Darden SchoolSocial Responsibility and

EntrepreneurshipApril 2, 2007

Recycling Energy: Profitably Mitigating

Climate Change

Tom CastenChair, Recycled Energy Development LLC

Founder, former CEO Trigen & Primary Energy

Presentation SummaryPresentation Summary Human actions are changing the climate, Human actions are changing the climate,

threatening life as we know it. threatening life as we know it. Conventional wisdom says a cooler planet will Conventional wisdom says a cooler planet will

cost money. This assumes current heat and cost money. This assumes current heat and power generation is economically optimal. power generation is economically optimal.

Perverse regulations block efficient energy Perverse regulations block efficient energy generation, forcing us to pay to destroy our generation, forcing us to pay to destroy our planetplanet

Recycling presently wasted energy is the key to Recycling presently wasted energy is the key to profitably mitigating climate changeprofitably mitigating climate change

Organizations I have led have put over $2.0 Organizations I have led have put over $2.0 billion to work in 250 local generation plantsbillion to work in 250 local generation plants

The worst of those plants uses half the fossil fuel of The worst of those plants uses half the fossil fuel of conventional generation and saves money. conventional generation and saves money.

An Inconvenient TruthAn Inconvenient Truth Al Gore describes global warming as an Al Gore describes global warming as an

‘Inconvenient Truth’ – a reality that we would ‘Inconvenient Truth’ – a reality that we would rather not face. rather not face.

Why inconvenient?Why inconvenient? Conventional wisdom assumes energy conversion Conventional wisdom assumes energy conversion

is optimal; thus mitigating climate change will is optimal; thus mitigating climate change will increase energy costsincrease energy costs

Why wrong?Why wrong? The energy system is not optimalThe energy system is not optimal Electric generation efficiency peaked in 1960, Electric generation efficiency peaked in 1960,

creates 38% of US GHGcreates 38% of US GHG

Conventional Central ApproachConventional Central Approach1960 Data (& 2003 Data)1960 Data (& 2003 Data)

Pollution

Fuel

100 units

Power Plant

=

67 units Waste Energy

33 units Electricity

End User

Waste HeatTransmission Line Losses

3 units (7.5%)

What is Recycled Energy?What is Recycled Energy?

Recycled energy is useful energy Recycled energy is useful energy derived from:derived from: Exhaust heat from Exhaust heat from power generationpower generation or or

industrial processesindustrial processes Tail gas that would otherwise be flaredTail gas that would otherwise be flared Pressure drop in steam or any gas Pressure drop in steam or any gas

Promoting energy recycling is a ‘blue Promoting energy recycling is a ‘blue box’ energy policy box’ energy policy

Typical Industrial Recycling PotentialTypical Industrial Recycling Potential

Steel blast furnace gas and exhaust heatSteel blast furnace gas and exhaust heat Refineries and chemical factoriesRefineries and chemical factories Natural gas pumping station exhaustNatural gas pumping station exhaust Pressure drop at gas delivery pointsPressure drop at gas delivery points Glass & fiberglass factory exhaust heatGlass & fiberglass factory exhaust heat Sewage gas, landfill gas, biomass, Sewage gas, landfill gas, biomass,

construction waste, recycled carpet, otherconstruction waste, recycled carpet, other All process thermal users, housing All process thermal users, housing

complexes, all central chilling userscomplexes, all central chilling users

Local Generation that Recycles Local Generation that Recycles Industrial Waste EnergyIndustrial Waste Energy

ElectricitySteam

Hot Water

End User Site

Energy Recycling

Plant

Electricity

Process Fuel

Finished Goods

Waste Energy

SavedEnergy Input

Local Generation that Local Generation that Combines Heat and Power ProductionCombines Heat and Power Production

Pollution

Recycle Waste Heat

CHP Plant

End User Site

33 units Waste Energy

=66 units Useful Work 33 units

Electricity

33 units Thermal Energy

Fuel

100 units

US Electric Efficiency,1900-2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Year

% E

ffic

ien

cy

Primary Efficiency, Delivered Electricity Final Efficiency raw energy to useful work

Local Generation Plants we have built that recycle waste heat

Denmark Electric Efficiency

Industrial Energy Recycling Industrial Energy Recycling 90 MW Recycled from Coke Production90 MW Recycled from Coke Production

Best New Generation: Recycle Industrial Best New Generation: Recycle Industrial EnergyEnergy

Wasted energy streams in nineteen industries Wasted energy streams in nineteen industries could generate 19% of US electricitycould generate 19% of US electricity

Source:USEPA 2004 Study

Recycled Energy in the US

Identified Opportunities

95,000 MW95,000 MWRecycled Energy

in Service

9,900 MW9,900 MW

These options are a ‘Convenient Truth’These options are a ‘Convenient Truth’ Energy Recycling Profitably Mitigates Climate Energy Recycling Profitably Mitigates Climate

ChangeChange

Recycling industrial waste energy could Recycling industrial waste energy could produce 20% of US electricity, fuel freeproduce 20% of US electricity, fuel free

Combining heat and power generation Combining heat and power generation (CHP) produces electricity with half the (CHP) produces electricity with half the fossil fuel of conventional central fossil fuel of conventional central generationgeneration

Recycling waste energy will improve US Recycling waste energy will improve US competitive positioncompetitive position

What About Economies of What About Economies of Scale?Scale?

