Co-generation systems have been around for 30 years and became popular as a means of reducing carbon emissions produced by coal generated grid electricity and of reducing reliance on the grid.

Co-generation can be used to lower a building’s overall energy costs, to achieve improved NABERS, Green Star or LEED ratings, and to demonstrate a commitment to ESD policy by offsetting high carbon emission from coal fired generation with less carbon intensive natural gas generated power.

Tri-generation systems may also be utilised to ensure continuous power can be maintained should there be a fault in the grid power supply.


Co-generation systems are in effect an electrical generation system with the additional benefits of reclaiming heat waste and, where applicable, cooling generation (chilled water for air conditioning). Systems comprising power generation, heat reclaim and cooling are normally referred as tri-generation systems, but for the sake of simplicity, let’s use the generic term co-generation to cover both heating and heating-plus-cooling systems.

The individual components which make up a co-generation system are:

The generator

This is most commonly a natural gas fuelled turbine or reciprocating engine driving an alternator.

The heat reclaim system

This may comprise a number of differing systems which are utilised to reclaim waste heat from the generator. The reclaimed waste heat can be used either for direct heating, pre-heating or as input heat for absorption chillers.

The cooling generation system

This comprises absorption cycle chillers which utilise a gas vapour cycle under vacuum to generate cooling from waste heat. The chillers generate chilled water which is then utilised by a building or facility cooling distribution system.


Benefits of co-generation

As mentioned, co-generation can be used to lower a building’s overall energy costs, to achieve improved NABERS, Green Star, LEED ratings, and to demonstrate a commitment to a company’s sustainability policy by offsetting high CO2 emitting mains power (from coal fired generation) with less carbon intensive natural gas generated power. The co-generation system may also be used to ensure continuous power can be maintained should there be a fault in the grid power supply.

The use of on-site power generation via a co-generation system lowers overall energy use, as waste heat reclaimed from the electricity generation process is effectively ‘free’ energy. Itt can be used for heating, offsetting the need to generate heat via a boiler or air heater, and it can also be used to generate chilled water (via an absorption chiller), offsetting the need to generate cooling via an electric chiller.

In theory, a co-generation system will provide payback on capital investment within five to seven years and will provide energy cost savings over a period of 25 to 30 years during its economic operating life.

In practice, there have been a number of issues hampering the effectiveness of co-generation systems, and a number of systems installed have had short and problematic lives.

Complexity and reliability

Complexity and reliability appears to be a key issue that comes to the fore when looking at real world issues users have experienced with co-generation systems. These systems are effectively a small power station, coupled with a central energy plant. They require many interdependent plant components and controls. If these interdependent systems are not set set up adequately, the plant will experience issues with achieving and maintaining design power and energy output figures.

Power generation

Integrating a power generation system within a facility’s electrical system, including synchronisation with the electrical authority supply grid, can be very challenging. There are strict parameters regarding the fault levels of electrical generation equipment as well as the quality of power being provided to the electrical grid.

Many installations were designed to operate in “island mode” which isolates the power generator from the authority electrical supply. This will normally limit the power supply to specific functions of the facility with no cross connection to the main power supply.

For grid connected systems, rigorous fault testing and power monitoring must be achieved and maintained to allow connection with a live authority power supply.

This part of the system requires highly experienced electrical engineers to ensure a reliable and stable power generation system is designed for long term operation.

Thermal generation

The waste heat produced by the power generation system can be utilised in a number of ways. Waste heat can be obtained from the engine/turbine exhaust flue gases and/or from the engine/turbine water cooling system.

This waste heat can then be used directly for heating water used for space heating, or can be directed to an absorption chiller which can generate cooling water for air conditioning purposes.

The waste heat reclaim system utilises pumps and controls to ensure the extraction of heat does not unduly affect the operation of the engine/turbine. Heat extraction needs to be closely controlled to prevent overheating or overcooling of the engine/turbine which can lead to a safety shutdown and the loss of power generation.

Absorption chillers use a chemical process to create a refrigeration effect and regenerate the cooling medium by using the waste heat available from the engines. These units do not have the flexibility of conventional electric refrigeration chillers and prefer relatively steady load operation over long periods. They do not operate effectively if they have to load and unload frequently. The larger machines require from 30 minutes to an hour to reach full operational capacity and a similar amount of time to stage down to a state where they can remain in standby mode.

Absorption chillers require specialist maintenance and, as they are not in common use in Australia, the availability of specialist operation and maintenance personnel is limited.

As with the power generation system, highly experienced mechanical engineers should be sought to ensure a reliable and stable thermal generation system is designed for long-term operation.

Mode of operation

Ideally, co-generation is designed to run continuously at a consistent load for long periods. However, this may not suit a facility’s electrical and thermal demands. Frequent loading and unloading of the system will challenge the ability of the system to achieve design operational parameters and will lead to increased maintainability and tuning needs.

Many systems are therefore designed to only provide a small portion of the building’s electrical demand (or base load), in order to ensure they can maintain operation through the majority of operational hours throughout the year.

Energy costs

Apart from the carbon reduction benefits of a gas fired co-generation system (where grid power is derived from cola fired generation), the other benefit is a reduction in electricity consumption and maximum demand cost.

A key factor in establishing the viability of one of these systems is the cost of grid-sourced electrical power against the cost of the natural gas cost used for the generator engines. A financial payback analysis is normally undertaken to evaluate the ongoing energy cost savings against the capital outlay and ongoing maintenance costs to operate the system.

A sensitivity analysis should be undertaken to test differing scenarios in energy cost escalation and its effect on payback of the system. This work should be undertaken by a professional with significant experienced in the energy market.

In recent times, the escalation of natural gas prices well above forecast projections, primarily due to growth of the natural gas export trade, has put significant strain on existing tri-generation and co-generation systems. High natural gas costs compared to off-peak electrical power can mean that power generation during off peak periods may not be economically viable for these systems. This may lead to limited operation, such as only during peak electrical cost times, which is not ideal for the stable operation of the system and also greatly extends the payback time for the system.

What does the future bring?

If a business is considering co-generation as a power reduction and ESD initiative, it will need to consider investment in highly skilled personnel to design, install, commission and operate the plant (for the life of the plant).

Careful analysis and modelling of the energy market trends will need to be undertaken before investing the substantial capital required for these systems. Government policy will play a significant role in how our energy pricing will change in the future.

Smaller scale co-generation systems may be an option to reduce overall capital costs and to maximise electrical generation periods. A tri-generation system in combination with a solar power system may also be a consideration , using solar power when available and natural gas generated energy when solar power is not available.

The current uncertainty in the cost of future energy may very well make it difficult for companies to consider tri-generation as a commercially viable means of providing low-cost power and low-cost thermal energy to their facilities. Before embarking on this pathway, significant review and consideration should be made to assess its viability and suitability against other forms of energy generation and energy reduction pathways.