The Analysis of the Marketing of Nuclear Power - Essay Example

Anil k. Pandey 08-05-06 Marketing of nuclear power Worldwide the power market can be ified on the basis of regions and also on the basis ofconsumption. On the basis of region: The three major groupings normally used for energy market are the Mature market economies, Transitional economies and Emerging economies. Mature market economies include nations whose energy markets are generally well established. It includes the countries of North America (USA, Canada, Mexico), Western Europe and mature Asia (Japan, Australia, Newzeland). The transitional economies include those nations who are transitioning away from the centrally planned economies of the Soviet Union to free market economies. The emerging economies include the countries whose economies are currently less developed but whose energy pattern in general, are expected to begin resembling those of the mature market economies over the next two decades. The nation in this region, which typically have fairly energy- sensitive industrial sectors includes rapidly growing economies as China & India, the middle east, Africa ,central &South America. Now looking at the future of the world energy market is to consider trends in energy consumption at the end use sector level. With the exception of the transportation sector which is almost universally dominated by petroleum products at present, the mix of energy use in residential and business sector (commercial & industrial) can vary worldwide from country to country depending on the combination regional factors such as the availability of the energy resources, the level of economic development and political, social and demographic factors. Now the worldwide energy market is expected to increase on an average by 2% per year over the forecast period from 2002 to 2025, slightly lower than the 2.2% average annual growth rate from 1970 to 2002. Total energy use is projected to grow from 412 quadri billion British thermal unit(Btu) in 2002 to 645 quadri billion Btu in 2025. Emerging economies account for much of the projected growth in marketed energy consumption over the next two decades with energy use in this group be more than double by 2025.Economic activity as measured by gross domestic product (GDP) is purchasing power parity terms, is expected to expand 5.1% per year in the emerging economies as compared with 2.5% per year in mature market and 4.4% in transitional market economies. On the basis of consumption: Domestic or Residential sector: The residential sector is defined by the energy consumed in household excluding transportation uses. The type of energy used by household varies from country to country depending on income levels, natural resources and available energy infrastructures. Households in mature market economies use energy more intensive than those in less developed economies primarily because of higher income level. In Mexico, country's residential energy consumption projected to increase by 3.4% per year in USA it is 1.6% while in Western Europe it is expected to increase by 0.4% per year from 2002 to 2025.Residential electricity use in transitional economies is projected to grow nearly double in the projected period of 2002 to 2025. Household energy use is projected to increase most rapidly in the emerging economies in the coming decades. In this region the population growth and urbanization will increase and create a larger demand for residential energy services. As a result the emerging economies in 2025 are projected to nearly equal the mature market economies in residential energy use. Business segment: a. Commercial sector: Often referred as the services sector or the services and institutional sector, consists of business organization that provides services. Due to slow rate of population growth in mature market as a whole expected demand in this region projected to grow by 1.9% per year from 2002 to 2025. Many countries in transitional economies expected to see their population decline during the period 2002 to 2025; commercial sector electricity consumption is projected to grow by 2% per year. Economic growth as well as population growth are expected in emerging economies resulting the additional energy demand and is projected to grow at 3.6% per year from 2002 to2025. b. Industrial sector: Worldwide energy consumption in industrial sector is projected to grow at a much slower pace i.e. 2.1% per year. However industrial energy use in mature market expected to grow at a much slower pace i.e. 1% per year during 2002 to 2025. In transitional economies industrial energy sector projected to grow by 1.6%per year while in emerging economies the growth rate will be expected at 3.9% per year. World net energy consumption nearly doubles in the forecast period i.e. from 2002 to 2025. More than half (59%) of the projected growth in demand occurs in emerging economies, where electricity use increases on an average by 4% per year from 2002 to 2025 , as compared to 2.6% per year worldwide. Now it has been clear from the above data that the energy market has been growing day by day specially in emerging economies region in both domestic and business segment. Energy market largely depends upon concerning Govt. regulations and control. In mature economies govt. and private partnership is allowed but in emerging economies power market largely regulated by govt. policies and control. Though there are some sorts of private partnership coming up but still long way to go to open up the power market worldwide. With fossil fuels depleting fast the world has always been on the lookout for alternate energy resources that are clean, cheap and easily available. The two options are nuclear energy and renewable sources. While a lot still needs