20 January 2014 — Embedded generation has the potential to reduce peak energy demand during heatwaves, helping to increase security and reduce the need for costly grid upgrades. Is it fair, then, that it’s being slugged with huge network charges?
Melbourne – along with many other parts of southern Australia – has just suffered a serious heat wave, with continued daily maximums above 40 degrees Celsius, and minimums above 25°C for over five days. We all know this puts large pressure on our electricity system due to airconditioner use in homes and businesses. High minimum temperatures see no relief overnight from the heat, particularly heat absorbed by our built form (such as walls, roofs and asphalt).
Our cooling systems struggle as the high ambient outdoor heat reduces the efficiency of airconditioners, placing even more pressure on the electricity grid. This has resulted in rolling blackouts for several areas in Melbourne. While these have been controlled, no doubt they are inconvenient at best, and costly at worst.
I noticed that Dandenong North was one of the areas hit with a rolling blackout, and wondered how the Dandenong Precinct Energy Project, where my consultancy has been engaged, performed this week to assist alleviating the issue (five years of my life must be worth something…).
The Dandenong Precinct Energy Project is a partnership between Cogent Energy and Places Victoria (previously VicUrban), and is part of the Revitalising Central Dandenong initiative. The RCD project will redevelop seven hectares of land immediately north of Dandenong station into a new Central Activity District, including more than 20 buildings to become commercial offices, educational buildings and multi-unit residential buildings. It includes an Energy Centre of six megawatts of combined heat and power, or cogeneration, of which 2MW is installed and was commissioned in early 2013, plus one kilometre of underground pre-insulated pipework to carry waste heat to the new buildings once they are developed and then tenanted.
The primary business case for investment in the precinct energy project was to assist new developments to achieve high Green Star ratings more cost effectively – much better than each building investing in their own CHP or trigeneration system. This would make the RCD land more attractive to developers, particularly when a minimum 5 Star Green Star development is compulsory.
Other drivers for the project included minimising the effect on climate change of the new developments through their energy use, increased energy efficiency, developing a model that could be replicated or adjusted for other projects and reducing the need for electricity network augmentation to deal with peak demand issues like this week.
Finally, considering how much time and resources that have been put into developing such precinct energy projects (I’ve seen at least three dozen glossy paged ”precinct trigeneration feasibility” reports), after all the work at Dandenong, it would be remiss to waste such work without biting the bullet and getting a project over the line, to prove or disprove the business case and take the learning forward for other projects.
I think more money has been spent on such feasibility reports and trying to turn them into deliverable projects, than has actually been spent on building the projects!
So, the Dandenong project is up and running, by Cogent, since early last year, producing electricity that is sold to local businesses who have acted as seed customers. New developments are to be connected up to the heating pipework, where they can use the waste heat from the energy centre to reduce their need for gas for space and hot water heating. Absorption chillers can also be used to reduce the use of electric chillers, and further assist the electricity grid coping with such hot days.
But what little thanks embedded generation gets.
Around Australia, a 2MW embedded generator that sells electricity to local customers across the road or down the street, gets charged around $500,000 annually for the use of the local electricity grid.
This charge is paid by the customers and harms the business case for embedded generation using the local grid. This is the same charge/rate for customers using electricity from hundreds of kilometres away. Sometimes there are network use of system discounts, but these are often small, uncertain and definitely not bankable at the time of project investment to assist getting such projects getting over the line.
Virtual net metering is a proposed system where embedded generation is more fairly charged for the reduced use of the electricity network, based on either distance from customers or calculated distance of grid used. Like most rule changes proposed to AER or AEMO, when they are not driven by the energy companies, they take a long time to make any progress. It feels like I have been talking about this issue for six years!
Of course, if some customers using embedded generation are charged less network charges for use of electricity, that means the rest of us pay more. The grid has to be paid for either way. But this is just in the short term.
Over time, the proliferation of embedded generation that generates at peak times, is reliable and dispatchable, will reduce the need for further investment in upgrading the electricity grid. This reduces further cost hikes for electricity network charges. Short term pain for long term gain. But the right drivers and regulation have to be in place for this to occur, and virtual net metering or cost reflective network charges is the fairest way forward.
After Hurricane Sandy, we heard how Princeton University was able to become a community hub by continuing to have access to electricity and heating, due to their onsite cogeneration, when much of the community had lost power.
So, how has the Dandenong PEP been going during the heatwave? I’m glad to hear, and report, that it has been quietly and confidently humming along.
Not enough to spare North Dandenong from two hours of lost power, but a small step in the right direction.
Jonathan Prendergast is the director of Prendergast Projects, which provides energy, technical and commercial advisory services for existing and new development projects.