Embedded networks could become a cornerstone of Australia’s renewable energy future, enabling apartment buildings and communities to generate, store, and share renewable power.
But without reform, Australia risks locking thousands of households into these systems that more often now hinder rather than help the clean energy transition.
“They are a key part of the transition, and particularly in the context where we’ve got more and more apartment blocks that are being built, higher density housing and the need for more housing,” Connor James, director and principal at Law Quarter, told Renew Economy’s SwitchedOn Australia podcast.
Embedded networks are private electricity systems common in large apartment buildings, retirement villages and even caravan parks.
More than 500,000 Australian households were part of an embedded network back in 2017. That number has jumped as high-density housing increases, meaning a growing share of Australians are affected by how these private networks operate.
Theoretically, embedded networks are ideally suited for distributed energy resources (DER) like rooftop solar, shared batteries, EV chargers, and microgrids because they aggregate multiple consumers behind a single gate meter.
This means they can provide solar for an entire building rather than individual apartments, and enable collective storage and load management with batteries, EVs and smart controls.
James says they “could provide residents with cheaper, cleaner energy.
But in practice, even without distributed energy resources, most embedded networks have historically failed to pass on benefits to consumers.
Embedded networks are effectively treated as a single customer by the distribution network, so they can make savings by aggregating electricity consumption across tenants, purchasing electricity in bulk, and avoiding multiple network costs.
“Unfortunately, a number of tenants within those embedded networks are not receiving the price [for electricity] that they should be receiving, and in some instances, are paying more than what they would be if they were directly connected,” James says.
This is because embedded networks are usually run by operators trying to maximise their own profits.
“Developers are allowing third party ‘embedded network operators’ (ENO) to install energy and water infrastructure – including DER – in developments for free, in return for the developer causing the body corporate to enter into long-term, lucrative contracts with the ENO,” Cathy Sherry, Law Professor at Macquarie University and a leading international expert on laws relating to high-density and master-planned properties, writes.
Tenants within those networks frequently have no way out. “Individual consumers cannot escape electricity embedded networks and source energy from on-market retailers because apartments have been constructed with ‘child meters’ that authorised retailers cannot access.”
And even where distributed energy resources are installed, Sherry says operators can prevent residents from generating or accessing renewables from other sources.
Unfortunately regulatory reform of embedded networks has been slow and piecemeal.
A major review by the Australian Energy Market Commission in 2017 proposed a comprehensive set of reforms to bring embedded networks into the national energy framework and strengthen consumer protections. But none were adopted.
“We went through this whole reform review, the final report was published, and then nothing was heard,” James says, noting that lobbying of governments likely influenced the outcome.
“Smaller industry associations … marinas and other operators were concerned about the cost of compliance with a new framework.”
Some states have recognised the need for reform. Victoria has banned new embedded networks with ten or more residential customers unless they meet renewable energy conditions, and NSW has recently announced they will legislate a cap on what operators can charge tenants.
But these efforts only address part of a much larger problem.
The real opportunity, both James and Sherry suggest, lies in putting consumers at the centre of how embedded networks are run.
Tenant-led or community-controlled networks can deliver genuine benefits, both economic and environmental.
At Narara Eco Village on the NSW Central Coast, residents run their own embedded network that integrates solar and batteries, combining onsite renewables with purchased grid power to lower costs.
“They’re able to realize the benefit by purchasing the electricity at the gate meter from another retailer and then combining it with the on site renewables to offer lower cost energy to the consumers,” says James.
“If the embedded network either directly involves the tenants in making some of those decisions, or is run by the tenant then there’s no misalignment of incentives, and maximum benefit can be realized by the tenants,” says James.
But most communities lack the technical or governance expertise to establish or manage such systems. Narara was fortunate to have members with electrical engineering experience.
Where communities lack these skills, James says they can still succeed by engaging specialist third parties to handle compliance and technical operations, while retaining community ownership and oversight.
And as Sherry points out, governments also have a role to play. She argues they must “step up and provide active assistance to communities that are striving to manage their own distributed energy as part of an embedded network.”
You can hear the full interview with Connor James on the SwitchedOn Australia podcast.
