September 27, 2024
Embedded Networks are becoming increasingly popular for their potential to reduce costs and improve energy efficiency. However, before embarking on the journey to establish an Embedded Network, it is crucial to conduct a thorough business case and feasibility assessment. This ensures that the project is viable and sustainable in the long run. One of the most common misconceptions about Embedded Networks is that because there is a sale of energy, all Embedded Networks are profitable; unfortunately, a poorly managed or evaluated embedded network can be just as damaging. This article will explore some of the key elements that must be considered when assessing your business case, with a particular emphasis on understanding network and energy costs, infrastructure costs, and regulatory requirements.
One of the primary benefits of an Embedded Network is the potential for cost savings through bulk purchasing of electricity. By consolidating the electricity consumption of multiple customers into a single meter, the Embedded Network Operator (ENO) can purchase electricity at a reduced cost from the National Electricity Market (NEM). This reduced cost can then be passed on to the customers, resulting in lower electricity rates
However, conducting a detailed financial analysis is essential to determine the potential savings, benefits, and surplus that the Embedded Network can generate. This analysis should at least consider various factors such as customer consumption patterns, occupancy levels, and potential bad debts.
High-level factors such as wholesale market volatility for parent meter rates and trends in network costs will also play a major role in determining the potential sustainability of your project.
Implementing an Embedded Network involves significant infrastructure costs, including the installation of compliant electricity meters, switchboard upgrades, and electrical works. For example, the estimated cost of compliant metering infrastructure alone can be upwards of ten thousand dollars for the average small residential retrofit.
Modern embedded networks involve more than just replacing metering and switchboards. They now include:
· Integration of electric heat pump solutions for efficient hot water,
· solar arrays
· battery systems
· energy management systems
· energy efficiency projects such as LED Lighting
It is crucial to assess these costs accurately and consider financing options to ensure the project's financial viability, not just in implementation, but for the years to come. The feasibility study should also account for potential future upgrades, such as the incorporation of Electric Vehicle (EV) Charging, which can further enhance the network's benefits but may also require power factor correction.
Embedded Networks operate under a complex regulatory framework, and compliance with these regulations is paramount. The National Electricity Rules(NER) and the National Energy Retail Law (Retail Law) govern the operation of Embedded Networks within the National Electricity Market (NEM).
These regulations require the ENO to obtain exemptions from the Australian Energy Regulator (AER) for both network and retail activities in some cases, and for all projects involving a retrofit or Brownfield conversion.Unfortunately, this is one of the most forgotten requirements for Embedded Network business case assessment.
The regulatory framework for retrofit projects is detailed, rigid and holds a high burden of evidence for approval by the AER. They also bring with them an onus of service and benefit to the customer. These include –
· appointing an Embedded Network Manager,
· becoming a member of the ombudsman scheme,
· ensuring customer protections are in place and invoicing accurately.
Failure to comply with these regulations can result in significant penalties and jeopardise the project's success. Therefore, it is essential to engage with experienced consultants and legal advisors to navigate the regulatory landscape effectively. With so many factors at play, the cost of project management and other associated requirements for retrofitting or implementing a Greenfield Embedded Network can be substantial and factored into your assessment.
Conducting a comprehensive business case and feasibility assessment is a critical step in the successful implementation of an Embedded Network. Through a thorough understanding of network and energy costs, infrastructure costs, and regulatory requirements, stakeholders can make informed decisions and ensure the project's long-term viability. Engaging with Independent expert support,such as ENM Solutions, can provide valuable insights and assistance throughout the assessment and implementation process
In summary, a well-conducted feasibility assessment not only identifies potential financial benefits but also mitigates risks and ensures compliance with regulatory requirements. This holistic approach sets the foundation for a successful and sustainable Embedded Network that delivers value to both the network owner and its customers.
