When the City of Sydney rejected all bids for the delivery of their trigeneration scheme it wasn’t in support of Ross Garnaut’s proposition that we need better regulation to foster the connection of distributed generation. Rather, was an outcome forced by the pricing and regulatory structures of the National Electricity Market.
Both the City of Sydney’s and Garnaut’s calls for changes in electricity regulation are in keeping with evolutions occurring in the UK and New Zealand, which provide some important lessons on how to connect distributed generation.
For the better part of the last decade, the UK has established mechanisms which start to remove barriers to distributed generation. The ‘virtual private wire’ elements of the UK model, which the City of Sydney wishes to apply locally, improves project financial returns. However, in Exigency’s experience, it’s not just financial returns that stymie distributed generation projects, but network connection.
Here, too, the UK market is instructive. Late last year rules were introduced that required networks to publish guides to the connection of distributed generation and to specify timelines and costs up front.
New Zealand has taken a similar approach to the UK, but one that arguably goes further, by specifying connection processes, default agreements, information requirements and fees.
In this way, both the UK and NZ markets have attempted to overcome the information barrier to distributed generation by standardising and publishing connection processes. Although regulatory approaches exist within Australia to connect distributed generation, they require time, money and specialist skills to implement. The result is that without specialist support most projects do not proceed; and where they do, connection takes a long time – with the City of Sydney providing a very public demonstration of this.
UK and NZ approaches have resulted in increased connections. The UK’s Energy Networks Association reported an increase in distributed generation from 1.2GW in 1993/4 to 12GW in June 2007 (when they stopped collecting statistics) and some NZ networks report similar trends.
While the customer benefits of distributed generation from reduced carbon emissions and energy costs are well known, the impact on networks' revenues through reduced network augmentation was spotlighted by Garnaut as a barrier to their support. The anecdotal evidence from the UK and NZ, however, is that distributed generation is gaining network support as networks are discovering that revenues from connection charges are offsetting those from reduced network augmentation.
By implementing standardised, publicly available distributed generation connection processes a win-win situation can be created for both customers and networks. And by taking the best of the UK and NZ approaches Australia might leapfrog to where its sister electricity markets have arrived allowing us to make another step to a greener future.
Bruce Macfarlane is associate director at specialist energy and carbon market advisory firm Exigency
When the City of Sydney rejected all bids for the delivery of their trigeneration scheme it wasn’t in support of Ross Garnaut’s proposition that we need better regulation to foster the connection of distributed generation. Rather, was an outcome forced by the pricing and regulatory structures of the National Electricity Market.
Both the City of Sydney’s and Garnaut’s calls for changes in electricity regulation are in keeping with evolutions occurring in the UK and New Zealand, which provide some important lessons on how to connect distributed generation.
For the better part of the last decade, the UK has established mechanisms which start to remove barriers to distributed generation. The ‘virtual private wire’ elements of the UK model, which the City of Sydney wishes to apply locally, improves project financial returns. However, in Exigency’s experience, it’s not just financial returns that stymie distributed generation projects, but network connection.
Here, too, the UK market is instructive. Late last year rules were introduced that required networks to publish guides to the connection of distributed generation and to specify timelines and costs up front.
New Zealand has taken a similar approach to the UK, but one that arguably goes further, by specifying connection processes, default agreements, information requirements and fees.
In this way, both the UK and NZ markets have attempted to overcome the information barrier to distributed generation by standardising and publishing connection processes. Although regulatory approaches exist within Australia to connect distributed generation, they require time, money and specialist skills to implement. The result is that without specialist support most projects do not proceed; and where they do, connection takes a long time – with the City of Sydney providing a very public demonstration of this.
UK and NZ approaches have resulted in increased connections. The UK’s Energy Networks Association reported an increase in distributed generation from 1.2GW in 1993/4 to 12GW in June 2007 (when they stopped collecting statistics) and some NZ networks report similar trends.
While the customer benefits of distributed generation from reduced carbon emissions and energy costs are well known, the impact on networks' revenues through reduced network augmentation was spotlighted by Garnaut as a barrier to their support. The anecdotal evidence from the UK and NZ, however, is that distributed generation is gaining network support as networks are discovering that revenues from connection charges are offsetting those from reduced network augmentation.
By implementing standardised, publicly available distributed generation connection processes a win-win situation can be created for both customers and networks. And by taking the best of the UK and NZ approaches Australia might leapfrog to where its sister electricity markets have arrived allowing us to make another step to a greener future.
Bruce Macfarlane is associate director at specialist energy and carbon market advisory firm Exigency