The recent changes in weather conditions and increase in cost of imported fossil fuel has forced many countries to look for alternative to secure their energy needs in the future. The use of fossil fuel has caused an increase in the general global temperatures causing changes in weather patterns globally. The changes in the weather condition globally which has caused global warming has also contributed to countries seeking greener energy. A case in point is Brazil which generates most of its energy needs from renewable sources like biodiesel. According to studies more than 30 percent of energy needs are from renewable sources.
Many organisations have emerged to fill the gap of production of renewable energy sources. These organisations are helping the government pursue greener sources of energy. E-co Fuelling is one such company which has come up to provide renewable sources of energy especially bio-fuels. The paper does a market analysis of the renewable energy sector that the company operates to find out the challenges it faces.
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Renewable Energy Sector
The cost of fossil fuels has continued to increase over the last decade forcing many countries to increase the budget spending on energy. To cut on the energy budget most countries investing in renewable energy sources. The government is supporting the commercialization of renewable energy production to secure the countries energy requirements. The government is looking for alternative renewable energy sources to reduce the use of fossil fuels due to its high costs. Renewable energy sources have been found to be efficient and to cause less emission of greenhouse gases to the atmosphere.
The renewable energy sector has changed a great deal over the last 100 years. The first technologies to be used were geothermal, biomass and hydroelectricity. With time more technologies emerged for which could be readily used in the market to provide renewable energy. This included solar heaters, wind mills and modern forms of bio-energy. The newest technologies in use include modern geothermal power, ocean energy solar power stations and bio-fuels. All these are in use to provide energy for industries and automobiles. The government has been the major stake holder in the energy sector.
Recently more firms have become involved in the production of renewable energy. They have made considerable investments in building modern bio-refineries to produce commercial bio-diesel. Firms have also invested heavily in research of more efficient methods of production.
Technology has also had its impact on the production and use of renewable energy. The main technical barrier in production of renewable energy the high cost of equipment to produce renewable energy. The main technological booster to production of clean energy has been the development of new technologies of production. These have impacted on the growth of E-co fuelling.
Politics has also contributed in the production of green energy. The major political barrier facing commercial production of green energy is the lack of a proper policy and regulatory framework. The existing regulations do not support production of renewable energy. The positive incentive from government is provision of tax credits for production of clean energy. This has impacted positively on production of clean energy.
Social issue have also made an impact on the way renewable energy is produced. The main negative social issues have been the poor perception of the public about bio-diesel as a source of energy, lack of proper channels to disseminate information to potential customers and lack of support from the local community for renewable energy projects. The major positive social issues supporting production of renewable energy is the adoption hybrid cars by public as a way of lifestyle.
Legal issues have also impacted on production of renewable energy. Legal barriers like zoning available space in a complex way and a long process of seeking permission to produce renewable energy have been a problem. Barriers put by energy regulators have also been a problem.
Technological has also had a major impact on production of renewable energy. The major technological barriers which have impacted negatively on production of renewable energy include lack of necessary manufacturing skills in the workforce. The education system has provided few skills required for new technologies. The major booster in technology which has accelerated production of renewable energy is presence of new and more efficient ways of producing bio fuel.
The environmental has also impacted on the production of Renewable energy. The main environmental issue is global warming. Countries are supporting the production of green energy which reduces green house gases. This has positively led to more investment in production of bio fuels to reduce the use of fossil fuel which is an advantage to E-co fuelling.
The economic condition has a major impact on the production of green energy. High cost has a negative impact on the deployment of new technology in producing renewable energy. Good economic conditions like where government gives incentives like tax credits to companies that produce green energy has a positive impact on its production. E-co fuelling is operating in a market where there are these incentives.
The market of for eco fuelling is production of bio-fuels for use in diesel engines. The largest consumer of bio-fuels in the America is the military who are also the major customers of e-co fuelling. Small cars that operate on bio-fuels also form part of the customer base. The prospective customers include passenger and cargo transporters. The main need for most customers’ is the bio-fuels sold to be usable in their vehicles. The prices should also be affordable. This market is expected to grow larger as more incentives for production increase. As more people start using hybrid cars the demand for bio-fuels is also set to rise.
