Power Generation, Market Analysis, and Procurement Strategies Report

This report provides a comprehensive overview of power generation, distribution, and procurement strategies within the Australian electricity market. It begins with an introduction to project management and its application in the power sector, emphasizing the importance of procurement strategies for companies in a competitive market. The report then delves into the current and past power generation methods, distribution structures, and products, highlighting the evolution from traditional sources to modern technologies and the impact of market volatility. The report provides a detailed analysis of Australia's electricity market, including its structure, key players, and consumer segments. Various procurement strategies used by corporations in the industry are discussed, including competitive solicitations, integration of power generation sources, bilateral contract negotiations, feed-in tariffs, and auctions. The report concludes with a discussion on how these strategies support suppliers in transitioning from traditional to new technologies, ensuring sustainability and competitiveness in the dynamic electricity market. The report uses data from various sources to support its arguments and provides a holistic view of the current state and future trends in the Australian power sector.

Project Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK ..............................................................................................................................................1
1. Current and past power generation, distribution structure and products............................1
2 Current procurement practices for the various corporation in the industry.........................3
3 Explanation about the electricity market in Australia.........................................................4
4 Consideration of the new technology and its influence on the procurement......................7
5 Description of the procurement strategy.............................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Project management can be defined as managing discrete packages of work in order to
meet with requirements of the project. For accomplishing the project it is essential for project
manager that to have relevant experience and skill. Present study is based on power generation
project. Electricity supply market is highly competitive and changes take place frequently.
Alteration in the local storage create problem in generation of power and distribution for the
firms (Elliston, Diesendorf & MacGill, 2012). For dealing with this issue, companies are
required to make procurement strategies so that they can sustain in the market for longer
duration. Current assignment will discuss current and past power generation. Distribution
structure and products will be described in this study. Furthermore, report will describe the
electricity market of Australia. In addition, it will outline procurement strategies that can support
suppliers to transition from traditional to new technologies.
TASK
1. Current and past power generation, distribution structure and products
In the present era, electricity supply market has grown well due to high demand of
energy. Electricity market is highly competitive and volatile in nature, practices get changed in
continuous basis. Electric power distribution is the end phase in which energy is distributed to
final consumer through transmission system (Foley and et.al., 2012). On the other hand an
electric power grid is a kind of network which is interconnected with other, it supplies power to
end users. There are three main system which play significant role in power generation. These
are as generating stations, distribution system and transmission system. In the earlier time period
some local distributors store power that is the reason that power generation companies had to
face huge problems. In order to solve this issue, power Distribution Corporation has designed
such procurement strategies through which power generation companies are able to generate
electricity as per the demand and can sustain in the market for long time.
In the pastime, people relied on wood, sun, wind etc. for energy. But with the
development of technology, infrastructure, demand of energy has increased to great extent. The
first electronic power industry and power supply was established in colonial era i.e. in year 1880
in Australian. Government has not made any regulations related to power generation till the end
of 1919. It was good time for small electric industry because it was easier for them to work in
such conservative time. The first power station was published by private company in city of
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Melbourne. In year 1921 State Electricity Commission has developed the brown coal deposit in
Latrobe valley. In 1909 major hydro-electricity development plant had been initiated by the
private firm. The first lighting company Victorian Electric Light Company has formed in
Melbourne in 1880. In 1899 from street lightning shop to offices everything were lighted with
electricity. In this era people understood the importance of electricity and demand of energy was
increasing frequently. Gradually power generating companies have increased their production
and till 1906 there were 46 electric light and power station with the capacity of 23,000kW, and
18 of them were managed by local authorities. Tasmania was the first one to use transmission
line with 100 km (Elliston, Macgill & Diesendorf, 2013). The next big step was in Victoria in
1924 where based on brown coal where the development of 50,000 kW Yallourn power station
covered 160 km of area with 132kV line. From Early times coal has played important role in
light generation. South Wales, Queensland, have dominant source of coal whereas Tasmania
cover all the major area through hydroelectricity.
