Converting Existing Buildings into Embedded Networks

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Today we are looking at the ‘retrofit process’ for embedded networks. We focus on the eastern states, other than Victoria – which has its own regulatory framework.

Under the National Electricity Rules (NER), any party that engages in an electricity transmission or distribution activity must either be registered with the Australian Energy Market Operator (AEMO) as a network service provider (NSP) or operate under an exemption. If that same entity sells electricity then it will also require either a retail exemption or a retail authorisation. We’ve discussed that distinction in more detail here.

A retrofit involves an Embedded Network Operator (ENO) converting an existing building (with separately metered sites) into an embedded network. This results in the building having a single connection point where electricity is purchased in bulk and then on-sold to the occupants. At the same time, the ENO can install solar to reduce the overall cost of electricity at the site.

The conversion of an existing building into an embedded network involves unique regulatory challenges.

ENOs are required to follow the processes set out in s 4.9 of the AER’s Network Exemption Guideline. Most ENOs struggle with that task, so we have decided to set out some key points to be considered.

Consent from occupants

A pivotal concept in the s 4.9 conversion process is consent. Consent is required to both convert an existing building into an embedded network and to supply occupants pursuant to an electricity supply agreement.

When considering what is required to obtain consent, ENOs should consider the principles applicable to explicit informed consent which we discuss here.

Section 4.9.1 Requirements

Section 4.9.1 of the AER’s Network Exemption Guideline sets out the process that ENOs must follow to convert an existing site into an embedded network.

An ENO must ensure that information regarding the proposed retrofit is ‘clearly, fully and adequately disclosed, and that it has regard to a person’s capacity to provide consent.’ Once again we come back to the pivotal role of consent.

When seeking consent, an ENO must provide its prospective customers with a disclosure document. It is important to note that the disclosure document is not a marketing document. The contents of the disclosure document are set out in the Network Exemption Guideline and ENOs must strictly follow that document. Along with the disclosure document, ENOs must provide a copy of the proposed electricity supply agreement (which they will need separate consent for) and contact details for a representative.

There is a clear process that needs to be followed and the documentation used must be compliant. If an ENO fails to comply with the AER’s Network Exemption Guideline in seeking consent for a retrofit, the ENO will likely need to start the process again- from scratch. This can mean months of unnecessary delay.

Help complying

Most ENOs find it very hard to meet the requirements of s 4.9.1 and that is one area that we can help you with. We can provide you with a disclosure document, record of attendance, fee disclosure, records of contact, and an opt-out policy.

Simply provide your details on our embedded network compliance page.

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