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Paving the Way for Renewable Power in Shared Spaces Empoweredby Land Administration System: The Role of Energy Entitlement

Jul 2024 | No Comment

Energy allocation demands an explicit approach with necessary legal and policy implications, acting as a ground for dispute resolutions

Aravind Poshnath

Doctoral Research Scholar in the Department of Infrastructure Engineering at the University of Melbourne

Dr Behzad Rismanchi

Senior Lecturer heading the Renewable Energy and Energy Efficiency Group at the Department of Infrastructure Engineering of the University of Melbourne

Prof Abbas Rajabifard

Discipline Leader of Geomatics at the Faculty of Engineering & IT, Associate Dean Sustainability, and the Director of the Centre for Spatial Data Infrastructures and Land Administration (CSDILA), The University of Melbourne

Introduction

As city populations surge, with projections indicating that two-thirds of the global populace will be urban dwellers by 2050, strategic management of resources and practical planning becomes paramount. Despite covering a mere 3% of the land area, cities contribute around 80% of the global GDP while generating 72% of greenhouse gases. The expanding trajectory of disasters complements these alarming statistics and is well acknowledged by the United Nations through the introduction of a distinct ‘Sustainable Development Goal’ (SDG 11), underscoring the urgency of enhancing urban living conditions. With the projected increase in city dwellings, a balanced focus on sustainability and resource utilisation is inevitable.

The global electricity grid predominantly relies on non-renewable, centralised energy sources. Incidents of natural disasters often trigger massive power blackouts, thereby affecting emergency services. Moreover, these grids are often not designed to handle abrupt spikes in energy demand during crises. Thus, researchers advocate decentralising energy to cater to multiple communities due to the detrimental effects of heavy reliance on a single energy system (Charani Shandiz et al., 2020). By extensively deploying renewable energy systems (RES), cities can fortify their energy resilience while bolstering sustainability.

Space limitations in cities caused by rapid urbanisation necessitate the development of multi-storeyed buildings for commercial, residential, or mixed-use purposes. These buildings may be individually owned by a person or a company, or collectively owned by numerous individuals, as often observed in residential buildings. The residential ‘Multi-Owned Buildings’ (MOBs) accommodate multicultural families, serving as a community. However, unlike the residents of detached homes, the residents in MOBs jointly share and own the building amenities. According to the 2016 census data (ABS, 2017), there is one occupied apartment in Australia for every five detached houses. The affordability of the apartments, compared to detached houses, coupled with the limited land stock, has also contributed to the growth of MOBs in major cities worldwide.

Challenges in Renewable Energy Adoption in MOBs

Unlike detached homes, the rooftops and other potential areas for RES installation are often recognised as common properties, collectively owned by all residents and managed by the ‘Owners’ Corporation’ (OC), in which the apartment owners are members.

Such a management structure, known as ‘Strata-title’ in Australia, has been followed globally under various names, such as ‘condominiums’, ‘freehold’, and ‘unit title’. Strata-title establishes the ‘Rights, Responsibilities, and Restrictions’ of the apartment owners in managing the properties while also granting each individual owner ownership of their unit, an ownership share of the common property as established in the ‘plan of subdivision’, and membership in the OC.

Due to the joint ownership of rooftops, any RES installation requires collective consensus, often discouraging individual initiatives. The issue is compounded by the presence of multiple owners’ corporations, called ‘limited’ and ‘unlimited’ owners corporations. While the limited OC members possess exclusive rights over a particular common property, known as limited common property, all residents collectively own the unlimited common properties. Figure 2 illustrates the ownership conundrum in MOB management. Since the residents of Building B may not directly benefit from the solar panels installed in Building A, as it is a limited CP, they can still participate in decisions about the CP since the entire land parcel and building structure are under unlimited CP. However, the ownership shares of individual apartments, defined by their ‘lot entitlement’, will also influence the voting power of the owners, with greater lot entitlement resulting in a larger voting share.

Due to these complexities, installing a collectively-owned RES that shares generated energy among all residents is common in MOBs. However, there are a multitude of barriers that the OCs must address to obtain consent for installing the RES, as categorised by Poshnath et al. (2023).
Strata-title barriers – This involves issues related to common property ownership and strata-title regulations, such as difficulty in obtaining collective consent, the lot entitlement of each apartment, the presence of multiple OCs and CPs, and the physical limitations of the buildings restricting feasible retrofits.
Behavioural barriers – Accommodating multicultural families with diverse lifestyles can cause behavioural obstacles to the uptake of RES. Apartments, especially in major cities, could be rented out to tenants, and the owners may not receive any direct benefit from installing RES. Furthermore, the turnover rate of tenants is significant, necessitating frequent rearrangements. Additionally, the tendency to free-ride on the efforts of others, coupled with a lack of awareness about the benefits of RES and preconceived judgements, contributes to inhibiting installation.
Financial barriers – Despite the decline, the cost of RES remains relatively high for a substantial population, causing challenges in raising the required capital. The lower feed-in tariffs for the exported energy, coupled with longer payback periods, discourage apartment residents from installing RES.
Regulatory & Market barriers – Globally, several governments have introduced policies for RES adoption, such as solar incentives. However, the policies specifically for apartment buildings are rare. Moreover, the complexity of procuring approvals, the diverse technical requirements, and inconsistent policies obstruct the RES installation.

