SELLING ELECTRICITY, UNPLUGGED
A question I’ve seen from clients and various forums in 2020 has been – can organisations that are not licensed energy businesses add electricity supply as part of their offering, without needing a bunch of authorisations from the Australian Energy Regulator (AER)?
Since expansions in 2018 to the National Energy Rules (NER) exemptions, scope has opened up to sell power without going through expensive and time-consuming regulatory hoops. Business models are developing fast in the wake of technology advances and interest in local consumption.
For those working with technology and sustainability, these developments are good news for three reasons -
- more weapons in the low-carbon generation toolkit. The more business models that can make a dollar out of private network operations, paying for installation of solar and battery, the better.
- New types of organisations can venture into electricity and bring new competitive models. Those already in related markets - property managers, body corporates, community housing co-ops, equipment suppliers, developers and serviced apartments - are well placed to expand into site-specific electricity supply, saving money for property owners, clients and tenants.
- The exemptions are a welcome reversal of the usual trend towards increased regulation creating barriers to entry.
That last factor explains why law firms and compliance professionals have not published much about the exemptions described below. Traditional energy businesses need a lot of professional advice to get and maintain authorisations under NER, and rightly so. Coming to the electricity business from the other direction, the goal is to structure operations to fall outside licensing requirements, keeping the need for advice low once the set-up is correct.
To start with I see four low-doc opportunities to get into the electricity supply business -
1. Exemption from Retail authorisation requirements – the AER’s Retail Exempt Selling Guideline creates exemptions from needing to be a Retailer, to sell electricity. “Deemed exemption” avoids registration altogether, applying to small operations such as apartments or commercial buildings with less than ten customers, holiday parks, or community organisations. “Registrable exemption” is the more expansive category, allowing for larger customer bases on a site, and requiring registration but still no approval process. Obligations still apply to terms of sale etc.
2. Exemption from Network Service Provider authorisation requirements – in parallel with the Retail exemptions, and often applying to the same operator, the AER’s Electricity Network Service Provider Registration Exemption Guideline allows operation of a small private network, known as a “behind the meter” or “embedded” network. As for retailing, a limited category of “deemed exemption” applies to sites with less than ten customers, holiday parks etc. And a “registrable exemption” class applies to the next level, such as retirement villages, shopping centres, mines and industrial/commercial parks. Operational obligations still apply.
3. Embedded Network Manager – whether due to choice of Retailer rules under State laws, or by choice, customers on an embedded network might have the option to select their own Retailer as opposed to buying from the exempt supplier. For such “on-market” customers, the embedded Network provider must be, or appoint, an “Embedded Network Manager”. Technical needs such as metering, demand management, maintenance, billing and supply software etc probably make it sensible anyway for the site owner to partner with an ENM who takes care of all that. ENM licensing requirements under NER Part 7 are less stringent than for Retailers, creating a good opportunity for the likes of body corporate managers, infrastructure operators, and utility and facilities managers.
4. Agents and managers – site owners and managers have the chance, but not necessarily the expertise, to move into the electricity business. This creates opportunities for wholesalers, consultants and intermediaries to build the product, provide support services and even take on obligations for a fee. I envisage white label providers emerging, perhaps working across electricity, gas, broadband, water, security, car-share, e-scooters, you name it.
It is an exciting time for distributed energy. You can contact Mick Coleman on 0438 378 399 and at email@example.com.