The proposal to ban embedded networks in Victoria

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In October 2018, the Victorian Government announced an election commitment to ban embedded networks in new residential developments in Victoria.

Since that time little has been publicly said about the proposed ban and, presumably, industry has lobbied the relevant ministers to highlight benefits of embedded networks and the impact of a ban on consumers and the industry.

The election commitment was not forgotten however and the Victorian Government appointed an Expert Panel whose work consists of reviewing the options available as a policy response and advising the Government accordingly.

The Victorian Government has also since opened up a consultation on the election promise – which they now say included appropriate ‘exemptions for buildings that use renewable energy microgrids to deliver low-cost renewable energy to apartment buildings.’

The consultation includes an issues paper and interested parties can lodge submissions by 5pm on Friday 26 February 2021. Submissions on the consultation will inform the Expert Panel in making recommendations to Government.

Drivers of the policy

Unofficially, we understand that a key driver was a government minister moving into an embedded network building and not being happy with what she or he found.

The stated position of the Victorian Government is that it is seeking to address concerns that customers living in embedded networks pay higher prices and do not have access to the same level of customer protections as those who live outside of embedded networks.

The Victorian Government’s review overlaps with work already completed in the review of the General Exemption Order and the updates made to the Energy Retail Code. This review however is the Victorian Government hitting the reset button on the work already completed with the starting point being a ‘ban.’

Principles guiding the review

The Expert Panel has developed four agreed principles which will guide the review and its recommendations to Government. These are:

  • Placing benefits to consumers at the centre- meaning that the review is being driven by the needs of customers, particularly customers who are experiencing vulnerability or disadvantage;
  • Prioritising equitable pricing outcomes and consumer protections- meaning that embedded network customers should be able to access the same competitive retail offers and consumer protections as other consumers;
  • Future-proofing the design of the ‘system’- ensuring that the review takes into account likely future energy options (including EVs, Storage, Solar) etc;
  • Ensure that Victoria’s regulatory framework will mirror or enhance the national ‘standards’ for embedded networks. Meaning the Expert Panel will consider the extensive work done to resolve these issues being considered by the Australian Energy Market Commission (AEMC).

It is common to see an overlap by the issues considered in Victoria to those already considered by the AEMC and we have written extensively on the prior work of the AEMC and the reforms that are yet to come into law in NECF jurisdictions.

Embedded networks vs Microgrids

The consultation paper appears to hint at a future distinction between an embedded network and a microgrid which the Department notes is a term that is not currently defined in legislation or in the GEO.

The consultation paper sets out the benefits of microgrids based on the various definitions in Appendix 6. The consultation paper notes that microgrids ‘deliver a vertically integrated bundle of electricity services to multiple users within a defined location(s).’

The main importance of the distinction appears to be the ability presented by the differentiation for the Department to both allow embedded networks to continue and, at the same time, to ban embedded networks.

Further updates

We will be discussing the core issues of the consultation paper in a future post. In the meantime have a look at our Embedded Network Compliance page and contact us if you wish to discuss.

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