Victoria ‘makes good’ on its promise to ban embedded network, or does it?

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Summary

Yesterday it was announced that the Victorian state government had ‘made good’ on its election promise to ban embedded networks. State minister for energy Lily D’Ambrosio said that from January 2023 embedded networks would be banned unless they ‘ran’ on 100% renewable energy. 

We’re banning embedded networks because all Victorians deserve to get the same competitive energy deals and have the same protections, driving down the cost of living when people need it most, said D’Ambrosio.

The recent announcement comes in response to a report from an expert panel.

Government response

The government’s response and position with respect to the expert panel’s final report can be viewed here: https://engage.vic.gov.au/embedded-networks-review

Below we examine some of the most important points.

Renewable energy condition

The government will amend the General Exemption Order so as to give effect to the condition that operators comply with a renewable energy condition for new embedded networks.

On the ban, the response paper notes The government also supports the recommendation to amend the GEO to include a new renewable energy condition, consistent with government policy to encourage uptake of renewable energy. The renewable energy condition will give effect to the ban, as embedded network operators who are not willing or able to meet the condition will not be able to legally operate new embedded networks in Victoria

and further … the government supports a renewable energy condition requiring 100% of electricity supplied to domestic customers within a new residential embedded network to be met from a mix of on- and off-site renewable sources. A minimum of 5% of the electricity supplied to these customers must be met from on-site renewable energy generation. This condition provides the flexibility stakeholders called for in allowing on- and off-site renewable generation, while helping to ensure new embedded networks are contributing towards the government’s renewable energy policy objectives. 

This means that embedded networks will require 100% of electricity consumed to be sourced from renewable sources with at least 5% of electricity supplied by on-site renewable energy generation.

Additional conditions for legacy embedded networks

The government supports the regulatory oversights of embedded networks and acknowledges that the Essential Services Commission will require additional resources in this regard.

Introducing a licensing framework for embedded networks

The government supports the introduction of an embedded licensing framework under the Electricity Industry Act 2000.

These reforms will be part of the second phase of implementation and will require a period for existing embedded networks to comply with modified requirements.

Application to small business customers

The expert panel recommended that the government consider expanding the implementation of its recommendations to small business customers. In response, the government notes that further assessment of potential impacts and appropriate timing is needed before implementing the recommendations with respect to small business customers.

Enhancing consumer protections

Additional consumer protections were recommended by the expert panels and in response the government notes that it will legislate during phase two of implementing the Panel’s recommendations to further enhance protections for embedded network customers and align these as far as practicable with the protections enjoyed by other Victorian customers.

Customer choice

In response to recommendations relating to access to alternative on-market retailers, the government notes that this requires multifaceted action, including legislative reform, further consultation with relevant stakeholders, working with the Australian Energy Market Operator on systems issues, and ensuring required metering technology is in place within embedded networks.

Effective date

A critical question for the industry will be what happens on 1 January 2023. 

Substantial work goes into the development of an embedded network before a building reaches practical completion. Typically, embedded network operators finance and arrange the installation of Solar PV, EV Charging stations and other infrastructure. Embedded network operators are able to do this as they enter into long term bulk purchasing agreements with ‘gate meter’ retailers. 

Should embedded network operators with existing contracts in place to develop renewable embedded networks be required to ensure that those embedded networks are compliant on 1 January 2023 embedded network operators will be placed in the position of potentially needing to break existing gate meter supply contracts. 

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