Public Procurement for Innovation in Renewable Energy

The assignment content discusses the role of government in influencing labor conditions through procurement of services in various countries, including Australia. It highlights the importance of considering the impact of public procurement on labor conditions and suggests that governments can play a crucial role in promoting fair labor practices by incorporating labor standards into their procurement processes. The discussion also emphasizes the need for transparency and accountability in public procurement to ensure that labor practices align with international labor standards.

Running head: PROCUREMENT MANAGEMENT
Procurement Management
Name of the Student
Name of the University
Author Note

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Table of Contents
Detailed current and past power generation....................................................................................2
Procurement practice of Different organizations in the electricity Industry...................................6
Description of the Electricity market in Australia and its Future changes......................................9
Impact of technology on the procurement market of electricity....................................................14
Procurement Strategy for suppliers to make them use of technology...........................................17
References......................................................................................................................................20

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Detailed current and past power generation
The electricity industry is one of the most important industries of Australia. Since the
entire power supply of Australia is dependent on this industry, hence the sector has a key role in
the Australian economy. The sectors of the electricity are involved in the generation of
electricity, along with its transmission and distribution ("ABC - Australian Broadcasting
Corporation", 2017). The retail sales of the electricity are also involved as a part of the activity of
the electricity supply industry. The social, industrial as well as commercial success of Australia
is dependent on the reliability of the electricity supply. In this way, the economy of Australia is
significantly dependent on the electricity industry.
The production of electricity has changed significantly over the years. Electricity could
be produced, either by chemical means or by mechanical actions ("ABC - Australian
Broadcasting Corporation", 2017). The electricity production by the chemical means relies on
the flow of the charged particles from the cells in a battery. This type of production of the
electricity is expensive in the modern day ("Australian Energy Regulator |", 2017). This is
because; the rise in the demand of the electricity has forced the electricity industry to look for
alternative sources of energy production. With this process of electricity production, only a
limited amount of electricity could be successfully produced ("ABC - Australian Broadcasting
Corporation", 2017). In order to meet the increased demand of the production of electricity,
mechanical actions are used widely. Powerful magnets spin very fast inside the coils of
conducting wires. Gas, water turbines or steam usually drives these, thus assisting in electricity
production. In the present day situation, more than 90% of the electricity produced in Australia is

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obtained by burning of fossil fuels, such as gas, oil and coals. The chemical energy that is stored
in the fossil fuel that is used to heat water as well as produce steam ("ABC - Australian
Broadcasting Corporation", 2017). This steam is then forced under high pressure through a
turbine that drives the generator, to produce enough electricity for supply all over Australia. This
complete process helps in conversion of the chemical energy into kinetic energy and then
eventually to electrical energy. The kinetic energy of water, falling from a great height, drives
the blades of the turbine that produce electricity ("ABC - Australian Broadcasting Corporation",
2017). The use of wind energy is also seen in the production of modern day electricity. The
kinetic energy of the wind force drives the blades of the wind power turbine, to produce
electrical energy. Before the period of the 1800s, the production of electricity was majorly
depended on wood, water, sun and wind as their energy sources. However, in the 19th century,
the introduction of coal-fired power was first introduced. In the 20th and the 21st century, the use
of burning of fossil fuels for the production of electricity was mainly used ("Australian Energy
Regulator |", 2017). However, with the increase in the need for the production of electricity, the
solar and tidal energy was also being used.

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Figure 1: Electricity distribution in Australia
(Source: "Australian Energy Regulator |", 2017)
The distribution of electricity is also important, as the effective transportation is
important for the successful utilization of electricity. The speed of electricity is similar to that of
the speed of light ("ABC - Australian Broadcasting Corporation", 2017). Though as users, people
see that the electricity supply comes to the electrical appliances instantaneously as soon as the
application is switched on, yet a number of stages are followed ("ABC - Australian Broadcasting
Corporation", 2017). A transformer coverts the electricity, that is produced in a generation plant.
The electricity then arrives to a location, where a substation transformer changes the high voltage
to a lower voltage, for distribution. The distribution channels then carry the low voltage

