribution is an indicator of an untapped resource that is of great potential, the community is bound to benefit wholesomely both in energy and agriculture(manure) Threats The idea of biogas is still a foreign concept and as such penetrating the gas market will be a hurdle to jump. Requires high capital establish and operate. Competitive advantage Electricity generation from renewable energy resources is gaining favor in the country as Australia is striving to curb the emissions of greenhouse gases mainly from combustion of coal. As such, the renewable resources that produce clean energy and relatively less contribution of gases of global warming will be key in the economy of Australia. Enabling policies are all in favor of the future electricity generation from renewable resources. Operations plan Responsible staff Pawambeo staff will comprise a team of technician to operate the generators and oversee transmission of electricity to the workers who will be feeding the tanks with waste. Production process Electricity generation from biogas is by far the easiest and less tenuous venture. Gas from anaerobic tanks (devoid of oxygen) s used to power up gas generators, which generate electricity for consumption. Product delivery and payment Our operation as energy retailers will be to sell directly to the consumers and settle on payment with the mutual agreement the company will settle with the client. Quality control Pawambeo will produce energy according to the policies and guidelines provided for in clean energy production in Australia. We plan to get certification for the energy we generate and the gas we will be supplying for it to be up to standard. Potential problems and preventive measures Generators breakdowns, natural disasters, and irregular supply of animal dung and plant remains. We will employ technicians to frequently check and maintain the generators and educate Pawambeo’s workers through seminars and workshops on biogas energy, for natural disasters we can do what we can manage, our operations and we plan to have a constant and ready animal and plant waste at the company site. Marketing strategy The electricity market in Australia is a well-established market from production to consumers, electricity retailers can sell their electricity directly to households or through the national electricity market structure with Australia Energy Market Operator (AEMO) at the center.AEMO determines the amount of power required and the distribution and transmission network for the same. Pricing strategy In Australia, factors such as distribution network cost and transmission are the key in determining the price of electrity, government policies and wholesale electricity price the retailers face do contribute to the pricing (Jean, Withers & Carol, 1992). In recent years, increase in retail electricity prices has been driven by significant new investments, upgrading of existing, distribution and transmission infrastructure required sustain increasing demand for electricity(peak rather than overall). Retail electricity prices performance in recent years has been on the rise. Tentatively from around 2007, both business and household prices have sharply risen (Susuna and Paul, 2012). From the early 2000’s, household electricity prices have increased than the business sector in Australia ,the average price indices for households and business 400 and 200 respectively in 2012(ABS 2012).our pricing will be based on the KWh standard unit for sale of our electric units. Product strategy Pawambeo will have two products for consumption, gas, and electricity. Electricity will be measured in KWh while the gas will be in cubic meter. Wires will supply electricity while the gas will be through pipes. Distribution and sales strategy Pawambeo’s electricity will align itself to the national electricity market structure which is the umbrella determining the distribution and sale of electricity to consumers in Australia. Promotion and advertising strategy For electricity, we believe there will be no need to advertise but ours will be to make sure Pawambeo is constant in generating electricity. We will use the digital media to advertise and vouch for the use of biogas in nearby household cooking and target hoteliers to be supplying them with the biogas at reasonable cheaper price than the LPG imports Starting capital plan The starting capital is estimated to $200,000, which we intend to get a loan from a commercial bank or sell the idea to an investor willing to share this vision. Critical risk in the pre-launch phase Entry barriers Authorization to operate within this electricity is the starting points we are yet to get that form the government to allow Pawambeo operate in this field. Finances for the initial startup capital is huge and bearing gin mind we still students the alternative is to fundraise form friends and relatives or get a bank loan or better still get funding for an interested investor. The operating cost and expertise needed also set a high capital base for Pawambeo establishment. Feasibility of product Majority of people are not familiar with use of biogas for household cooking and lighting, they are used to the conventional LPG imports. We believe our electricity will be absorbed into the general transmission and distribution channels. Product financing Start up expenses form an critical part in project financing (Peter & Frank, 2000). In this perspective, the initial