NABERS Disrupts Strata Energy Goldrush

Embedded electrical networks in Strata may be set to clash with NABERS energy efficiency agenda

Strata management practices have, for the most part, been blissful beneficiaries of the emerging Prosumer Market.  The bulk buying of energy supply for strata has been delivering financial savings of 25%-40% and opening up new service channels for strata management offices and their partners. 
 
However, the game is about to change with the introduction of the NABERS star ratings for apartment buildings.  NABERS is concerned with reducing energy waste and is expected to be introduced into the strata market over the next few years.

​Strata managers may want to pop the hood on their Prosumer Market strategies and partnership agreements.  Essentially a conflict is set to emerge between profits, the NABERS energy efficiency agenda and customer relationships. The good news is that a few contractual tweaks now may avert a major breakdown further down the energy pioneering highway.
 
The Prosumer Market typically involves setting up what’s called an Embedded Electrical Network or Microgrid for an apartment building.  There is a “gate meter” that sits in front of all the apartments, commercial tenants, and common area power supplies.  The value proposition is clear.  By aggregating the power supply of the whole building, resident energy bills can be reduced from rates north of 35 cents per kWh down to about 22 cents per kWh.  This can amount to millions of dollars in savings for larger stratas … and big margins for the intermediaries who provide these services. 
 
In the last few years this has been something of a gold rush in the strata market, particularly around Brisbane, Adelaide and Melbourne.  All sorts of prospectors have emerged and regulations have been quick to tighten.  This includes big guns like Origin, Savant and Win Energy as well as a large cast of me too entrants flying under the radar. This is all above board for the most part, and the Australian Energy Regulator (AER) acts as the sheriff. 
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Hot Embedded Networks markets in Brisbane, Melbourne and Adelaide

Service providers are referred to as Embedded Network Managers or ENMs for short.  They work with strata to buy bulk energy supply on market and sell it to residents at a margin. Other than dealing with tenants that don’t pay their bills, overall there are very healthy margins to be made.  Prospectors are going after the big complexes first.  The bigger the combined energy usage of a building, the more profitable the deal for all concerned.
 
However, there is stranger in town that’s been causing a bit of stir, talking crazy talk about bringing energy consumption down and saving the environment.  NABERS wants to introduce an energy efficiency star rating to apartment buildings.  These are fighting words for many prospectors who have already staked their claims.  The big question is, where does the customer sit in this impending wild west shoot out.  Many will find themselves over a barrel contractually speaking.
 
NABERS wants strata buildings to install solar power on rooftops and do energy efficiency projects.  In the absence of third parties there is a strong financial case for these projects.  Fast paybacks and improved property valuations are strong motivators, particularly when you start talking about formal star ratings. However, once third parties have moved in, split incentives start getting in the way. Who pays and who benefits become grey areas bound to tie up strata in frustrated inaction. Whether or not there is alignment comes down to commercial terms.
 
For further reading try our NABERS white paper (PDF, 58 Pages) and articles The Strata NABERS Muster and Everybody Needs Good NABERS.  We have also published a number of articles on the Prosumer Market including Stratas Profit From ‘Prosumer’ Market and Power of Choice.

Ross McIntyre
Contributor, Strata Energy News 

Strata managers can now register buildings in the City of Sydney and in Melbourne for a fully funded electric vehicle recharge assessment. Registrations for Brisbane have closed. However, if you're interested in learning more contact Scott Witheridge on (02) 9977 1801. Read more about the program here.
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