Australian cogen challenges feature
Commercial buildings in Australia have not formed an active market for cogeneration
technology – until last year, when one company started to use a particular business model
(against a background of growing demand for ‘greener’ building operation and rising
electricity prices) to change this. Nalin Wickramasinghe writes on progress and the
challenges still to be faced.
Cogen comes to
changing conditions make the technology right
for eastern states
ogeneration in general, and commercial building cogen- cooling. This means the overall efficiency of cogeneration is
eration specifically, has had extremely low penetration in much lower as heat needs to be dumped. Whilst there has been
the Australian market. There is approximately 307 MW minor deployment of absorption chillers in the past, issues of
of installed capacity in the state of New South Wales1, most of reliability and very low coefficients of performance (COP) of
which is accounted for by industrial applications, and almost no around 0.5, have made this an unattractive option.
installed capacity in commercial buildings and offices. There
are several reasons for this situation: High capital costs
Australia is a relatively small market for cogeneration equipment
and also a very distant market for equipment manufactured
Historically Australia – eastern states in particular – has had mostly in Europe. This results in a quite high capital cost
very low electricity prices relative to the rest of the world. An of cogeneration plant and equipment as well as ongoing
abundance of cheap coal-fired generation sources in the eastern replacement components.
states of Australia have supported the low pricing levels for For the above reasons, on-site cogeneration as an alternative
decades. As a result, switching to an alternative energy source, energy source has not been cost effective locally.
such as on-site cogeneration, usually means paying a higher rate
for electricity. WHAT HAS CHANGED?
Over the past two to three years, there has been a remarkable
increase in the acceptance of cogeneration in the Sydney
Low cost of environmental compliance
Whilst the Mandatory Renewable Energy Target (MRET – commercial building market. The reasons for this are several – a
Federal) and New South Wales Greenhouse Abatement (NGAC combination of regulatory and market changes as well as Cogent
– State) schemes levy environmental charges on electricity, they Energy’s business model.
still have not raised compliance costs to a level where switching
to a cogeneration supply is cost effective. Australia also lagged Rising electricity prices
behind the rest of the world (excluding the USA) in not ratifying New South Wales base contract prices for electricity have
the Kyoto Protocol. increased approximately 20% over the past two years2. The
prolonged drought conditions experienced by the state have
significantly contributed to this increase – water shortages
Cogeneration has traditionally been well-suited to northern have compelled generators to reduce generation output at
hemisphere climates with long, cold winters and buildings with times. In addition, there is also an impending shortage of
a high heating demand. In Sydney, most commercial buildings generating capacity. In New South Wales the majority of gener-
have insignificant heating demands – most have only a minor ation capacity is state-owned and uncertainty of the sector’s
preheating requirement at the start of the day in midwinter. ownership – potential privatization – has served as a disin-
In general, Sydney commercial buildings require year round centive to investment in new plants.
Cogeneration and On-Site Power Production may–june 2009 | 31
Australian cogen challenges
Cogeneration Plant Room
M Absorption chillers
M Cogeneration plant
& hot water system
Building electrical Cogen switch boards
Figure 1. Schematic of a typical plant
The Australian Government ratified the Kyoto Business model
Cogent Energy uses a business model based on majority
Protocol in late 2007 and has announced the financing of the cogeneration plant. As Cogent is also a licensed
electricity retailer, the building owner is invoiced monthly for
introduction of a carbon emission trading metered energy consumed – both electrical and thermal. The
key benefits of this approach are:
scheme commencing July 2010
n minimal up-front capital outlay for the building owner
n Cogent can achieve economies of scale in equipment
Increasing focus on environmental ratings
Most commercial building owners have found that blue-chip sourcing
corporate tenants increasingly look for premises with high n aggregated natural gas procurement across all projects.
environmental credentials. In particular, major multinationals
who have global corporate objectives in relation to sustainability COGENT ENERGY BUSINESS MODEL
are driven to seek high-rated buildings. This is also the case Cogent is a licensed electricity retailer and owns, operates and
with Government tenants. maintains the plant. The capital cost of the plant is majority
Of particular relevance are the National Australian Built financed by Cogent’s financier, with the contribution from the
Environment Rating System (NABERS, administered by client minimal – usually around 10% for a standard installation.
Department of Environment and Climate Change) and the Cogent invoices monthly for metered energy consumption, both
Green Star rating (administered by the Green Building Council electrical and thermal. The base building (house services) usage
of Australia). Cogeneration systems with integrated absorption is charged to building owner whilst the tenancy usage is charged
chilling (trigeneration) can achieve an increase of up to to individual tenants.