capital required is for purchasing of 2 biogas genarators, employing expert services and wiring and overhead cost is estimated to be $200,000 this is expected to generate 60 Kw. Target Customers & Competitors Customers Our target market is the household consumption, which at times shows a varied demand for electricity, Competitors Our competition is from the already established sewerage and landfill biogas plants but we believe Pawambeo will dominate this field as the large-scale producer and supplier of biogas and electricity. Development plan Significant growth is expected in coming years from renewable energy generation. By October 2012, BREE had fourteen major electricity projects at an advanced stage that relied on renewable energy. The sector is expected to generate 19 Gigawatts at an expenditure of $40 billion when it commences in 2018, this is the total capacity from both advanced and the less advanced renewable projects. Government policies of carbon price and RET are in favors of use of renewable energy resources as compared to fossil fuel based because of the clean production (Willis, 2000) Southern Coast is investing in wind energy on a large scale, large-scale solar installation for electricity generation is also gaining fast. Australia is leading in solar radiation per square meter in the world coupled with its spearheading research in technology and development of solar PV, 2012 saw the commencement of 10MW Greenough River Solar Farm in Western Australia is one such investment. Investment in clean energy is gaining growing interest, technology advancements, government support policy key among them carbon price and RET and improving commercial viability are the factors behind this zest in the renewable energy growth (Afuah, 2009). With time, the Australia energy landscape is shifting towards a large proportion of using clean energy in electricity generation. Renewable are foreseen to dominate over non-renewable by 2049-2050 as the major source of electricity generation with a 51% share of energy mix (Rosemary & Adrian, 2006). Solar electricity is expected to grow at an unprecedented pace from the current (2012-2013)1 TWh to 62TWh in 2049-2050, which will be about 16% of total electricity generation. Geothermal and wind are expected to rise rapidly, reaching 29 and 62 TWh of generation respectively in 2049-2050. We plan to set up Pawambeo as soon as we get funding. The next step is for the company to be registered to be a retailer in electricity generation, distribution, and transmission this will be our start of the first phase into the electricity market. We plan to be fully operational and operating by 2030 even as the demand from the domestic consumption is set to increase also to be part of the 51% of renewable energy electricity generators in Australia by the year 2049-2050. Conclusion It is clear that Australia’s long-term goal in electricity generation is to have the bulk share from renewable resources. Government policies and energy investment in research and technology are all aimed in bettering the exploitation and harnessing the renewable resources endowed to Australia. Major sectors being solar, geothermal and wind resources, bagasse use is losing ground in the country from the projections set has no clear plan for expansion of the biogas sector. It is also clear that huge investments in billions have been put in place in this industry and critical to this is the increase in household and business demand as projected by BREE 2012 by the year 2050. The regional distribution of renewable resources in Australia is dependent on climatic and geographical characteristics of the region. Hydroelectricity is mostly located in New South Wales, Queensland, Tasmania, and Victoria; while wind farms are abundant in South Australia, Western Australia, and Victoria. Almost all bagasse energy facilities are in Queensland since sugarcane production is located there. By contrast, landfill and sewerage biogas facilities are evenly distributed across Australia. Though the initial capital is bound to be steep, we believe the entry of Pawambeo in the biogas market is bound to fetch quite a large share in energy production in years to come. Biogas form our company is from animal farm waste, which is plenty in Australia, the company, aims to align itself to benefit from the policies and technologies undertaken by the Australian Government in the renewable energy sector. The even distribution of bags is an indicator that our Pawambeo can be set in any province and still be productive. Government funding ,the multiproduct from the biogas-methane for cooking, methane to power generators and the use of the exhausted waste as manure in farms, give us the impetus to proceed with the project. References Afuah, A 2009, Strategic Innovation: New Game Strategies for Competitive Advantage, Routledge, New York. Australian Bureau of Statistics (ABS), Research and Experimental Development, Businesses, Australia, cat. No.81040 Australia Bereau of Statistics (ABS) 1992, Year Book Australia. Bureau of Resources and Energy Economics (BREE) 2012, Australian Energy Statistics; BREE Estimation. 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Susan, T & Paul, M 2012, Plannning Australia: An Overview of Urban and Regional Planning, Cambridge University Press, Canbridge, New York. Willis, HL 2000, Distributed Power Generation: Planning and Evaluation, CRC Press, New York. Read More