In the current time, Power generation firms are delivering electricity to consumers
through complex network. In the today's time, electricity produced at the power plants and
deliver with help of complex system and structure. Australia is a country where fuels still play
major role in electricity generation. The brown coal has become basic necessity for energy
production. 73% of electricity is produced through coal, 13% through natural gas, 7% through
hydro power, 4% through wind, 2% of solar and 1% of bioenergy. Australia depends heavily
upon coal for the production as it is cheaper and easily available element for generating power.
These element impacts on the environmental conditions thus, demand of renewable sources are
increasing now-a-days. Australia is a land with the highest solar radiation per square meter but
still it contributes to only 2% of total production (MacGill, 2010). New methods and
technologies are made so that Australia can use this factor as there benefactor but since
technologies are still not developed enough to actually store this energy, it cannot be used when
there is no sun, it limited there role and is not good enough for commercial supply.
In the modern era companies are utilizing the natural resources in order to generate the
power. They are taking support of water flow. In the modern era hydroelectric generation
stations are working tremendous for meeting with the demand of energy. In addition to this
hydro generation are the systematic process in which generating equipments are operated and
controlled by remote.
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Australia use lot of energy, industrial sector is the one who use maximum amount of
electricity and gas contributing 27% of whole demand. Households are following them close
behind with consuming quarter of this energy, transport and mining are also big consumer with
13% of contribution. Australia have four main electricity business i.e. Transgrid, Ausgrid,
Endeavour Energy and Essential Energy. In year 2015 state intention of partial privatisation was
implemented with state having the ownership of 51%. The network is effected by 99 year lease
structure. Electricity distribution industry have potential growing customer base and provide with
well-established services. New technologies like such as electricity storages and smart meters in
market are expected to change the traditional industry and hope to cover wider division
2 Current procurement practices for the various corporation in the industry
In the present time, the major issue faced by electronic industry is related with the
alteration in the local storage of the power and electricity. Due to this issue, companies are
unable to generate power as per the demand. In order to resolve this issue, corporation are
making and implementing various procurement strategy that can save energy and can generate
the power as per the demand.
Competitive solicitation is widely used in the electronic industry as renewable resource
procurement (Elliston, Macgill & Diesendorf, 2013). This aspect increases competition among
project developers in the Australia. This strategy is a formal procedure in which procurement
agents, distributors evaluate and gather valid bids and executes the contract with other bidders.
This is the best strategy to save energy and power in the country and it can reduce the alteration
of local storage. Furthermore, integration of power generation sources can be beneficial strategy
because by this way companies will be able to utilize the resources well and it will support in
minimizing the wastage. In addition to this, new advanced technologies are able to manage
power system. These sources have large penetration of distribution generation, energy storage
etc. This procurement strategy can support in minimizing the wastage and increasing production
of electricity.
Bilateral contract negotiation is another major important strategy used by various
corporation in the industry. Under this technique, agreement are sigh and develop among two
corporations in the absence of resorting to an official competitive solicitation. It is kind of private
contract which generate among the two parties used in the competitive and regulated market of
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RTO. This kind of contract signed in extraordinary situation where it is increased regulatory
modality.
Feed in tariff is another important procurement strategy in which development of new
renewable energy occurs by delivering free access to large contracts of purchase for sale of
renewable electricity.
Auction is another major important procurement strategy in electricity industry. This
strategy also used by various power generation organisation. In this procurement strategy, new
renewable electricity has produced by firms under the formal auction framework. This strategy is
used in the bod based energy market at which electricity producers place bid in the market along
with the prices which near to its cost of margin. That helps the government in giving contract to
the entity which can generate power at low cost. This is the great tactic that support in generating
maximum energy at affordable rates.
3 Explanation about the electricity market in Australia
In the Australia, there are two largest electricity networks; south west interconnected
system and national electricity market. In the context of national electricity market, it is one of
the major type of energy network in Australia coming shortly after coal, oil and natural gas, in
below graph, the different product for energy use in Australia is shown with their consumption.