1.5 NABERS stars and almost 1 Green Star. Most blue-chip
tenants look for buildings with 4.5 NABERS stars and 4 or 5 Pricing and contracting
Green Stars. Cogent’s pricing value proposition is ‘competitive energy pricing
The Australian Government ratified the Kyoto Protocol compared to 50% green-blend energy from the grid.’ In New
in late 2007 and has announced the introduction of a carbon South Wales coal-fired grid electricity emits approximately
emission trading scheme commencing July 2010. These moves 1060 kg/MWh while the comparative figure for an on-site
have also created strong expectations of electricity price gas-fired cogeneration plant is 550 kg/MWh. A building owner
increases in the future and cogeneration is seen as an effective would need to purchase 50% green-blend electricity to achieve
way of reducing the liability of emissions associated costs. the latter figure. In addition, there are further benefits resulting
from the displacement of on-site boilers and electric chillers.
Hence Cogent’s offer is very competitive.
Absorption chiller technology
Packaging the cogeneration system with an absorption chiller The supply agreement with the building owner is usually
has significant benefit locally, due to the climate. In the past low a 12-year term, with pricing fixed for the first year. In subse-
reliability and efficiency of absorption chillers have precluded quent years pricing is reviewed using the Wholesale Electricity
their use. More recently COP greater than 1.3 and improved Pricing Index as a reference. At the end of the 12-year term the
absorption chiller technology has resulted in a better package. options available to the client include renewing for a further
32 | may–june 2009 Cogeneration and On-Site Power Production
Australian cogen challenges
Mirvac Miller Street – flagship project
Cogent plant at
Mirvac Miller Street
Specifications of the Miller Street trigeneration plant:
In 2008 Mirvac Funds Management embarked on a com-
plete refurbishment of its commercial tower at 101 Miller TECHNICAL OvERvIEW:
• wo 1200 kWe MTU series 4000 gas fired engines
Street, North Sydney. A key objective of the refurbishment
with 415V AC alternators
was to achieve a significant uplift in the environmental
• wo 750 kWr Thermax exhaust fired absorption
credentials of this 39,000 m2 building. Mirvac wanted to
chillers to convert engine exhaust energy to chilled
achieve both a NABERS and Green Star rating of 5 – an
ambitious target for a circa 1990 building.
• ne MDE control system to monitor and control
Being a retrofit project, Cogent had to fit its plant in to
the existing basement plant room – which in itself pre-
• Plant can operate in grid parallel and island mode.
sented a significant engineering challenge. Considerable
modifications to the existing electrical switchboards were SUSTAINABILITY ACHIEvEMENT:
• 5 Green Star building rating
also necessary due to their age. The client’s objectives,
• 5 star NABERS energy rating
in terms of environmental ratings, are well on track and
• 80% (max) energy efficiency
the cogeneration plant is expected to save approximately
• 6000 tonnes of CO2 abated per annum.
6000 tonnes per annum of carbon dioxide.
period or buying out the plant at its depreciated value. Separate chiller capacity ranges from 292–1245 kWt. Engine jacket heat
supply agreements are negotiated with individual tenants. recovery from these engines range from 231–1018 kWt. Control
systems from MDE are used on all the plants.
Plants are configured in parallel import mode with the grid,
Scope of works
In a typical installation, Cogent designs, configures and maintains and are currently sized at approximately 60% of the building’s
plant. The company is responsible for negotiating the natural maximum demand. Energy from the grid is used as top-up.
gas supply contract as well as managing the electricity network Cogent operates the plant during peak periods (typically 15
connection agreement and approvals with network operators. hours per day, Monday to Friday).
Client’s scope includes the provision of suitable plant During the off-peak period the plant switches off and supply
room with ventilation and sound attenuation. The client is also is purely from the grid. Currently, this mode of operation is
responsible for bringing the electrical and thermal distribution the most cost effective. As there is no commercial benefit from
systems and natural gas pipeline to the plant. exporting electricity, it is necessary that plants are sized below
Ownership and responsibility for maintenance of assets the building’s peak so that they can operate at constant duty
is delineated by the plant room – Cogent generally owns and cycle through the day.
maintains what is within the plant room and the client is respon- The plants can also be configured to operate in standby
sible for everything external. This also provides clarity in a (island) mode which provides the building better security of
contractual sense. supply during a grid outage.
As gas engines can only cope with much smaller load steps
in comparison to a diesel generator, correct set up of load
Currently Cogent uses gas reciprocating engines from MTU, with shedding steps on the building’s main switchboard (usually
capacity ranging from 386 kWe to 2 MWe. The corresponding through motorized circuit breakers), is critical in ensuring the
(and matching) Thermax exhaust-fired double-effect absorption standby function works effectively.
