A new energy market rule change signals a boom for embedded generation.

23 April 2014 — The property industry is set for a boom in embedded low carbon energy generation, following a National Electricity Market reform allowing for faster approvals, more certainty, lower costs and more rights for applicants.

The rule change means that businesses wanting to connect co/trigeneration plants and large renewable energy systems to the grid will be able to do so cheaper and faster.

The request was put forward by the Property Council of Australia, ClimateWorks and Seed Advisory, who were concerned that connection barriers were a major obstacle to cleaner energy in the built environment.

“The reforms provide a green light to the property industry and will unleash pent-up potential to accelerate cleaner energy investments in a range of technologies,” Property Council chief executive Peter Verwer said.

“The Property Council envisages green grids of buildings, neighbourhoods and city precincts that power themselves renewably. Green grids can complement centralised power stations, and will also evolve into localised, self-sufficient clean energy power stations.”

Before the rule change, set to take effect 1 October 2014, businesses could face waits of up to three years or longer to see whether embedded generation could be connected to the grid, making the process cost prohibitive and dissuading business from cleaner energy production.

Project holding costs could be in the vicinity of $100,000 a week for a new CBD building, the rule change proponents said. Combined with costs to upgrade network capacity, uncertainty and long connection times, this meant many projects faced being scaled down or cancelled completely.

Previously, smaller businesses, local councils and community groups had found it almost impossible to overcome connection barriers, Mr Verwer said, which were wasted opportunities for clean energy.

Under the new rules, more connections should be successful within 6-12 months, the proponents said, depending on the size of the energy system, which opened up the possibility of embedded generation for a greater number of buildings.

The new rule offers an updated connection process, providing:

  • Certainty and faster connection stages: with a clear map of and guidance on the new connection process; time bounded connection stages; and no “stop the clock” option for distribution network service providers to consult third parties
  • Critical information and lower costs: with standardised enquiry forms to be created by DNSPs to cut down customers’ “green tape”; information packs by DNSPs, including technical standards, costs, application details, timing and a model connection agreement; location specific network information, helping applicants find out very early where the “no go” zones are; and registers of completed projects with details of previously connected equipment by DNSPs for systems larger than 5MW
  • Greater customer rights: witha more balanced set of mutual obligations, including a description of both parties’ obligations; a clearer dispute resolution process; and more time and flexibility for applicants to accept DNSP’s offers – from 2-3 days to 20 business days, with the option to extend

“This rule change helps unblock long standing barriers and complements energy efficiency and climate change measures,” ClimateWorks executive director Anna Skarbek said.

“ClimateWorks identified the property industry can deliver about one-fifth of the Federal Government‘s 2020 carbon reduction total in a low cost way.”

The new rule will apply to:

  • all sized embedded energy systems (larger household, business, power station) in Victoria and Queensland
  • medium to large systems (over five megawatts: business, power station) in New South Wales, South Australia and Tasmania

As Western Australia and the Northern Territory are not part of the NEM, the reforms will not affect them.

Some requests remain unanswered

In the original rule change request, the proponents had also pushed for an automatic right of connection for those with embedded energy systems.

While the Australian Energy Market Commission did not accept this, it has not ruled out the possibility completely. If a technical standard is developed, this could provide the foundation for a future automatic right of connection to the grid.

It is understood that the Property Council will be conducting further work to progress technical standards for medium-sized generators.

The AEMC also rejected a request to shield proponents from costs related to network capacity upgrades.

Currently, if a project proponent wants to connect to the grid but there is no capacity to do so, they must incur the costs involved in upgrading the grid infrastructure, even though present and future connections would also benefit from these upgrades.

A Property Council spokesman previously told The Fifth Estate that it was creating a free rider problem.

“All customers should pay fairly for network infrastructure,” he said. “The unlucky few are paying for the upgrade.

“Energy infrastructure is underfunded. Governments are relying on the private sector stepping in, but the benefits go to more than the people paying for the upgrades.”

In the AEMC’s final determination, it said: “If embedded generators were exempt from contributing then other users of the network would have to bear these costs.”

The Victorian Property Council will hold an information session on the changes during its sustainability conference on 11 June.

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  1. This is a great step forward. It is unlikely to lead to an immediate ‘clean energy boom’, as gas pricing are doubling, which reduces the spark spread for cogen/trigen projects back to where is was 10 years ago, and as a result reduces the ROI for these projects.