INDUSTRY OVERVIEW
Electricity industry is one of the fastest growing industries in Australia. Any electricity industry essentially comprises of electricity generators, transmission and distribution networks and retailers, who facilitate final sale of electricity to the end consumers (industry, households, etc.). Electricity industry in Australia has shown a very robust revenue growth year on year. The Australian electricity industry has undergone huge transformation in the past two decades. Regulatory barriers to the interstate trade have been removed in phases. (Australian Energy Regulator)
Despite a slight decline in consumption volumes, the Australian electricity market exhibited strong growth in value during the 2008-2012 period. The Australian electricity market had total revenues of $41.2bn in 2012, representing a compound annual growth rate (CAGR) of 12% between 2008 and 2012. (MarketLine Industry Profile, February 2014).
MARKET DEFINITION
The retail market is the final link in the electricity supply chain. This market accounts for almost 70 % of the total electricity market revenue of Australia. The electricity retail market consists of the sale of electricity to industrial, commercial, household, transportation, and other end-users, including agricultural users.
In Australia, the industry is dominated by four large energy retailers that account for over 75.0% of industry revenue combined. The figure below gives the percentage of market share occupied by the four major industry players.
Figure-1: Electricity Retail Market share (Finch, 2013)
We would confine our Porter’s five force analysis only to the state of Victoria. The idea is to analyze the five forces in a relatively competitive market. In Australia, almost eve...
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...han the retail price of the electricity, the shifting of customers entirely to the rooftop solar systems in order to meet their electricity demands seems highly unlikely.
Alternatively, for residential and some commercial buyers, natural gas is often the main substitute. However gas is not a complete substitute as it can only be used for heating and cooking, and there are switching costs associated with the transition from all -electric to dual-fuel household. This makes the cross price elasticity of demand for gas very less.
Overall, the threat of substitutes is very weak. However, the impact of declining cost of solar technology cannot be neglected. If the government incentive schemes on installation of renewable energy persist, one of the biggest threats that the industry would face is that households may cut them out of the electricity supply chain altogether.
At the other end of the scale licensed retail distributors provide majority of the customer base. These retailers provide a great downstream to the end consumers through their chain stores all over the country. It must be said that the most influential customer is the Australia Football League. The close relationship that these two organisations share is the foundation of Australian Rules football. They both work to promote each other and benefits arise from the straight rebuy situation that has existed for over a century.
13) Standard & Poor’s. Register of Corporations, Directors and Executives. 2003 ed. New York: McGraw-Hill Companies, 2003. The energy sector as a whole. External
As a natural resources company, BHP Billiton is vulnerable to changes in the environment and policies regarding the environment. With each environmental downfall, profit is jeopardized, which can push growth and innovation back. BHP Billiton has been heavily affected with blackouts in South Australia that has been interrupting production in Olympic Dam since September 28 during a two-week blackout. Without power supply security, BHP Billiton is having difficulty keeping power prices affordable in South Australia. The total estimated profit loss of the power outages was $450 million. These obstacles have disturbed BHP Billiton’s ability to compete globally with electricity price rises.
In recent times, In the case of gas, prices for households and businesses are expected to increase significantly in eastern Australia, as the development of new gas export terminals leads to a tightening of supply. As the tightening of supply in the natural gas industry this result in an increase of the gas price in NSW. These increase of gas price effect on the households and business in NSW especially industrial gas users such as trade-exposed businesses. “Industrial gas users in the eastern states face ‘a doubling or tripling’of wholesale prices, with the impacts to be felt throughout the chemicals, fertilisers, food processing and other sectors”(Mark Goodsell, Australian Industry Gro...
In the short, renewable energy added to the grid just may displace natural gas use, because natural gas power typically has the highest operating costs.
Tracy, Ryan, and Dan Fitzpatrick. "J.P. Morgan Settles Electricity-Market Case." The Wall Street Journal. Dow Jones & Company, 30 July 2013. Web.
Australia has had one of the most outstanding economies of the world in recent years - competitive, open and vibrant. The nation’s high economic performance stems from effective economic management and ongoing structural reform. Australia has a competitive and dynamic private sector and a skilled, flexible workforce. It also has a comprehensive economic policy framework in place. The economy is globally competitive and remains an attractive destination for investment. Australia has a sound, stable and modern institutional structure that provides certainty to businesses. For long time, Australia is a stable democratic country with strong growth, low inflation and low interest rate.(Ning)
Zweibel, K.(2010, July 19). Should Solar Photovoltaics be Deployed Sooner Because of Long Operating Life at Low Predictable Costs? Energy Policy, Volume 38, Issue 11, November 2010, Pages 7519-7530. Retrieved August 12, 2011 from http://solar.gwu.edu/Research/EnergyPolicy_Zweibel2010.pdf
The threat of substitutes to solar energy is very high. Solar energy is primarily used for the generation of electricity making the range of substitute products fairly large as many types of energy sources can also generate electricity.
The year is 2200. The world is going through a fossil fuel shortage. Oil reserves are almost completely consumed and it is becoming impossible to find new fossil fuel sources. Not prepared for this event to occur, The United States, has no alternative options. As a result of the oil shortage, the standard of living deteriorates. Heat in homes, supermarkets full of food, and transportation, all basic necessities taken for granted, will be depleted because fossil fuels are used to power almost everything. The key to the prevention of this future is renewable energy. Unfortunately the support for the use of renewable energy is weak and ineffective. Unless the US puts forth effort to research and promote the use of renewable energy to consumers, conversion from fossil fuels to renewable energy will no longer be an option.
United States. Energy Information Administration. “Electric Power Monthly with Data for February 2014” eia.gov. US Energy Information Administration, 22 Apr. 2014. Web. 8 May 2014.
Claim: Solar power has the potential to become the United States main supply of energy and replace are needs for more conventional and harmful forms of power generation.
The food and staples retailing is an increasingly competitive industry. The market giants (competitors) are Coles (owned by Wesfarmers) which has 741 stores across Australia and plans to add 70 m...
According to the world’s energy statistical figures, the current gas reserves in the world is …….. The discoveries of Natural gas in specific areas of the world, high capital intensives, its special market structure and its increasing demands worldwide can turn this market into a ‘Natural Monopoly’, a challenge for the world’s energy and economic future and social welfare. The new form of LNG (Liquefied natural gas) is more attractive, demanding and variable in terms of destinations, as a result the regional markets are becoming more and more connected. The future biggest producers of the Natural gas and their energy giants can monopolise the gas industry in the future. The process of fundamental restructuring of this market has already started in the past decades to unbundle and open up the market to attract private investment in the energy sector. But these deregulations are more favourable for old players of the industry. Recent mergers, acquisitions, regrouping of energy giants are the results of wild competition to win the operating natural gas resources and markets.
The 4 market structures in relation to the benefits and costs to the consumer and producer