National electricity market (NEM) of Australia is incorporated around 40000 km of cables and
transmission lines. Approx power generation capacity of the NEW is 45000MW. It is
interconnected with the five major regional markets such as Queensland, New South Wales,
Victoria, Tasmania and South Australia. NEW helps in transporting electricity via high voltage
transmission lines from generators to large industry energy users.
Electricity is one of the major type of energy uses in Australia coming shortly after coal,
oil and natural gas, in below graph, the different product for energy use in Australia is shown
with their consumption.
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Markets of electricity in Australia are handle under the National Electricity Market which
work as a wholesale market for the retailers in Queensland, Victoria, South Australia and South
Wales, for power supply since 1998, Tasmania was also included under NEM in the year 2005. It
has longest inter connected power system from Queensland to South Australia, trading more than
$10 billion of electricity (Mideksa & Kallbekken, 2010). NEM is partially owned by state Govt.
and some of it are operated by private business. The NEM is further managed by Australian
Energy Market Operator. In current time the major sectors to which NEM provide are residential
(27.7%), commercial (22.8%), metals 18.3%, manufacturing (9.1%), mining (9.4%) and
transport and storage (1.0%). Through below figure it is clear that residential and commercial are
the biggest consumption sector it also shows there future consumption.
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The another important part of market is Energy Retailers they buy electricity and gas
from wholesale market and sale it to customer under retail contract. The customer pays
according to the rates set in contract and doesn't have to go through the short term movement of
wholesale market price. In recent times new models has emerged because of rising prices and
customer wish to manage their energy (Areekul and et.al., 2010). On selling is business model
where consumer can purchase electricity products in bulk from retailer. Solar power purchase
agreement looks for the energy which are generated through solar panels located at customer
home or business. Pool pass through arrangement, happen when customer take the risk of
wholesale market volatility and Customised or packaged energy sales, there main target are those
customers who have specific requirements, or sell it as services package giving greater control to
customer over their energy use.
NEM is the major part of Australian energy market, standards of this unit are established
by Australian Energy market commission. NEM has to generate electricity according to define
levels of reserves. It is the responsibility of AEMO (Australian energy market operator) to ensure
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850 megawatts of reserve can be carried across the NEM. In order to manage the working of
NEM, Australian government has established AEMO in the year 2009. Its main function is to
ensure power generation by the national electricity market and companies fulfil their
responsibility towards the nation.
Australian energy markets are highly concentrated having only three retailers who supply
90% of small electricity customer. AGL Energy, Origin energy and Energy Australia are leading
retailers in eastern and southern part of Australia. They together supply for 70% of small
electricity customer and 80% of gas customer.
The major industrial user or business man buy the electricity in greater amount but they
are few in numbers, on other hand we have private and small business consumer who mostly buy
their electricity from the retailers. Acc. to Full Retail Contestability consumer get chance to
choose their retailer and get in contract with them. They are not bound to go to the wholesale
market or any particular retailer. Its main aim is to provide protection to local customers (Ela,
and et.al., 2014). Deregulation is another way where people who does not have any market
contract are transferred to ' transitional tariff' where they moved to another electricity offer,
around 20% of state electricity customer are on transitional tariff. The major customer base of
this retailer are small business or household but seeing the regular increase in the price of
household supply it has effect there customers, many people have complained against these
private company such as AGL for having more soaring power prices. Energy prices are absolute
key in this competing world, where retailers are fighting for customer on daily basis. AGL is not
the only company many company nowadays have started earning more by increasing the prices
of their retail contract and electricity, which lead consumer to find new way to buy power. It
maybe through direct contact with wholesale market or finding another way such as transitional
tariff. Transitional tariff give them chance to switch to the lowest price offered by market. The
below graph clearly show that the increase in prices of electricity bill from year 2013-2014,
which depict that with privatization the prices of electricity is hiking and that also not only in one
state but many of the state of Australia.
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Illustration 1: Annula electricity Bill
Source: Average Monthly Electrical Bill by State. 2015.
4 Consideration of the new technology and its influence on the procurement
It's already been established that Australia uses coal for their major electricity production.