Innovating Energy Allocation: The Concept of ‘Energy Entitlement’

The allocation of renewable energy in MOBs has troubled stakeholders due to the inherent complexities pertaining to energy allocation, energy ownership, and the division of benefits and liabilities among residents. A standardised regulatory approach tailored for energy ownership is necessary to address the issue. This problem aims to be solved by introducing the concept of ‘Energy Entitlement’, which delineates the energy ownership each apartment owner can manage. Energy entitlement is founded on the principles of ‘equitable’ energy allocation, which incorporates the land administration principle while capturing the dynamic characteristics of energy management. Energy entitlement is poised to have policy implications and act as grounds for dispute resolutions, speeding up the renewable energy transition to attain netzero objectives. The energy entitlement concept operates independently of the type of RES, whether solar panels, microwind turbines, or geothermal energy. Figure 3 illustrates the concept of energy entitlement in a MOB, which operates behind the meter and allows residents to maintain grid connections with their preferred electricity retailer, unlike embedded networks. Such a system allows for trading energy between the apartment units and the grid, unveiling opportunities for the owners to generate more revenue and thus reducing the payback period.

Disputes in strata buildings often arise from how common costs and benefits are allocated. Despite being prevalent, lot entitlement, founded on the market value of the property, is susceptible to the orientation of the apartment, the floor level of the unit, and rental potential. Since the literature and legislation are silent on the allocation of energy, any practised energy allocation model is based on the principles of common cost allocation, lacking consideration of the role of energy in strata. Thus, numerous disputes are expected to stem from the lack of legislative support for energy allocation.

The Subdivision Act (1988) suggests the allocation of common costs either equally or based on lot entitlement unless there are significant variations in lot size or number of occupants. Basing the allocation of energy on these models may have its disadvantages. For instance, equal allocation of energy may disproportionately benefit apartments with minimal energy usage, while energy-intensive units remain reliant on the grid. This may hinder the path towards net-zero energy status for the building. Moreover, if the building does not have the infrastructure to support energy trading, the surplus energy of energy-efficient users may be wasted. As discussed, lot entitlement is based on the market value of the property, which has an insignificant relationship to energy usage. The orientation towards specific cardinal directions may result in high energy demand for particular apartments, while their lot entitlement may be lower than a similar apartment with a different orientation. Thus, the units may not get the required energy to Figure 3: Graphical illustration of energy entitlement in MOBs (Poshnath et al., 2023) Figure 2: MOB Management (Poshnath et al., 2023) Energy entitlement is poised to have policy implications and serve as a basis for dispute resolutions, speeding up the renewable energy transition to attain net-zero objectives. offset their additional energy demand, which is not a result of their actions.

While allocating energy based on the number of occupants residing in the unit may contribute positively towards attaining net zero, monitoring the occupancy is a hideous task. Being a static quantity and an indicator of energy demand, the allocation of energy based on the unit size could be a potential allocation model. However, external conditions may influence the energy demand of two identical apartments. Moreover, assuming double the energy demand for double the area in a residential building oversimplifies the intricacies of energy consumption. Thus, the choice of energy allocation model in a MOB plays a significant role in the effective functioning of the RES in MOBs. Exploring more potential allocation models that complement the MOB dynamics may prove essential. Moreover, it may be worthwhile to delve deep into the role of building typologies in the suitability of the allocation models. Identifying and integrating allocation models that align with the unique MOB characteristics is critical for determining energy entitlement and their sustainable operation.

Conclusion

The presence of around two and a half million strata titles or community buildings in Australia (Green & Newman, 2017) and more around the globe signifies the impending opportunity for the transition to net-zero communities. However, the adoption of renewable energy systems in strata buildings is insignificant compared to detached homes. The barriers to adoption range across various domains, from strata-title to social characteristics, underscoring the severity of the issue. The ‘Energy Entitlement’ is poised as a catalyst for renewable energy systems’ adoption in MOBs by delineating the individual ownership of energy to each resident from a commonlyowned renewable energy system. The concept possesses the flexibility to extend across various multi-owned buildings as it operates independently of the type of RES. However, the practical implementation of energy entitlement mandates explicit guidelines on allocating energy from the jointly-owned system.

The literature and legislation are silent on this matter, and the allocations, if any in practice, are based on the principles of common cost allocation, not aligning with the traits of energy, which are expected to generate disputes. Thus, energy allocation demands an explicit approach with necessary legal and policy implications, acting as a ground for dispute resolutions. Further development of ‘energy entitlement’ should encompass the policy and legal requisites, with the aid of novel technologies, to instil trust in the stakeholders transitioning to renewable energy.

References

Charani Shandiz, S., Foliente, G., Rismanchi, B., Wachtel, A., & Jeffers, R. F. (2020). Resilience framework and metrics for energy master planning of communities. Energy, 203. https://doi. org/10.1016/j.energy.2020.117856

Green, J., & Newman, P. (2017). Planning and Governance for Decentralised Energy Assets in Medium-Density Housing: The WGV Gen Y Case Study. Urban Policy and Research, 36(2), 201-214. https://doi.org/10 .1080/08111146.2017.1295935

Poshnath, A., Rismanchi, B., & Rajabifard, A. (2023). Adoption of Renewable Energy Systems in common properties of multi-owned buildings: Introduction of ‘Energy Entitlement’. Energy Policy, 174. https://doi. org/10.1016/j.enpol.2023.113465

Shoory, M. (2016). The Growth of Apartment Construction in Australia.

Subdivision Act 1988 – Section 27F(4) inserted by No. 4/2021 s. 88(3). (1988).

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