to be done to harness renewable energy sources to their optimum, nuclear energy has turned out to be a commercially matured and established technology. In near future the world will increasingly look at nuclear energy for power needs. A long history of successful nuclear energy generation has finally late the fear of nuclear holocaust to rest. Apart from advantages of security of supply and environmental friendliness nuclear power is economically competitive. Existing nuclear power plants in operation are supplying electricity at competitive rates. Taking account the cost of transportation of coal the present level of capital costs, nuclear power is competitive with coal based power locations about 800 to 1000 kms. away from coal mines. Reducing the capital cost and improving plant could make performance nuclear power competitive at lesser distance from coalmines. Considering future development of clean coal technologies for reducing green house gases emission from the power plant, relative economic competitiveness of nuclear power would further improved. The use of all energy sources increases over the period 2002- 2025, fossil fuels (oil, natural gas, and coal) continue to supply much of the energy used worldwide, the oil remains the dominant energy source, given its importance in transportation and industry as end use sectors. World oil use is expected to grow from 78 million barrels per day in 2002 to 119 barrels per day in 2025. world oil prizes rose upto $70 per barrel brought about by tight oil market conditions that includes low inventory level, surging demand in emerging Asia and the situation in Iraq and Iran. Natural gas demand is the fastest growing component of world primary energy consumption that is projected to increase at 2.3% annually from 2002-2025. compared as projected annual growth rates of 1.9% of oil consumption and 2% of coal consumption natural gas is seen as desirable alternative for electricity generation. The industrial sector accounts for 36% growth in world natural gas demand over 2002-2025 but the availability of natural gas and oil is limited. Although the consumption of coal is expected to increase in the above period but its share is projected to decline from 8% to 5% in 2025. Hydroelectricity and other grid connected renewable energy sources are expected to maintain at 8% share of total energy used worldwide throughout 2002-2025. Presently the share of nuclear power in mature economies as well as in transitional economies is around 20% but in emerging economies it is around 10% or less. So going by the share in total power generation there is a lot of scope for enhancement in nuclear power generation worldwide. Consumption of electricity generated from nuclear power worldwide is projected to increase from 2560 billion kilowatt-hours in 2002 to 3270 billion kilowatt-hours in 2025. prospects for nuclear power have improved in recent years with higher capacity utilization reported for many existing nuclear facilities and expectation that most of the existing plants in the mature market and transitional economy nations will be granted extensions to their operational lives. Further higher fossils fuel prizes and entry into force of the Kyoto Protocol are expected to improve prospects for new nuclear capacity. Worldwide total installed nuclear capacity is projected to increase from 361 gigawatts in 2002 to 422 gigawatts in 2025, 55 gigawatts of the world increment in nuclear capacity is projected for emerging economies alone and another 19 gigawatts is projected for the transitional economies. In the emerging economies consumption of electricity from nuclear power is projected to increase by 4.9% per year during 2002 to 2025. 96% of the total projected increased in nuclear power capacity for the emerging economies in emerging Asia i.e., China, India and South Korea in particular. When we think of nuclear power marketing we immediately understand that almost all the components of successful marketing strategies have been missing. Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of marketing is "meeting needs profitably" (Kotler, 2003). Marketing is one of the fundamental jobs of any successful organizations. It is not limited to advertising, promotional materials or personal relationship. It is a team enterprise that requires a focused effort to identify potential customer, to learn what the customer needs, to develop suitable products, to meet those needs, to package products in away that will attract customers, to prize the products at a level that will encourage purchases and to inform potential customers of the product benefits. A good marketer emphasizes benefits not technological features. Nuclear energy industry has ignored a huge segment of potential customer base and market. Government policies (with an eye to public opinion) in general guide the development of nuclear power not to corporations or utilities that would base their decisions solely on economics. In 1970s OPECS oil embargo and strong public support led some nations to pursue nuclear power programs aggressively but subsequently accidents at the Three Mile Island nuclear power plant in 1979 and Chernobyl in1986 pushed public opinion and national energy policies away from nuclear power. Rapidly increasing capital cost and construction delays virtually ended construction of nuclear power plants. More recently however there has been talk of renaissance in nuclear power programs as fossil fuel prizes have remained relatively higher and energy security issues, concerns about air pollution and global warning and the high performance levels of existing nuclear power plants have come to the forefront. On the other hand future adverse events involving nuclear power viz, another Chernobyl sized nuclear