Many companies have joined the race to produce bio-fuel due to its increased demand in the market (Panwar). The main advantage these companies enjoy against E-co fuelling is that they have been in the market for some time and therefore have invested a lot of money on production plants. They are also investing heavily in research and equipment to make sure they have the best. The companies also enjoy market reputation. Eco-fuelling plans to use its superior technical capabilities to tap the existing market
Stake holder analysis
Production of renewable energy is a much discussed topic throughout the world. Stakeholders from all over the world hold conferences to discuss ways of producing renewable energy. The major stake holders in the renewable energy sector include governments, energy regulators, energy producers, rights groups’ news reporters and financiers. Each of these stakeholders contributes differently towards achieving the goal of producing sustainable energy.
Businesses have certain factors which make them more competitive than others (Marlon). These are the strengths of the business. For eco fuelling the first factor that makes it more competitive is that it has better production technology compared to its rivals. This make it more efficient compared to its rivals. The second advantage is that it incurs low running costs as some of the bio-fuels produced is used to meet its own energy needs. Another advantage is that the company operates on large scale and enjoys economies of scale. The other advantage is that the company has better marketing as produce renewable energy which can be promoted as it conserves the environment.
Businesses have weaknesses which put them at a disadvantage compared to others in the same sector. The first weakness of eco fuelling is the incurring high capital cost to put up equipment to produces bio-fuel (Droege).
This is a disadvantage because companies in convectional energy sector do not incur very high initial costs and are therefore advantaged. Another weakness is that the company also incurs high maintenance cost for the equipment used in production of renewable energy compared to companies dealing in convectional energy. Another weakness is that the company has few local retailers in many parts compared to other companies in the energy sector and therefore cannot compete favourably.
Most businesses always have areas which they have not exploited fully and which when exploited is provide more opportunities for the company to increase profitability (Johansson). For eco fuelling the first opportunity is in improving manufacturing technology to attain more efficiency and improve on quality. The fossil fuel industry does not have this opportunity because emergence of new technologies in this sector is very limited. The other opportunity is in reduction of costs by receiving financial incentives in form of tax credits or funding and grants to its projects to promote use of green energy. The financial incentives reduce the cost of capital considerably. Another opportunity is the large labour force available gives which gives the company an opportunity to boost its work force in all areas of production with people who have lost jobs in other sectors due to recession. Another opportunity is that the company stands to gain an increase in market share due to the efforts to promote the use of sustainable green energy.
Various threats that face companies
For e-Co fuelling the first threat is in marketing (Kneebone). The company cannot compete effectively with companies dealing in fossil fuels because they are well established. The other threat is in the costs. The high capital and cost of raw materials coupled with lowering cost of bio-fuels may cause the company to incur losses if they are not managed properly. Another threat is that the sector the company is operating in receives low incentives compared to those given to companies dealing in non renewable sources of energy and therefore the competition is unfavourable. The other threat facing the company is customers have no information on renewable sources of energy. The public has very little information on how bio-fuels work. Another threat that facing the company is that the law tends to favour competing technologies which is a disadvantage to the company.
Most of the countries are facing a problem due to increase in fossil fuel prices and increase in global warming. This provides an opportunity to develop a market in the key technology areas of renewable energy production. E-co fuelling has an opportunity to develop a market in hydrogen technology and photovoltaic’s where it has a small market presence. The company can leverage its weaknesses by increasing its marketing and investing in research to improve its technical capabilities.
All the tools above are very strong for conducting market audit for the renewable energy sector. The tools summarize the condition of the market at any given time. A business that uses these tools to carefully analyse can establish its market position and also set goals for the future.
The outcome of the above audit is that the company stands at an advantaged position. This is because the market for renewable energy is new and the technology is still developing. The company can effectively compete with other companies in the same sector and others dealing with fossil fuels.