Australia Country Case

Australia is a high income, highly developed nation, with a GNI per capita (US$) of 60 070, ranking 15th out of 190 countries of ease of doing business according to the World Bank. The power outages in SA, are an uncommon occurrence, especially since it's ranked 41st in terms of electricity availability, with a reliability of power supply ranked 7.0 out of 8. The outages were caused by a miscalculation of demand, caused by a heat wave, increasing local demand for electricity. Supply was not able to keep up, and due to having only one transfer link (NSW and VIC have 2) the supply was not sufficient, and local authorities stopped power. These outages will most likely not impact the ease of doing business in Australia if the private sector will work together with the government in providing solutions to the mismanagement.

The entry barriers are relatively high for energy industry in Australia. This is due to the fact that energy industry is controlled by AEMO: an independent body that controlled most Australia’s electricity and gas but not under the control of federal or state government. Moreover, the energy industry is a highly capital intensive industry, hence demand high level of capital investment. Therefore the threat of new entrant appears to be low.

The bargaining power of suppliers is a relatively strong within the energy industry. The fact that Pelican Point supplies about 40 percent of South Australia’s power, and they can decide whether to use backup powers when experiencing blackout further strengthen their position to manipulate the wholesale price of electricity. Thus, suppliers can use their bargaining power to earn abnormal profit.

The buyers do not have bargaining powers, as they cannot choose which energy company to provide electricity, the wholesale price went dramatically from $70 to $14,000MHh, and the residents have no bargaining power other than expressing their concern to government.

The threat of substitute is relatively weak at the moment as there are limited number of energy sources to choose from. However, the increase in electricity price, and the inability to keep up with supply in times of need, encouraged the government to support new form of renewable energy. Private companies, such as Tesla, have stepped in offering to solve SA energy problem competitively, by installing innovative battery storage units “Tesla will get the system installed and working 100 days from contract signature or it is free.” -Elon Musk.