Skeptics claim local generation Skeptics claim local generation will raise capital costs will raise capital costs

Economies of Scale?Economies of Scale? Central versus Decentralized Generation Central versus Decentralized Generation

Transmission Transmission & Distribution& Distribution

$1380$1380

$138$138

$1,242$1,242

1000%1000%

GenerationGeneration

Central GenerationCentral Generation $890$890

Local GenerationLocal Generation $1,200$1,200

Savings (Excess) of Savings (Excess) of Central vs. Local Central vs. Local

GenerationGeneration$310$310

Central generation Central generation capital as a % of capital as a % of

local capitallocal capital 74%74%

Total / kW Total / kW of of

GenerationGeneration

$2,270$2,270

$1,338$1,338

$1,068$1,068

213%213%

KW KW required/ required/ kW LoadkW Load

1.441.44

1.071.07

0.370.37

135%135%

Total Total costs/ kW costs/ kW New LoadNew Load

$3,269$3,269

$1,432$1,432

$1,837$1,837

228%228%

Costs per Delivered MWh

($20)

$0

$20

$40

$60

$80

$100

$120

$140

Conv. C

oal

ICGGT c

oal

CCGT gas

CCGT CHP

BP Turb

.

Heat R

ec.

$ p

er

de

liv

ere

d M

WH

Fuel Emissions Other Ops Amortization

Lowest Cost Central Option

Local Options that Recycle Energy

Central Gen Options

$0

$20

$40

$60

$80

$100

$120

$140

Conv. Coal IGCC Coal CCGT gas CCGT CHP BP Turbine RecycledEnergy

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Delivered Cost per MWh Tons CO2 per delivered MWH

Cost and CO2 per Delivered MWhCost and CO2 per Delivered MWh

Local Plants that Recycle Energy

Central Plants

Other Recycled Energy BenefitsOther Recycled Energy Benefits Induces new investmentInduces new investment

Creates high quality jobsCreates high quality jobs

Creates new revenue streams for industryCreates new revenue streams for industry

Improves industrial competitivenessImproves industrial competitiveness

Significantly reduces health and Significantly reduces health and environmental costs, saving public sector environmental costs, saving public sector costscosts

Why Don’t Markets Force More Why Don’t Markets Force More Efficiency and Recycling?Efficiency and Recycling?

Markets need accurate price signals: energy is Markets need accurate price signals: energy is subsidizedsubsidized

Markets require free entry & exit: illegal to run a Markets require free entry & exit: illegal to run a private wire, utilities not allowed to failprivate wire, utilities not allowed to fail

Markets need level playing field: Markets need level playing field: Central generation is financially guaranteedCentral generation is financially guaranteed Old plants allowed up to 100 times more emissions Old plants allowed up to 100 times more emissions

than new plantsthan new plants Perverse incentives distort market decisions:Perverse incentives distort market decisions:

Under typical rate structures, 5% electric sales drop Under typical rate structures, 5% electric sales drop causes 59% drop in utility profits, 12 to 1 ratio.causes 59% drop in utility profits, 12 to 1 ratio.

Thus, utility CEO’s are closet opponents of end use Thus, utility CEO’s are closet opponents of end use efficiency and sworn enemies of local generation efficiency and sworn enemies of local generation

Conclusions: A Convenient TruthConclusions: A Convenient TruthEnergy Recycling Solves Multiple ProblemsEnergy Recycling Solves Multiple Problems Entrepreneurs should be encouraged to Entrepreneurs should be encouraged to

‘mine’ industrial waste energy, create ‘mine’ industrial waste energy, create added revenue streams for industryadded revenue streams for industry

This requires better governanceThis requires better governance Remove barriers to efficiencyRemove barriers to efficiency Pay local generation for values it createsPay local generation for values it creates Remove perverse incentives for utilities to Remove perverse incentives for utilities to

increase sales and fight efficiency increase sales and fight efficiency

Denmark Changed in Two DecadesDenmark Changed in Two Decades

Source: Danish Energy CenterSource: Danish Energy Center

Comparative Deployment of Combined Heat Comparative Deployment of Combined Heat and Power in 2004and Power in 2004

0

10

20

30

40

50

60

Denmar

k

Nether

lands

Finlan

d

Russia

Germ

any

Poland

Japa

n

China

Portugal

Canada

Mex

ico

WORLD US UK

Indon

esia

France

Brazil

India

Argentin

aDE

sh

are

as a

% o

f to

tal

po

wer

gen

erat

ion

Feasible Target of 30% CHP in US

My Goal:My Goal:Change the Way the World Change the Way the World

Makes PowerMakes Power

Lead the way to profitably Lead the way to profitably reducing GHG emissions, raise reducing GHG emissions, raise

income and mitigate climate income and mitigate climate changechange

Thank you

Future Generation Options

Existing Coal Fossil Plant - No new T&D

New Coal

New Combined Cycle Gas Turbine

Coal Gassification CCGT

Remote Wind

Coal Gas with CO2 Sequestration

Balanced CHP Recycled Industrial Energy

0

5

10

15

20

-10123

Average Fossil Heat Rate (Units of fossil fuel per unit of delivered electricity)

Cen

ts /

kWh

Renewable Energy Options

Central Generation

Options

No incremental fossil fuel line

Recycled Energy Options

Avg. Industrial Power Price 5.5¢ / kWh

(33% efficiency) (50% efficiency) (100% efficiency) (net fossil savings)

Avg. Retail Power Price 8.1¢ / kWh