A Guide To Embedded Energy Networks

If you’re moving into a new apartment, you may have been told that it’s part of an ‘embedded energy network’.

So, what does this mean?

This is a system through which your building owner purchases energy from an authorised supplier and resells it onto you*. In this guide, we explain exactly how these networks operate and answer your questions so that you can determine whether your network works in your favour or not.

What is an embedded energy network?

An embedded energy network provides energy to all homes within an apartment block, retirement village, or similar residential complex with multiple properties.

Rather than each tenant or homeowner arranging their own electricity supply as they usually would, the building or complex owner signs a single contract with an energy supplier to provide energy to every property within this development.

This means that when you move in, you don't need to worry about signing up with a new electricity provider. Everything is provided for you via the embedded electricity network.

On the one hand, this can be a good thing. Some tenants enjoy the convenience of already having one less thing to worry about when it comes to managing their home.

On the other hand, others find that being part of an embedded energy network can make it difficult to switch suppliers if they want a better deal or switch to a more environmentally friendly plan.

How do embedded energy networks work?

Embedded energy networks work by supplying energy to an entire building or complex through a single metered point.

The owner of that development will purchase energy from an embedded energy supplier and then sell it on to each individual tenant.

Those tenants then have their own sub-meter, which measures the energy consumption in that home so that tenants can be billed accurately and appropriately.

This is a good example of the power of group purchasing.

Rather than each tenant negotiating their own energy contract, all the tenants within that development are combined under one contract. This can result in much bigger discounts than any tenant could negotiate on their own.

Why is it hard to get out of an embedded energy network?

Though embedded networks do have their advantages, they’re not ideal for everyone.

Some tenants simply don’t like the idea of being forced to buy from a particular supplier and want the freedom to find the best deal for their own particular needs.

What’s more, environmentally-conscious residents may be unhappy that their energy supplier isn’t committed to offering green energy and may want to switch to one that does.

In these cases, some residents may find that the wiring of their building's energy network makes it difficult to switch to a new provider. They may even find that some energy suppliers simply won't supply to properties that are already part of an existing network*.

You can connect to suppliers outside your embedded energy network, but be warned that this is expensive to do and may not be worth the added costs.

What is an embedded network supplier?

An embedded network supplier is usually a privately-owned company (usually the same one that owns your apartment complex), acting as an energy reseller, buying energy from an authorised energy retailer and on-selling it to the end consumer (i.e., you).

These companies don’t need to register as authorised retailers. As such, they are commonly referred to as "exempt sellers."

It's important to point out that they do still need to hold an official exception from the AER and are bound by specific rules which protect your rights as a consumer.

You can find a list of these rights on the Essential Services Commission website^.

Is embedded energy more expensive?

Due to the nature of group purchasing power, embedded energy networks are often promoted as being cheaper than negotiating an individual contract with an authorised energy retailer.

However, this is not always be the case.

In 2019, a survey by the Victoria Energy Policy Centre found that customers on embedded networks were paying as much as $439 more than they would if they switched to the best individual deal they could get**.

In other words, it all depends on the individual network and what alternatives are out there.

This is why it's so important for tenants who are part of a network to shop around, compare energy prices, and work out which is the least expensive option for them.

What are the pros and cons of an embedded energy network?

Pros:

• You may be able to enjoy a significant discount on your energy bills, thanks to group purchasing power.

• Being part of a network takes the hassle out of choosing a provider on your own.

• Some energy providers offer green initiatives, which may appeal to eco-conscious consumers.

Cons:

• Retailers may have no incentive to offer the best prices to tenants who are locked into a network.

• Networks have a reputation for being difficult to get out of if you want to switch.

• Not all energy providers offer green energy solutions, which can be off-putting for some consumers.

What if I move out, and am no longer connected to my embedded energy network?

The good news is that if you’re not in an embedded energy network, or you’ve recently relocated outside of one, you’re in a good position to find a better deal from other power suppliers.

At Compare Club, we do the legwork - and the paperwork - to find an energy plan that's right for you^^. Speak to one of our experts today.

Sources

*Information for electricity consumers in embedded networks ^Information for embedded electricity network customers (Vic) **Embedded electricity networks customers paying too much

Paul Coughran is the General Manager of Emerging Verticals at Compare Club. Paul has over 20 years of experience across a wide range of industries including Banking and Finance, Telecommunications and Energy. Paul leads a team of trusted experts dedicated to helping individuals make informed decisions about their insurance and utilities needs.

Meet our energy expert, Paul Coughran

Paul's top energy tips

• 1

  Australia’s top three energy companies still hold 64% of the total Australian market, even though competition was deregulated in 2017.

• 2

  If you don't shop around for energy providers, you’re probably leaving your savings on the table by failing to compare better value options.

• 3

  Most energy providers offer discounted rates for new customers, which is a strong incentive to switch.

• 4

  There should be no interruption when you switch energy providers. You'll need to pay a new company for your energy, but there won't be a disruption to your power supply.