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electricity to the consumers. The consumers then use it, according to their needs. The distribution
of the electricity has changed over the years ("ABC - Australian Broadcasting Corporation",
2017). With the rise in the use of the various electrical gadgets such as air-conditions, the
demand in various states of Australia has risen. The increase in the number of households also
resulted in the changes in the distribution of electricity all over Australia. Statistics show that
with the increase in the demand in the household, the deficit in the supply to the industries is
witnessed. The increase in the use of air-condition have increased the demand in the household
for the supply of electricity increased ("ABC - Australian Broadcasting Corporation", 2017).
However, with the increase in the use of solar energy and other cost effective forms of energy,
the demand in the electricity is seen to be lowered.
The modern electricity distribution networks are expensive as well as geographically
specific. This means that the distribution of the electricity is confined to geographical limits, and
hence natural monopoly is established ("ABC - Australian Broadcasting Corporation", 2017).
Moreover, the electricity industry is highly regulated as the access to reliable supply of
electricity is considered important by the government. The Australian Energy Market
Commission (AEMC) regulates the distribution of electricity all over Australia. However, in the
past, the National Electricity Market regulated the industry ("ABC - Australian Broadcasting
Corporation", 2017).
Thus, significant changes in the past and the present power generation in Australia have
been witnessed. The changes are appropriate in order to ensure that demand of the electricity
among the people of Australia is met. Moreover, the electricity distribution industry is dominated
by the state-owned enterprises, such that stability could be maintained over time ("ABC -

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Australian Broadcasting Corporation", 2017). The most significant impact of the capacity
extension, over the past five years has been on the cost structure of the industry.
Procurement practice of Different organizations in the electricity Industry
Procurement management practice is a systemic approach where business organization
secured goods and raw materials, from respective suppliers which will ensure that they have
enough resources to sustain the future of the company. It is essential for all companies to
procure their resources in order to improve upon their value and business practice. Edquist et al.,
(2015), have added in the context that securing the resources in form of procurement
management practice will help to save both time and money for the company. The procurement
management can help a company to identify all the issues related to purchasing products
suppliers and thereby able to make a business deal with all third party organizations. It is also
possible to ensure Proper delivery of the required resources within definite time. According to
McMurray et al., (2014), securing the dealership with all suppliers is the primary step of
procurement management, which can help you identify all the major relevant issues. It is also
essential in this context for the company to maintain effective communication with the suppliers,
which will help them to resolve all issues related to securing management. The procurement of
goods and other resources from external supplier on outsourcers is a critical path, which decides
upon the success of the project (Sanchez et al., 2013).
With the demand of electricity going up in Australia, all the power supplying companies
need to implement effective procurement management practices in order to ensure that there is
no shortage of supply that can lead to a crisis situation. In the current time, most of the supply of
power generation in Australia is either from power generating plants or production from natural

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gases. This power is then provided to the houses with the help of retail servicing, which are
responsible for maintaining the billing service. There are separate forms of business, in each
component of electricity supply chain of Australia. It is essential for every Organization in this
entire system of power supply chain to have effective strategy of procurement practice, which
will ensure that the growing demand of power generation are fulfilled. It is also relevant to
mention that due to the Global change in electricity supply market, new types of procurement
strategy are necessary in the context that it can have huge impact on the entire system of
distribution.
The procurement strategy that needs to be implemented in the Australian electricity
supply chain is dependent upon the centralized power. The companies of power distribution in
Australia need to adopt short term contract policy during the time the prices of electricity supply
goes higher (Lember, et al., 2013). It is essential for every company of Electric Supply Chain
within Australia to have separate Department, who will be in charge of making and
implementing procurement strategies. Procurement officer should also be recruited in order to
ensure that proper planning for the future resources are done properly.
The government in Australia has from the State Procurement Board, Who is in charge of
monitoring on the procurement strategies implemented by Electricity Distribution agents at
various levels. The major component of the procurement strategy implemented by various supply
chain is to ensure that there are alternative sources, from where it is possible to generate
electricity (Dowling & Kent, 2015). With the growth of the non conventional mode of electricity
generation, all the major companies in the Australian Electricity Board are implementing
strategies that will help them to get the power supply from alternative sources other than the
forms of regular modes. It is also the responsibility of the electricity supply agent to strictly