Australia is the country where consumption of renewable sources are quit low, hydroelectricity is
the only major renewable source used to produce electricity. But it is also confined only to the
state of Tasmania. Australia is trying to increase the electricity generation by using advanced
technologies through renewable resources. Govt. is trying to pay more attention on wind power,
solar energy, and gas and combining it with carbon price to generate electricity. Authorities are
planning to utilize natural resources in effective manner so that operation cost can be minimized
and companies can increase their production capacity. Wind power is considered as powerful
renewable source and lowest cost emissions technology. Many investments have been made by
government of Australia for the progress of wind power, the current biggest investment has been
done by Engie which is working on the construction of wind farm near Hallett in South
Australia. Solar panel is another renewable resource Govt. is working on, they are already
supported by many incentives so that they can develop properly. The latest addition to this, is
new thermal plant going to build in north of Adelaide, which is predicted to have eight hours of
storage or 1100 MW hours. Natural gas combined with carbon capture and storage is of the
lowest cost, and it's a low emissions' fossil fuel technology (Nelson, Kelley & Orton, 2012). The
major impact of these technologies on customer is that there will be major shifts in prices of
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electricity. Residential and commercial electric consumption had declined because of risen
prices, consumer become conscious and start buying energy efficient appliances. This plants can
help to reach the demand of people on much lower price than of now. It is difficult to say how
those big scale industry get affected by all this technology as they were not much affected by the
increasing price and most of them work and negotiate privately, but in year 2013-14 there was
decline in consumption of electricity. New method and technology have great influence on them,
through survey it has come to notice that these technologies has influenced their decision on
energy efficiency and usage. The biggest impact it has on producer is that carbon price has
played major role in decision making for different producer, for e.g. with carbon price producer
can give priority to coal with higher energy emission ratio, which can increase their plant
efficiency and can also reduce the intensity emission post. Under carbon price, renewable and
gas generator can sell in the market at much higher rate without any increase in cost, which can
lead to some shift in overall merit. In the future there will be great change in traditional way of
procuring power, coal will still remain the main source of generating electricity but it will not be
the only source, some pressure will be lifted from it the demand of people will be meet at much
lower price. Producer get chance to sell at higher price with low cost. This gave them chance to
some development and more innovation of new technologies.
5 Description of the procurement strategy
In the electricity industry, procurement strategy plays a very crucial role by which
company can bridge the gap between executive plan and directive policies. With help of this
strategy, corporation can make planning and analyse its operations in effective manner. In the
context of supply chain of electricity, it has consisted with four stages which includes
consumption, transmission, generation and distribution. Following is one static model which
define demand for the electric power in the supply chain management in the electricity industry
(Mudd, 2010). With help of this tool, company can deliver power to customers effectively.
Company can use game theory for attaining the lowest cost in the distribution network of
electricity. It is considered as effective procurement strategy that supports in increasing
production capacity and minimizing the wastage as well. In this theory, linear integer
programming and nonlinear programming is applied in the five participated group. With help of
this technology, company can effectively deliver the power and electricity in an effective
manner. With help of procurement strategy, corporation in the Australia can innovate the
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existing resources of power and meet the actual requirement of customers. In this manner, one of
the most effective procurement tool is transport management software which use for the
computerised shipping and tracking system which help to integrate all operation from the single
state (Hussey & Pittock 2012). In addition to this, advanced weighting technology is another
major important tool in the supply chain of electricity which help to the seamless operation while
access to the platform is not available within the corporation. This technology enhances the
productivity and quality of the product and services through which supply of the power can
conduct in an impressive manner. In a simple word it can be said that in the Australia, the supply
chain management in the electronic market is very wide which required the effective source of
technology in order to supply the power and electricity in the residential and industrial area.
CONCLUSION
Supply chain management is one of the most important aspect in the electronic market by
which electricity can deliver to the end users in appropriate manner. From this entire report it has
been concluded that in the Australian electricity is very complicated because prices of electricity
is increasing continuously and consumption rate is also augmented. It has been also concluded
that use of advanced technologies in the power generation field can be beneficial for the industry
by which corporations deliver the power in an effective manner.
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