An embedded network is an electrical system that serves an entire building, rather than individual occupants with their own suppliers and contracts. They include a parent connection to the local grid through a main meter, and sub-meters for tenant spaces. The property management company bills tenants internally, and in turn they are billed by the local energy retailer based on total consumption. By comparison, under the traditional approach each tenant has a dedicated meter and separate account, paying the energy retailer directly. Embedded networks alone do not offer electricity savings but rather a starting point for further activities, such as bulk electricity discounts and commercial solar power. When commercial solar power is used in buildings with embedded networks, it offers a unique opportunity for all parties to reap the benefits. From tenants to property managers and PV system suppliers
Lower electricity rates for all
The key benefit of an embedded network is reduced costs through aggregated buying power resulting in bulk discounts and simpler allocation of shared charges. Property management companies can get a kWh price discount based on bulk purchasing. Tenants pay less for each kWh, even if the developer adds a margin to the discounted price. A large solar array can be deployed and connected behind the main meter, reducing the net energy consumption measured by the energy retailer. Savings can be split among tenants by reducing the internal kWh price. A facility that uses an embedded network with a commercial solar power system is much more attractive for tenants since they pay less for each kWh. Considering that Australia has some of the highest electricity prices in the world, this is a huge benefit.
Increased rental income
Solar with an embedded network provides an additional source of income for developers; helping their tenants reduce their electricity bills and keeping a potion of the savings in return. When combined with a commercial solar power provider in a Power Purchase Agreement, the same logic applies: the property management company gets a lower kWh price, and passes on a portion of the savings as a discount.
The PPA business model can be especially attractive for property developers, since they avoid two of the main challenges that come with commercial solar power: the upfront cost of the installation, and training the required staff to provide maintenance. Solar PPAs provide a risk-free approach where the burden of financing, maintenance and component replacements is delegated to the supplier.
Embedded networks enable all energy metering and tenant billings to be automated. Tenants also benefit by being able to simply enter the network provided by their landlord instead of researching and negotiating their own contracts.
An embedded network provides more flexibility because it is managed internally. If a large company requires many tenant spaces, the measurements from the respective power meters can simply be added. On the other hand, if there are plans to split a large space to accommodate many smaller tenants, the property management company can simply add new electricity meters.
Feel Good Factor
Beyond all of the benefits already mentioned, the use of embedded networks with commercial solar power unlocks an attractive marketing story for Australian developers. Solar power has a strong positive public perception in Australia and has broad appeal to tenants for cost and environmentally driven reasons.
A ‘PPA’ is a financial agreement between a developer and a customer whereby the developer organizes the design, permits, finance and installation of a solar energy system on the customer’s property. The developer owns the system and the host simply buys the energy produced at fixed rate that is generally lower than the local utility retail rate. The lower electricity price serves to offset the customer’s purchase of electricity from the grid while the developer receives income from the sales of electricity as well as any tax credits and other incentives that are a byproduct of the system. PPAs can range from 5 to 25 years and the developer is responsible for the operation and maintenance for the entirety of the agreed upon period. At the end of the contract term, the customer is able to extend the PPA, remove the solar system or buy the solar system from the developer.
Because the developer handles any upfront costs involved with sizing, procuring and installation of the system, the customer is able to get solar and see the savings as soon as the system starts operating. Freeing up cash for other business investments.
Solar PPAs offer a fixed, predictable electricity cost throughout the whole agreement which can be structured one of two ways. With a fixed escalator plan the price rises and a predetermined rate (often between 2% – 5%), which is lower than the projected utility price increase. With a fixed price plan the cost is maintained resulting in increased savings as the utility prices rise with time. Utility / grid prices may grow faster than the PPA price resulting in increased cost savings over time.
All performance risks are owned by the developer who is responsible for the systems monitoring, maintenance and operating risks.
Developers are in a better position to leverage tax credits to reduce the costs of a solar system, such as Section 48 Investment Tax Credit.
A solar energy system has in some cases, shown to increase residential property values. The long term nature of PPAs mean they can be transferred with the property allowing the customer a means to invest in their home with little to financial cost.
While you are under no obligation to purchase the system at the end of the contract, the opportunity is available allowing you to continue to save on energy bills for the life of the system.
Beyond saving money and other benefits, engaging in a PPA positions your company as a leader in climate action and highlights your role in mitigating the environmental impact of your activities.
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