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Chapter 4: Planning for a more secure future

After becoming familiar with the various management tools and processes presented/discussed in Chapter 4, let’s have a look at the energy industry and its future planning for one vital issue that the industry is facing right now.

An energy crisis is fast approaching Australia and both, state and federal government do not agree on fixing solutions. As a major gas supply shortage is predicted from next year, the Australian Energy Market Operator (AEMO) is warning policy makers and energy markets that Australia could shiver in cold winters and be overheated in hot summers.

Gas is currently used to power the electricity generators. As a consequence of a gas shortage, the industries and the consumers will experience a shortfall in electricity supply as well. Shortages of both gas and electricity will affect New South Wales and South Australia first, then Victoria in 2021 followed by Queensland between 2030 and 2036. According to AEMO, the demand for gas was greater with the use of the coal-fired power stations. Therefore, the Australian Energy Market Operator authority advises that new development of gas-powered electricity generators should be created, due to decrease in gas flowing from existing fields, mostly noticed in Bass Strait coupled with the need of LNG(liquefied natural gas) which supports Queensland’ export projects. New developments would make sense considering that the existing assets of gas development are old and inefficient, according to the energy expert Andrew Stock from the Climate Council.

Another option to overcome the gas shortage was announced by Frank Calabria, the chief executive of Origin Energy, who said that more gas was likely to be sold into the domestic market from the Queensland’ export projects mentioned above. Even if this option can be seen as an alternative solution, it is not a very efficient one considering that the commercial and industrial businesses are facing financial difficulties due to the rise of gas production costs. Also, due to Hazelwood closure the wholesale power prices will go up, therefore our prices will be three, four times higher than our competitors, situation that can force businesses to move their plants overseas.

Another reason for the increased energy prices is the advent of the entry of Australia’s east coast into global gas marketplace. As a consequence, regardless of the domestic supply the prices will no longer return to the previous levels, when Australian gas was isolated from global markets. That can be possible if Commonwealth or state government embrace the suggestion to reserve a percentage of gas for domestic use. However, the gas is known as a polluter, generating great emissions and contributing to climate change. Therefore it is recommended that states should adopt their own renewable targets, as part to a national policy.

Adopting renewable energy is not protecting the environment only, is also now the Australia’s cheapest source of energy, even with the addition of the cost of storage in order to make intermittent power source reliable. Despite of having the renewable energy as a cheaper solution, aggressive Renewable Energy Targets-meaning that a percentage of the state and territories electricity supplies are coming from renewable sources, without an emission trading scheme and a price on carbon, even these prices can rise.

Planning for the best outcome is a big challenge for political, as well as industry, leaders.

Consider the following questions for discussion:

  1. From the post, what types of planning are energy industry decision makers engaging in at this stage?  What type of planning would you recommend for them?
  2. From the post, what goals can you identify? Which are the stated goals and which are the real goals? How can you tell them apart? Based on what?
  3. What elements of strategic planning are evident in the article? What elements are missing? How would you, as strategic manager in Origin Energy or Hazelwood, use these missing elements?