Microgrids are well and truly here to stay – the fact that there are over 1,000 precincts now registered as embedded networks across the National Energy Market (NEM) reflects this rapidly growing trend of becoming less reliant on the grid, selling energy back into the grid, or in some cases getting off it altogether.
But what exactly is a microgrid and what is an embedded network? What is the difference? A microgrid is defined as a precinct that utilises onsite generation and storage to meet some or all of the energy requirements of the precinct and its tenants; it is also able to support the grid with supplementary output and capacity. A microgrid requires an embedded network to be in place to on-sell energy to precinct tenants – this is critical, as we shall see.
The Australian Energy Market Operator (AEMO) describes embedded networks as private electricity networks which serve multiple premises and are located within, and connected to, a distribution or transmission system through a parent connection point in the National Electricity Market (NEM). Embedded networks are regulated by the Australian Energy Regulator (AER) via a structure of licence exemptions and conditions; they must:
• Be registered
• Have tenants’ consent to establish
• Have accurate metering
• Not make tenants worse off
• Preserve tenant access to the market
• Have dispute resolution process in place & documented
As outlined above, this registration and licensing process has been put in place to ensure that things remain fair and equitable, and to maintain freedom of choice. After all, embedded network precincts are essentially enjoying the arbitrage between their Network Use of Service (NUOS) tariff and that which their tenants are entitled to (under NUOS rules); with solar PV and battery storage this arbitrage increases, so it makes sense to have a suitable regulatory framework in place.
Make no mistake – the AER is taking this seriously, as demonstrated recently when some subsidiaries of a high profile property owner were given a hefty fine for allegedly selling electricity to customers without holding either retailer authorisation or retail exemption as required. This should serve as a salient lesson to anyone who is either currently operating or contemplating a microgrid scenario which involves selling electricity to tenants – get some expert advice!
There seems little doubt that the growing implementation of microgrids will continue, in wide range of existing precincts and greenfield developments alike. There are literally thousands of residential, commercial and retail precincts across Australia that could significantly benefit by utilising microgrids, in terms of supply certainty, cost savings and sustainability. The rapid development and uptake of solar PV and battery storage will only make the case more compelling.
As is often the case with ‘new’ and disruptive ideas or technologies, not that long ago microgrids were mainly used as a solution for providing or supplementing power to remote regions or communities, and perhaps regarded as somewhat ‘alternative’ in any other scenario. How quickly things change.
In Part 2 of this article next month we will take a look at what the future might hold, and how the Australian Energy Market Commission’s Power of Choice Rules (which come into effect in December 2017) may shape the market. More critically, who will ‘own’ embedded networks and the potential revenue streams they bring?