Benefits of Solar Power in Embedded Networks
07 Oct 2020
Embedded networks are electricity distribution systems that are privately owned. They are commonly used to power groups of buildings or tenant spaces, which are billed individually with power meters. In turn, the owner purchases electricity in bulk from a local energy company. However, an embedded network can also produce its own electricity with solar panels.
Solar power brings many benefits when added to embedded networks. First of all, tenants can be offered a lower kWh price when part of the electricity is generated locally with solar panels. At the same time, owners can lower energy costs for common areas. If local energy companies depend on fossil fuels, a solar array also reduces emissions.
How Solar Power Reduces Energy Costs in Embedded Networks
Compared with regions like North America and Europe, solar technology has a very low cost in Australia. When the total ownership cost of a solar array is divided by the electricity output during its lifetime, the cost per kWh is very low. Since Australia has some of the highest electricity tariffs in the world, the potential savings with solar power are very high. The following example is very simplified, but it illustrates the concept:
- Assume that an embedded network delivers 700,000 kWh for its users each month, while common areas consume 50,000 kWh per month.
- If all this electricity is purchased from the local energy company at 20 cents/kWh, the embedded network owner must pay $150,000 per month ($1.8 million per year).
In this case, the owner can use a solar power system to reduce the total kilowatt-hours billed. For example, 375,000 kWh could be obtained through a solar PPA at 12 cents/kWh, reducing total energy expenses:
- Solar PPA expenses: 375,000 kWh x $0.12/kWh = $45,000
- Electricity bill from the local energy company: 375,000 kWh x $0.20 = $75,000
- Total electricity cost = $120,000 per month
With this agreement, the embedded network owner is saving $30,000 per month, or $360,000 per year. The average kWh cost is now 16 cents, down from 20 cents. While the owner could keep all the savings, they can also be shared with tenants by reducing the kWh price that is billed internally.
Sharing solar power savings with tenants can be a smart business decision. Existing tenants are less likely to leave, and empty commercial spaces can be filled more easily by offering cheaper electricity.
Embedded Network Electricity Costs Before and After Solar Power
Embedded network owners are subject to the same price limits as energy companies, which means they cannot apply an arbitrary profit margin. In the example above, the owner could bill tenants at the retail price of 20 cents/kWh, and the total charge for 700,000 kWh would be $140,000. However, the owner gets an electricity bill of $150,000 when common areas are included, which means the net cost is $10,000 per month. Landlords can make a profit from rent payments, but internal electricity bills are regulated.
After adding solar power, the total electricity cost for the embedded network owner is $120,000, which is the sum of the power bill ($75,000) and the PPA ($45,000).
- Tenants could be billed 17.50 cents/kWh, which is 12.5% less than the retail price.
- In total, the tenants would be paying $122,500.
This is a win-win situation, since tenants are paying less, but the owner is charging enough to cover the electricity costs of common areas. Actually, the owner still has $2,500 left after paying the power bill and solar PPA.
Solar power provides a competitive advantage when used in an embedded network. When negotiating with potential tenants, the owner can offer cheaper and cleaner electricity. This is a major advantage in large real estate projects, such as shopping malls and industrial parks. Also, when a company gets solar power through a PPA, they can forget about operation and maintenance, since these responsibilities are assumed by the solar PPA provider.
Although there are similarities, embedded networks should not be confused with microgrids. An embedded network is only the system that distributes electricity and meters consumption, while a microgrid has energy generation systems to operate independently. If an embedded network is equipped with enough generation and storage capacity, it can become a microgrid.