Efficient, effective and fair allocation of costs and benefits in residential energy communities deploying shared photovoltaics

Deployment of rooftop solar photovoltaics on multi-family buildings lags behind other residential buildings sectors, despite the benefit of significantly higher self-consumption achievable by applying on-site generation to aggregated building load. This is, in part, because of challenges in developing suitable business models to ensure the fair allocation of costs and benefits between different stakeholders. Embedded networks can provide a mechanism for consumers to co-ordinate their engagement in the energy market, as well as to distribute on-site generation between multiple households. However, to succeed, an embedded network must deliver benefits to all households as well as providing returns to investors. This paper uses a case-study of a 72-apartment complex in Sydney Australia to explore different ways to distribute the costs and benefits of a potential shared photovoltaic system between apartment owners and residents. A range of tariff structures, including demand or capacity charges as well as fixed and time-varying volumetric charges, are compared for their ability to recover investment costs, incentivise efficient energy behaviour and achieve customer acceptance through fairness and transparency. The analysis demonstrates the tension between these desired outcomes and the significant challenge of designing a mechanism to deliver them all. In particular, tariff structures incorporating peak demand charges, while cost-reflective and efficient, are unable to deliver benefits to all stakeholders and thereby ensure the sustainability of the embedded network. The findings have implications for market design and for policy approaches to support embedded networks and energy communities.