The use of commercial solar power in buildings with embedded networks is one of those business deals where everyone involved gets benefits: tenants, property management companies and solar PV system suppliers.
As we explained in a previous article, embedded networks are electrical distribution systems where there is 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. For comparison, under the traditional approach each tenant has a dedicated meter and a separate account, paying the energy retailer directly.
Commercial and industrial facilities with tenants and conventional metering can be a difficult market for solar power, due to the following reasons:
However, these limitations are eliminated with an embedded network, creating an excellent scenario for commercial solar power. Embedded networks by themselves do not provide electricity savings, but they provide a starting point for other measures: bulk electricity discounts and commercial solar power are two great examples.
When a property management company deploys an embedded network, individual tenants still pay an electricity bill based on the reading of their individual meter. However, they are no longer billed by an energy retailer, but rather by their landlord, and there are many favorable changes:
|Conventional Electricity Billing||Embedded Network + Commercial Solar|
|Tenants must pay the kilowatt-hour price charged by the energy retailer according to the type of client. Since they are metered and billed individually, they have no negotiating power to get bulk discounts.||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.|
|Commercial solar power is difficult to deploy because there is no common connection point for all tenants. The only option for tenants is to install solar panels on rented property, with the required authorisation.||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 competitive advantage.
When individual tenants are billed directly by a power retailer, property management companies are only concerned about the electricity consumed by common areas. However, embedded networks provide an additional source of income for developers: helping their tenants reduce their electricity bills, and keeping a portion of the savings in return (win-win scenario).
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. This concept is also called “solar as a service”.
As lithium-ion batteries continue to decrease in price, they can become a promising addition for embedded networks. Energy storage can be used to maximise the value of solar power, avoiding energy exports to the electricity network in exchange for a low feed-in tariff. The opposite also applies: if the energy retailers charge higher tariffs during peak demand hours, the battery system can be used to avoid them.
Beyond electricity savings, the combination of embedded networks with commercial solar power provides a marketing benefit for Australian developers. Tenants are attracted by the prospect of paying less for electricity, and also consider that the public perception of solar power is very positive in Australia.
The benefit for solar power providers is very simple: embedded networks open up a market segment that is difficult to serve when tenants are billed separately. Australian developers can purchase commercial solar power systems upfront or they can sign PPAs, but the end result for solar PV system providers is the same – increased revenue.
Australia can become an even better market for solar power if more property developers start using embedded networks to manage their electricity. The year 2017 was record-breaking, with more than 1 gigawatt of new rooftop solar power capacity, and upcoming years can be even better by complementing solar power with concepts like embedded networks.
If you are in the commercial real estate sector in Australia, it is strongly advised that you consider embedded networks for your properties, combined with solar power. This can provide lower electricity prices for your tenants and and extra source of income for your company, all while reducing the carbon footprint of your buildings.
Cameron Quin has been heavily involved in business development from an early age. After founding and selling two online companies, Cameron found a strong passion for renewables and the opportunities it brings for the commercial and industrial sector. Sharing the possibilities of solar and the knowledge from the Solar Bay team is his favourite pastime.