34 | may–june 2009 Cogeneration and On-Site Power Production
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Australian cogen challenges
Figure 2. Cogent’s Backoffice system – a typical plant status screen
collating consumption data to support reporting for NABERS
REMOTE MONITORING AND CONTROL
and Green Star ratings. As the major motivation for commercial
The cogeneration plant is fully monitored and maintained
building owners in choosing cogeneration is achieving high
by Cogent Energy, which remotely monitors the plant for
environmental ratings, this is a significant feature of the
monthly billing and in-depth performance analysis. The remote
monitoring facility is able to monitor numerous parameters of
the engine such as temperatures, pressures, voltages, etc. This
data can be used for live performance monitoring and historical CURRENT PROJECTS
analysis, as well as predictive fault prevention. It is also possible Since formation in late 2006, Cogent Energy has made significant
to remotely start and stop the engine and tweak parameters to progress in developing a distributed network of cogeneration plants.
The company now employs 15 professional staff and has its head
Each site is modelled within the system and office located in Melbourne. The company currently focuses on the
eastern states of Australia, in particular Sydney and Melbourne. To
configured according to the plant installed and date, it has quoted a potential capacity of almost 100 MW across
Sydney, Melbourne, Adelaide and Brisbane. The commercial
the level of monitoring required building market in Sydney was the most responsive and Cogent has
installed its first four plants there.
increase the performance of the unit.
The Cogent Energy Backoffice system is intended to allow CHALLENGES AND RISKS
management, engineering and operations staff access to monitor Whilst Cogent’s business model and approach have yielded very
all plants installed on-site. The system consists of a central good progress in developing a network of cogeneration plants,
server and software. Each site is modelled within the system there are many challenges yet to be overcome and risks that
and configured according to the plant installed and the level of need to be managed.
monitoring required. Staff access the Backoffice system on their
laptops and alarm ‘flags’ can be received on PDAs. Grid/network connection
Through the Backoffice system a range of dynamic screens Currently the local electricity network operators have no specific
displaying plant status, single-line diagrams, process and instru- commercial terms applicable to cogeneration plant’s operator in
mentation (P&I) diagrams, etc. can be accessed, allowing the ability terms of demand/capacity charges. Their assessment is based on
to drill down to check plant operating data and characteristics. a site-by-site approach and this misses the overall benefit that
Core functionality in the system also includes gathering and a network of distributed plants brings. Electricity grid operators
Client Building m2 Engines Absorption chillers Commencement
14,000 2 x 0.386 MW 2 x 0.290 MW September 08
39,000 2 x 1.17 MW 2 x 0.75 MW October 08
Mirvac Miller St
40,000 1 x 0.39 MW Nil December 08
29,000 1 x 0.78 MW 1 x 0.48 MW March 09
14,000 1 x 0.78 MW Nil – (heat 0.4 MW) October 09
University of NSW
8,500 1 x 0.39 MW 1 x 0.29 MW July 09
victoria St vIC
Table 1. Projects carried out by Cogent Energy
36 | may–june 2009 Cogeneration and On-Site Power Production
Australian cogen challenges feature
need to take a big-picture view of a cogeneration operation and
appreciate the synergies available – the management of grid hot
spots and overall peak demand reduction.
The monopoly owners of gas networks often don’t take a commercial
view of connecting greenfield cogeneration sites, and they tend to
pass on total network expansion and augmentation costs, making
projects unfeasible at times. With greenfield site developments on
the outskirts of the city, there can be a substantial augmentation
cost to connect gas. The gas network owner may often not factor
in the future value of network expansion, thereby allocating all of
the costs to the cogeneration project.
Currently there is a lack of clarity and consistency in relation to
NOx emissions standards, and the authorities take a rigid view
of cogeneration plants – which tends to frame projects purely
in terms of NOx emission levels with no weighting attached to
the carbon dioxide emissions reductions. The requirement for
selective catalytic reduction could potentially render a project
There is risk of over sizing a plant based on projected energy
loads, particularly with a new development. This is compounded
by the parallel import/no-export mode of operation. If a plant is
oversized then there is a risk it may not run efficiently. Currently
there is no commercial value in exporting, as cogenerated
energy does not fetch a premium once exported off site.
Supply of tenancies
Again, there is risk of over sizing a plant if some of the tenants
decide not to take supply from it. Tenants have legal entitlement
to choice of energy supplier and if there is inadequate take up of
cogenerated supply by tenants, it could lead to a scenario where
plant is oversized.
There has been a great opportunity presented by the move to
reduce commercial building carbon emissions in Australia –
and Cogent Energy has seized this. The company has made
progress with over 5 MW committed in Sydney in the past
two years. Many other opportunities are also currently being
developed. There are still many challenges to be overcome.
Nalin Wickramasinghe is general manager for New South
Wales with Cogent Energy, St Leonards, NSW, Australia.
1 Cogeneration in NSW – Review & Analysis of Opportunities, Institute
of Sustainable Futures, Sydney, January 2008
This article is available on-line. Please visit www.cospp.com
Cogeneration and On-Site Power Production may–june 2009 | 37