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follow the policies of State Procurement Board, which will help them to meet up with their
business demands. The major policies that are implemented in this process are the fact that it is
only the public authority, which will be in charge of making supply contracts related to power
distribution.
State Procurement Act 2004 is one of the major government policies in this context
which are responsible for managing the entire contract between Electricity Distribution
companies and supply chain organizations. All forms of Electricity Distribution which includes
solar power or Thermal form of electricity generation are included within this act (Ravenswood
& Kaine, 2015).
In order to encourage the increase uses of renewable electricity supply, there is separate
procurement Strategies for encouraging Electricity Distribution companies. The Australian
Electricity Board has encouraged all the distribution companies to procure their source of
renewable electricity generation. The implementation of solar energy distribution program in
Australia, it has encouraged all the major Electricity Distribution companies to implement new
contract with suppliers, in order to get regular supply from the Electricity Distribution boards.
All the major companies in the domain of electricity supply chain in Australia have on new
contract with the solar power distribution supply chain, which is believed to be one of the
measures of procuring the generation of electricity and meet up with the growing demand of the
younger generation (Grob & Benn, 2014). It is also relevant to mention in this context that the
economic progress of industry and all other manufacturing sectors are entirely dependent upon
the procurement strategies that are implemented by the Australian electricity suppliers.

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There are few issues that the distribution companies have to face due to the fact that there
will be a rise of cost, while they are procuring their distribution from renewable supply chain.
For example, there will be a rise of cost of maintenance that is required for the supply chain of
electricity from solar sources. Hence, it is evident that the overall capital that is required in
operational activities of electricity supply will rise to some extent. However, it is believed that
considering the project activities, which is implemented initially there is huge cost in the overall
infrastructure. However, with the improvement of solar technology and other renewable form of
Electricity Distribution Technology, it is possible to reduce the operational cost and thereby
making it possible to procure the power supply for the future at lower capital expenditures
(Lember, et al., 2014).
Description of the Electricity market in Australia and its Future changes
The electricity industry of Australia is one of the largest manufacturing sectors of the
nation, which is responsible for meeting up all types of power demand for both household and
commercial purposes. The power throughout the nation is distributed with the guidelines of The
National Electricity Board (NEM), which is the wholesale market for the electricity generation.
The national electricity market is responsible for supplying 80% of the total electric power
generation in Australia (Elliston et al., 2013). The electricity market began its operation in the
year 1998 and is currently one of the leading power distribution organisations not only in
Australia but in all over the globe. The electricity is distributed by facilitating electricity with
the help of power generator and retailers. These retailers directly sell the power supply to

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business and houses. High Voltage suppliers and transmission line are used in order to generate
electricity and distribute them to various commercial and domestic houses.
The National Electricity Market of Australia has the operating range of 5000km that is
from the Port Douglas in the state of Queensland to the Lincoln Port in the Southern parts of
Australia. This is the world’s longest power operating system in the world (McConnell et al.,
2013). The Australian Energy Market Operator (AEMO) is in charge of all forms of activities
that are conducted by the NEM. The economic regulation of the electricity market in Australia is
generated by the AEMO, which helps to generate the policies related to the monopoly of power
distribution. The NEM currently supplies around 200 terawatt of electricity to all commercial
and business distribution per year. The total number of customers is of 9 million, who are
dependent on the power distribution of NEM (Bae et al., 2014).
With the advancement of the technology, it is possible for the NEM to use the
sophisticated forms of electricity distribution. With the help of this form of technique, it is
possible to deal with the challenges of power wastage that is caused due to the transmission of
the electricity. The infrastructure of NEM is contributed by the capital of both state and private
forms of assets.

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Figure 2: Process of Electricity generation in Australia
Source: (Anuta et al., 2014)
The pricing of the electricity system is determined with the help of the 5-6 minutes of
parameters, which helps in the matter of determining the spot price. This is one of the most
important matters that can help on to deal with the financial transactions of the electricity
generation systems. The rule of the pricing is set with the minimum value of $1000 per megawatt
hour. The term spot price is used to ensure that the pricing level of the electricity generation is
not over hiked. In the year 2015, the pricing of the electric generation is set with the help of the
cap technique, which is set at the inflation price of $13,800 per megawatt hour (Apergis & Lau,
2015). Most of the customers do not pay directly to the NEM due to the fact that they purchase

