Transcript Document

CHP: One of the answers (but
not the question)
Presentation to Efficient Enterprises:
Powering American Industry
Sean Casten,
President & CEO
Recycled Energy Development, LLC
June 23, 2009
US Capitol Building, Room HC-7
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Asking the right questions
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Technology-specific questions have minimal policy merit.
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How could we deploy more CHP, how much CHP could we deploy, how
does CHP work are not especially enlightening.
Much more constructive to ask questions about how to
better realize our goals
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How can we quickly and cost-effectively lower CO2 emissions?
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How can we enhance the competitive position of the US economy?
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How can we induce rapid, large scale private sector investment in the
nation’s aging (and increasingly, unacceptably dirty) energy
infrastructure?
Understanding the potential for CHP is key to answering
these questions – but it is not the question.
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Things you think are true aren’t.
1. The past is a good predictor of the future
2. The US energy sector is too big, too capital-intensive and
too politically powerful to accommodate rapid,
transformative change.
3. Significant reductions in CO2 emissions will require
increased energy costs and/or technological breakthrough
In other words: Unexpected, transformative
changes can quickly reduce our CO2 emissions and
grow our economy… so long as we don’t constrain
our future with our present conventional wisdom.
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Transformative changes in our fossil
energy use are inevitable.
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Current fossil fuel extraction rates are unsustainable
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50% of all the coal we have ever burned has been burned since 1970.
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50% of all the oil we have ever burned has been burned since 1986.
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50% of all the natural gas we have ever burned has been burned since
1990.
Our choice is one of adaptation:
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Proactively, by increasing our energy efficiency?
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Reactively, forced to act by resource constraints?
“If you choose not to decide, you still have made a choice”
(Neal Peart)
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Transformative shifts in our fossil
fuel use are inevitable.
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Things you think are true aren’t.
1. The past is a good predictor of the future
2. The US energy sector is too big, too capital-intensive and
too politically powerful to accommodate rapid,
transformative change.
3. Significant reductions in CO2 emissions will require
increased energy costs and/or technological breakthrough
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Potential pace of electric sector
reform: 20% of US fleet built in just
10 years!
US Installed Generation Capacity, by Fuel Type
Installed GW
450
400
Natural Gas
Nuclear
350
Coal
300
250
Final FERC rehearing
of 888
200
150
100
50
FERC Order 888 mandates
non-discriminatory
transmission access
1992 Energy Policy Act opens
competitive markets
0
1975
1985
1995
2005
Source: US DOE, Energy Information Administration (www.doe.eia.gov)
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New England’s FCM success is even
more dramatic.
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Typical NE power peak = 19,000 – 24,000 MW
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ISO-NE’s forward capacity market closed their first
capacity auction on 3/1/07; they have now completed two
forward capacity auctions (FCAs)
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All time peak = 28,160 MW (8/6/06)
FCM allowed demand resources (including, but not limited to CHP and
other behind-the-meter generation) to bid into markets and compete
with new-build generation to meet system supply needs.
As of their most recent auction (FCA#2), they have 2,936
MW of demand resources that have been brought forward
under this program.
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Met over 10% of the system peak in under 3 years without
building a single power plant.
Source: ISO-NE; website and personal correspondence.
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Things you think are true aren’t.
1. The past is a good predictor of the future
2. The US energy sector is too big, too capital-intensive and
too politically powerful to accommodate rapid,
transformative change.
3. Significant reductions in CO2 emissions will require
increased energy costs and/or technological breakthrough
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CO2 reduction is not constrained by
technology nor economics.
1. Non-renewable CO2 release comes from the combustion of
(previously sequestered) fossil carbon fuels.
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Uniquely among pollutants, the thing which causes the pollution costs
money; ergo, reducing CO2 pollution saves money.
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If done with greater efficiency, this cost reduction need not be coupled to
a reduction in standard of living.
2. Current regulations generally do not encourage energy
efficiency, and in some cases discourage it.
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Clean Air Act has the right intent, but is methodologically flawed;
efficiency doesn’t count as a pollution control strategy!
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Ditto for modern utility regulation, which keeps the power flowing, but
does not allow utilities to use cost-control to maximize profits.
3. Most US energy capital stock is old; to the degree it was
optimized, it was for yesterday’s energy prices.
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The costs of current policy, and
potential for CHP.
US Electric Industry Fuel-Conversion Efficiency
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1990
1980
1970
1960
1950
1940
1930
1920
1910
1900
1890
1880
Energy waste = Economic
/ Environmental
opportunity
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Homer Simpson’s plant wastes
lots of energy.
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So do ours.
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Energy flows in the US electric
sector.
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Energy flows in a fueled CHP plant
(“topping cycle cogen”)
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Energy flows in an energy
recycling plant (“bottoming cycle
cogen”)
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CHP’s local nature gives it an innate
capital cost advantage.
US Average Capex ($/kW installed)
Generation
T&D
Line Loss &
Redundancy
Total $ per
new kW load
Central
Approach
$1,000 - $3,500
$1,400
1.44
$3,460 - $7,000
Local
Generation
$1,200 $4,000
$140
1.07
$1,430 - $4,430
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Supporting data from FERC
Courtesy Jon Wellinghoff
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Total potential for additional US CHP
is massive and transformative.
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DOE estimate: 135+ GW of opportunity for fueled-CHP
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EPA estimate: 65+ GW of opportunity for power
generation from currently wasted energy (including, but
not limited to waste heat).
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In total, represents 20% of entire US generation fleet
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Taking capacity factor into account, represents
approximately 40% of total US power consumption.
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If fully deployed, would reduce total US CO2 emissions by
20% AND would lower our cost of energy.
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Achieving this level of CHP has
already been done by many of our
trading partners.
Percent of Total Power Generation from CHP, By Country
50
40
30
20
10
France
UK
Belgium
USA
EU 25
China
Canada
India
Japan
Netherlands
Russia
Latvia
Finland
Denmark
0
Source: Energy & Environmental Analysis
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What CHP looks like: steel
manufacturer in Gary, IN.
• 95 MW of power recovered from the exhaust of 268 coke ovens.
• Saves host ~$40 million/year with no marginal fuel combustion or
CO2 release.
• Generates more clean power in 1 year than all the world’s gridconnected solar panels (with less CO2/MWh!)
Courtesy Primary Energy
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What CHP looks like: silicon
manufacturer in Alloy, WV.
• RED will recycle hot gas to generate 45 MW of power from waste
heat on 120 MW furnace
• Competitive with West Virginia (coal) power prices.
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Ask the right questions
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What regulatory barriers exist to energy efficiency (in all
its flavors), and how can we remove them?
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How do we reward the goal, instead of the path?
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Lesson from FERC 888 / FCM: unleashing a flood of private sector
investment need not require tearing down an entire dam – we simply
need to remove the critical bricks, and let the blocked resource do the
rest of the work for us.
More incentives for CHP / solar / wind / nuclear / clean coal are not the
answer; experience teaches that approach will cause massive unintended
consequences.
We have enough time to change course – barely.
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