Yes of course, I just would have assumed the cost of that is pretty minor compared to the cost of the (apparently) 26 megawatt cogeneration plant

But isn't that just because of legislation? As far as I can tell the system could just as easily throw a switch, test to make sure the switch was thrown, and then safely power locally. I know in California this is law, but I have never heard of a very good reason why it is technically difficult or inherently more dangerous to "air gap" your local power at the building rather than at the battery/power source.

Inverters are only used for DC to AC conversion, cogeneration sets are conventional prime mover setups that output 3-phase AC directly. The problem likely has to do with islanded grid stability, without the grid you have to take care of power factor correction and grid voltage regulation yourself, this can get pretty dicey if you don't have direct control or knowledge of the type of loads you'll have.

True for inverter based generation (most renewables like wind and solar), but generally not for rotating machines like most Co-gen plants. Some rotating machines (steam turbines generally) won’t have governors for frequency control, but usually in a CHP plant they would have a linked combustion turbine that does. Rotating machines that are paralleled with the rest of the grid are by default in sync with all of the other rotating machines if there is not some sort of fault situation at the plant or on the grid. If you try to parallel a generator with the grid that is out of sync (frequency or phase), the grid will always win and pull the generator into sync (potentially destructively for the generator).

The most likely limitation of a typical power plant operating disconnected from the grid would be if it could “black start” or not. Cogen plants would normally have this capability. Essentially the problem is whether you have enough power available from backup generation to bring all of the plant auxiliary systems online and get the generators initially started and producing power. Once started you set the governor to maintain 60.0Hz (if in North America) and begin slowly bringing on load so you can ramp the generation to match it.

The easiest solution to a future blackout would be to match the load in your island area to the output of your plant and then disconnect from the rest of the grid before or at the time the blackout occurs. This way you have avoided the black start situation completely. The blackout detection, disconnection, and load balancing steps can be automated to occur nearly instantly if the system is designed well.

The main issue for Berkeley is that the cogeneration plant doesn’t seem to be sized to accommodate their islanded load. This is especially problematic if you lose a generator while islanded because then you will have instant frequency collapse if you were already on the edge of your plant’s capabilities.