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the required power from the local retailers. The price that is set by the NEM is based on the
offers of the generators and also upon the market volume of electricity. The demand of the power
generation at any particular time is also one of the major determining factors.
It is important to understand the overall system of electricity distribution in order to
understand the current system. The very first electricity is produced with the help of generators.
In a subsequent step the generator, convert low voltage of electricity into high voltage, which is
needed for transport of the electricity through the lines of transmission. The transmission lines
are responsible for carrying the electricity through long distance which is then distributed to
transformers. The transformers are responsible for converting the high voltage too low voltage
power which is 10 distributed to the consumer. This conversation is done depending upon the
source of purchase of electricity. For example, the power generations of domestic houses are
generally lower than that of commercial industries, where heavy gadgets are required for
manufacturing process.
Nearly 77% of the total electricity generation is from thermal sources that accounts for
152,463 GWh. 9% of the generation is from gas, 7% is from hydro power projects and 5% from
the wind power. The rest 1% is dependent upon other forms of electricity generation which
includes solar panels installed at roof tops (Elliston et al., 2013).
It is evident from the given data that currently the Australian power industry is mostly
dependent upon Thermal Power sources. Less than 15% of the total electricity generation in the
current market is dependent upon Renewable Sources. It is crucial to change this scenario at a
very rapid rate within the near future, which will help to procure the resources for the industry
and thereby able to secure the future (Elliston et al., 2014). The scientists and government

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authorities of Australia are highly concerned about the factors related to climate change and
sustainable development that needs to be implemented with the help of alternative forms of
Electricity Distribution techniques. As the electricity supply is reaching at the juncture due to
over exploitation of the natural resources, it is essential to improve upon the alternative sources
which are renewable and can help to deal with the issues related to energy crisis.
Government in Australia has made strict commitment towards reducing the total amount
of greenhouse gases that are emitted in the atmosphere, which is mainly produced from the
thermal power projects. It is important to implement the transition plan in order to change the
overall system of Electricity Distribution in domestic and commercial places of Australia. In the
recent upcoming years, the Government of Australia will change the energy policy which will
aim to put forward National transition plan. It is important for the electricity board and the NEM
to exploit the new form of technology that will improve over the cost effectiveness of electricity
generation. The feature of procurement management of the Australian electricity industry is
dependent upon the policies that are being implemented at present.
Nuclear energy is believed to be one of the effective sources of electricity generation,
which has the potential to change the demand rate of electricity market in Australia in
recent coming future. Additionally, due to its long term efficiency and ability to provide
power, it is believed that the nuclear energy could bring about revolution in the electricity
market. The modern forms of nuclear reactors are reported to emit minimum amount of
greenhouse gases that can harm the environment. By the yard 2030, it is estimated that nearly
15% of the total power generation in all over Australia will be done with the help of nuclear
energy, which is currently just below the rate of 5% (Anuta et al., 2014). Nevertheless, it is also

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essential to ensure the nuclear waste obtained from the power plant is treated properly, which
will minimize the risk of spreading nuclear contamination.
Figure: Source of electricity generations in different states of Australia
Source (Anuta et al., 2014)
Impact of technology on the procurement market of electricity
It is evident that the modern technology will play a significant part in the procurement
strategy management of demand for the electricity supply chain in the Australian market. With
the Rise of the demand of power generation, it is essential for the electricity industry of Australia
to implement alternative techniques in order to meet up with the excessive demand. Hale et al.,
(2016), have mentioned about the importance of technology that can be implemented in order to
deal with the challenges of dealing with the shortage of resources. Predictive analysis one of the
important benefits that are gained with the implication of technology in the cases related to

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procurement management. Predictive can help in the cases related to securing the future and also
dealing with the risk of resource shortages. It is also possible to make effective decisions
depending upon the investment that is made for the future. In case of the electricity market of
Australia, it is possible to improve upon the supply transmission process with the implementation
of Technology.
In the current time, it has been seen that due today long distance process of supplying
electricity, there is huge amount of wastage of power. With the implementation of new process
of power transmission, it is possible to reduce the wastages that can improve upon the cost
benefit ratio.
The technology can also help to improve upon the process of implementation of
renewable sources of energy. The usage of ultra supercritical Coal fired Technology and carbon
capture storage is believed to play a major role in the future of electricity industry of Australia.
Ultra supercritical coal Technology can help to improve upon the efficiency of thermal power
plants and thereby help to produce more electricity. The increase of efficiency is generally
measured in units produced per hour. Higher level of efficiency with the help of steam
temperature and pressure is the basis of this type of Technology. The emission of greenhouse gas
is significantly reduced with the help of this technology. As the wastage of electricity can be
prevented, it is possible to procure the resources which can help to generate more electricity. It is
predicted that with the help of ultra superficial coal technology, it is possible to generate 16% of
the total electricity demand for all over of Australia (Ortega-Vazquez et al., 2013).
The use of the renewable form of technology is used in the purpose of dealing with most
of the procuring form of electricity generation. There is also a significant rise in the popularity

