It’s a tough job trying to take much of the CBD of Australia’s largest city off the electricity grid.

The City of Sydney’s ambitious plan to provide for the energy needs for its CBD buildings by 2030 through a network of cogeneration and trigeneration plants has been hurled against a wall of regulatory barriers.

Some of them are merely technical — such as the decision on Monday to reject a tender by the Origin Energy-controlled Cogent, so that the city council can continue one on one negotiations with the company. This was required by the local government act, which has strict rules on how tenders can be negotiated.

Other barriers, however, appear more formidable. While the Cogent tender should allow the city to set up a network of cogen and trigen plants to service its own buildings, it will not be allowed to sell any surplus energy to buildings owned by other entities.

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Similar rules apply to anyone else with similar plans, meaning that economies of scale will largely go untapped, and the city’s target of reducing emissions by 70% from 2006 levels by 2030 may well be difficult to meet.

“Our long-term goal is to see precinct-based trigeneration all around the city, but it doesn’t stack up economically for buildings to go it alone,” says Monica Barone, the CEO of the City of Sydney. The city envisages a network of around 325MW within 15 years, if it is allowed to proceed.

Barone says trigen, which uses natural gas to produce low-carbon electricity and capture waste heat from electricity generation and use it locally for the heating and cooling of buildings, is ideally suited for buildings in the CBD because of their huge heating and cooling needs. Trigen systems are nearly three times more energy efficient and emit less than half the greenhouse gas emissions of a coal-fired power station, and because they generate power and deliver it locally, they avoid some of the high costs of transmission.

A report compiled and presented to councillors last night by the city’s climate change and energy adviser Allan Jones, notes that decentralised energy is in its infancy in Australia, even though it is well developed in parts of Europe, Asia and the US. Australia ranks 34th — behind Indonesia, South Africa and Uganda — out of 40 countries surveyed by the World Association of Decentralised Energy.

That survey found that just 5% of total energy and heat generation in Australia comes from decentralised sources, primarily from cogeneration plants in large industrial applications. This compared with 40% in the Netherlands and 55% in Denmark.

Jones says there has been no study carried out in Australia identifying the real costs and economic barriers to decentralised energy participating in the National Electricity Market. If there was one, he says, it will likely come to a similar conclusion to a study conducted in the UK in 2007, when the London Climate Change Agency found that the up-front costs of decentralised energy were relatively small, but the requirement for it to be part of the UK’s national electricity trading arrangements made it uneconomic.

Jones says the real cost of decentralised energy participating in the Australian national energy market is likely to be similar, if not worse, than the UK, but could be addressed if — like in the UK — regulators allowed decentralised energy proponents to supply export electricity to any consumer over the public wires distribution network, although not the transmission grid.

This is a process known as “virtual private wire” over public wires, where the transaction costs are commensurate with the scale of generation, distribution and supply. Unfortunately, the Prime Minister’s Task Group on Energy Efficiency, while recognising the regulatory barriers, came up with a different proposal, of creating energy efficient hubs or precinct-based decentralised energy.

Jones proposes a “half-way house” that would allow the trigen and cogen owners to mandate an existing licensed electricity retailer to trade the surplus export electricity on the public wires distribution network (not the transmission grid) and so avoid National Electricity Market costs for decentralised energy. He says this would increase the economic value of the export electricity traded in this way by 325% for peak electricity and by 225% for shoulder electricity.

The use of cogeneration is not a radical or even a new concept. The very first power plant constructed in Manhattan in 1882 by Thomas Edison was a cogeneration plant. Apparently he couldn’t stand the idea of wasting excess heat.

Unfortunately, the systems that came to dominate most national grids focused on a centralised business model and modern day electricity networks do not share the same anxiety about waste. John Pierce, the chairman of the Australian Energy Market Commission said last year, many of the changes proposed by the City of Sydney could be done with a stroke of a pen, but there are great cultural barriers to overcome.

This article was originally published at Climate Spectator