power plants accidents or a terrorist attack on a nuclear plant or using processed nuclear materials to commit an act of terrorism could strengthen negative perceptions of nuclear power. We will never convince everyone that the nuclear is the way to go but we can certainly convince our customers at a time that nuclear energy can meet their particular needs at a competitive prize. That will be a rewarding endeavor but success will depend upon a well-planned and executed sales strategy. Much of the expansion in nuclear power generating capacity projected- a total of 148 gigawatts in more mature nuclear power market , 52 gigawatts in western Europe , 36 gigawatts in transitional economies and in emerging economies china ,India and south Korea expected to add up nuclear power plants. Strong nuclear revival would have the greatest impact on the fuel shares of natural gas, oil and renewable in fuel mix for world electricity generation. Strong nuclear revival case shows decline of 96 gigawatts in natural gas and oil and 32 gigawatts in renewable energy capacity in 2025. Marketing is more about customer needs and satisfaction. To market nuclear energy we have to tell the customers about positive aspects. Of all the energy sources, nuclear energy perhaps the lowest impact on the environment, including water, land habitat, species and air resources. Because it does not emit harmful air pollutants, the use of nuclear energy helps to keep air clean, preserve the earth climate, avoid ground level ozone formation and prevents acid rain. Nuclear energy also is efficient and cost effective. Unlike some other energy resources nuclear energy is not subject to weather or climatic condition, unpredictable cost fluctuations or dependence on foreign suppliers. The nuclear energy industry is the only industry established since the industrial revolution that has managed and accounted for all its waste, preventing adverse impact on environment. The nuclear industry has not paid enough attention to cost. Several recent studies indicate that that nuclear spare parts costs as much as an identical items without the word nuclear attached. There have been some impressive moves towards reducing costs. The industry should also move away from dependence on services and spare parts supplies. A common mistake made by engineering is to focus marketing efforts on features not benefits. Marketers need to realize that customers care more about how a product will make their lives easier or more prosperous than they do. The message needs to be simple and true: do not pollute air , cannot be spilled on beaches, not dependent on weather , moderate the prices of fossil fuels , refueled leading to long term energy security and compact enough to be delivered by air. We have to make an effort to inform the public about the benefits associated with nuclear energy but the effort is failing because of a lack of commitment and an inability to learn from the successes of other industries. People emotions have been stirred through audio-visual aids, to show the pictures about strong shipping containers, clean power plants and how dirty the competitors are. Industries have to involve marketing professional who can make the message accessible and clear to the people. Popular media outlets are to be created to alter the public opinion in the positive direction. Mass media campaign to focus attention on low cost fuels, job creation and clean environment. Recently utility data institute published a list of 25 lowest cost effective electricity plants in USA, 5 were nuclear power plants. The nuclear power marketing efforts mimic those of industries that have a successful convinced people to by their products. Industry should take the following steps to market nuclear power effectively. 1. Properly identifying the core business i.e. electricity to the customers. People continue to purchase energy, which is core product of the industry. Customer energy needs is ever increasing and he needs it at effective cost. They must be told properly about advantages of nuclear power. 2. Aggressively search for new markets, which has been discussed earlier specially emerging economies where the need of energy is increasing at a much faster rate than any other region. 3. Developing appropriate products to serve identified markets i.e. people should know that nuclear energy not only provides large scale electric power but it can be used for small DC supplies, for moderate sized heating and power units, for ship propulsion also. The other areas are nuclear batteries, remote area power stations whose fuel supplies are difficult and ocean going ships, which carries 95% of the world trade by weight & volume. 4. Product packaging can be demonstrated by the way of compact nuclear power stations with aesthetics, natural characteristics so that the power plant looks like a visiting place. 5. Identifying unique benefits and telling the customers about the benefits of nuclear energy. 6. Constantly telling people about benefits of the product. In every market people are battling to eliminate competition instead of working to supply a better product. This is also true for the nuclear energy business. References: Kotlar,Philip (2003). Part I: Understanding Marketing Management. A Framework for marketing Management. 2nd Edition. Pearson Education Publication (Singapore). Annual Energy Outlook: International Energy Outlook: Nuclear Generation, 1973 - 2003 and Capacity Factor Trend, 1989-2003. (Accessed on 6.05.06). Available on powermarketers.netcontentinc.net/newsreader. aspppa=8knpq_% e Power Marketing Association OnLine (Accessed on 6.05.06) http://www.nuclearfiles.org/.../treaties/non-proliferation-treaty/ prepcom/trty_npt_prepcom_1998_nuclear-energy(Accessed on 7.05.06) Read More