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of renewable electricity generation storage Technology, which can help to reduce the cost of
electricity supply chain. Moreover, there is also the technology of low carbon emission
technique, which can help in the matter of Sustainable development and preventing
environmental degradation. The renewable forms of electricity generation technology is mainly
dependent upon solar energy, which is needed the case of implementing procurement
technology. There has been nearly 1.5 million distributed PV solar system technology installed
in various parts of the nation, which has the potential to provide nearly 30 to 50% of the total
electricity generation of Australia by the year 2050. Hence, securing the source of solar energy
generation is one of the significant steps of implementing procurement management practice for
the future of electricity industry. In spite of the fact that large scale solar PV generation project
are still at its initial phase, it is believed that with new forms of investment by the year 2020, it is
possible to generate 482 megawatt of electricity (Morales et al., 2013).
The generation of wind power energy is believed to be the lowest cost as there is no
expenditure involved in the process of maintenance of the wind generated turbine. In the year
2015, 76 wind farms have been able to generate 4187 Megawatt of electricity. As taller Towers
are being installed, it will be possible to get access to greater wind speed. This will thereby help
to improve upon the rate of efficiency of power generation. By the year 2030, with further
improvement of the wind energy, it is possible to generate nearly 25% of the total electricity
consumption of Australian population (Kim & Kim, 2015).
Hence, it can be said that with the implementation of wind solar and other form of
renewable technology of energy, it is possible to improve upon the efficiency of power
generation. With the current state of progress, it is expected that the renewable source of

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electricity Technology will bring about Revolution within the next few decades the Australian
power generation market.
On the other hand there are few challenges due to the process of implementation of the
Renewable electricity generation in the form of solar and wind power. This is mainly because
most of the technology that is entirely dependent upon the natural forces and thereby the natural
calamities in the forms of disasters can compromise upon the total amount of electricity that are
being generated from these renewable sources. The NEM plays a major part in the process of
electricity generation process, which is needed in the process of dealing with the challenges
related to the procurement of electricity supply for the future (Borenstein, & Bushnell, 2015).
Hence, it is essential to implement proper intervention techniques, in order to deal with the
challenges of the power generation. It is also important to implement the power security
techniques that will help in the process of making up with back up processes to deal with the
challenges of procurement management. Proper storage technology will be used both at the
domestic and commercial levels, which will help to deal with the techniques related to storage of
energy.
Procurement Strategy for suppliers to make them use of technology
In order to ensure the procurement strategy it is important to understand the overall
demand and necessity of electricity market of Australia. The overall objectives of the industry
and resource that are available also need to be properly assessed. The suppliers of the electricity
industry need to implement the implication of new technology in order to procure the resources.
The suppliers thereby need to shift from the traditional theories to that of the new strategies,
which is necessary in the process of implementing the procurement strategies ().

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The NEM and OEM Will play a significant role in ensuring about the fact that all the
electricity suppliers of Australian power industry are able to transfer to new technological
methods. The management of the electricity industry in Australia need to close the monitor the
Dynamics and changes within the Industry that are happening due to implementation of
renewable Technology (Mahmoudi et al., 2014). The suppliers have to get used to the process of
energy Optimization techniques, which is the basis of implementing procurement within the
electricity industry.
The energy procurement Outsourcing market in the Australian electricity industry is
highly mature and deregulated due to the changes in the economic market. In order to ensure
better process of implementing the technology, it is important for the suppliers to deal with the
process of outsourcing. One of the major challenges that exist in the electricity industry of
Australia is due to the fact that in house energy procurement process is highly volatile.
One of the important steps for the suppliers in procuring the energy supply can be
achieved by helping the customers strengthening their purchase unit (Peterseim et al., 2014).
Unrivalled knowledge and technological capabilities are also required in the process of executing
procurement strategies.
The process of energy supply procurement capability in the Australian electricity market
includes opportunity identification and market entry Strategies for renewable Technology. It is
essential for the officials of Electricity Distribution industry to form contracts with new group of
suppliers, who will be able to provide electricity from renewable sources. It is also important to
provide proper training to the suppliers along with awareness program, which is needed to

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enhance the skill with the use of new technology in the procurement market of electricity (Riesz
et al., 2015).
With the help of Transition process from traditional approaches to the application of new
technology, it is possible for the Australian electricity industry to have a secured future with the
implementation of procurement management practice that is necessary to deal with the increase
demand of electricity.

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