Transcript Darden School Social Responsibility and Entrepreneurship April 2, 2007 Recycling Energy: Profitably Mitigating Climate Change Tom Casten Chair, Recycled Energy Development LLC Founder, former CEO Trigen & Primary Energy.

Darden School
Social Responsibility and
Entrepreneurship
April 2, 2007
Recycling Energy:
Profitably Mitigating Climate
Change
Tom Casten
Chair, Recycled Energy Development LLC
Founder, former CEO Trigen & Primary Energy
Presentation Summary
 Human actions are changing the climate,
threatening life as we know it.
 Conventional wisdom says a cooler planet will
cost money. This assumes current heat and
power generation is economically optimal.
 Perverse regulations block efficient energy
generation, forcing us to pay to destroy our
planet
 Recycling presently wasted energy is the key to
profitably mitigating climate change
 Organizations I have led have put over $2.0
billion to work in 250 local generation plants

The worst of those plants uses half the fossil fuel of
conventional generation and saves money.
An Inconvenient Truth
 Al Gore describes global warming as an
‘Inconvenient Truth’ – a reality that we would
rather not face.
 Why inconvenient?

Conventional wisdom assumes energy conversion
is optimal; thus mitigating climate change will
increase energy costs
 Why wrong?


The energy system is not optimal
Electric generation efficiency peaked in 1960,
creates 38% of US GHG
Conventional Central Approach
1960 Data (& 2003 Data)
Pollution
Waste Heat
Transmission Line Losses
3 units (7.5%)
67 units
Waste
Energy
Fuel
=
100
units
33 units
Electricity
End User
Power Plant
What is Recycled Energy?
 Recycled energy is useful energy
derived from:

Exhaust heat from power generation or
industrial processes

Tail gas that would otherwise be flared

Pressure drop in steam or any gas
 Promoting energy recycling is a ‘blue
box’ energy policy
Typical Industrial Recycling Potential






Steel blast furnace gas and exhaust heat
Refineries and chemical factories
Natural gas pumping station exhaust
Pressure drop at gas delivery points
Glass & fiberglass factory exhaust heat
Sewage gas, landfill gas, biomass,
construction waste, recycled carpet, other
 All process thermal users, housing
complexes, all central chilling users
Local Generation that Recycles
Industrial Waste Energy
Saved
Energy Input
Energy
Recycling
Plant
Electricity
Finished Goods
Process
Fuel
Waste
Energy
Electricity
Steam
Hot Water
End User
Site
Local Generation that
Combines Heat and Power Production
Pollution
33 units
Waste
Energy
Fuel
100
units
=
33 units
Thermal
Energy
CHP Plant
33 units
Electricity
Recycle
Waste
Heat
End User
Site
66 units
Useful
Work
US Electric Efficiency,1900-2005
Primary Efficiency, Delivered Electricity
Final Efficiency raw energy to useful work
100%
90%
Local Generation
Plants we have
built that recycle
waste heat
Denmark Electric
Efficiency
80%
60%
50%
40%
30%
20%
10%
Year
20
00
19
90
19
80
19
70
19
60
19
50
19
40
19
30
19
20
19
10
0%
19
00
% Efficiency
70%
Industrial Energy Recycling
90 MW Recycled from Coke Production
Best New Generation: Recycle Industrial
Energy
 Wasted energy streams in nineteen industries
could generate 19% of US electricity
Recycled Energy in the US
9,900 MW
Recycled Energy
in Service
95,000 MW
Identified
Opportunities
Source:USEPA 2004 Study
These options are a ‘Convenient Truth’
Energy Recycling Profitably Mitigates Climate
Change
 Recycling industrial waste energy could
produce 20% of US electricity, fuel free
 Combining heat and power generation
(CHP) produces electricity with half the
fossil fuel of conventional central
generation
 Recycling waste energy will improve US
competitive position
What About Economies of
Scale?
Skeptics claim local generation
will raise capital costs
Economies of Scale?
Central versus Decentralized Generation
KW
Total costs/
Transmission Total / kW
Generation & Distribution
of
required/ kW New
Generation kW Load
Load
Central Generation
$890
$1380
$2,270
1.44
$3,269
Local Generation
$1,200
$138
$1,338
1.07
$1,432
Savings (Excess) of
Central vs. Local
Generation
$310
$1,242
$1,068
0.37
$1,837
74%
1000%
213%
135%
228%
Central generation
capital as a % of
local capital
Costs per Delivered MWh
Fuel
Emissions
Other Ops
Amortization
$140
$120
$100
Lowest Cost
Central Option
$80
$60
$40
$20
.
H
ea
t
R
ec
.
B
T
CG
C
P
CH
Tu
rb
P
ga
s
T
CG
T
G
G
IC
C
oa
l
C
on
v.
($20)
co
al
$0
C
$ per delivered MWH
Local Options that
Recycle Energy
Central Gen Options
Cost and CO2 per Delivered MWh
Delivered Cost per MWh
Tons CO2 per delivered MWH
$140
1.4
Central Plants
$120
1.2
Local Plants that
Recycle Energy
$100
1.0
$80
0.8
$60
0.6
$40
0.4
$20
0.2
$0
0.0
Conv. Coal
IGCC Coal
CCGT gas
CCGT CHP
BP Turbine
Recycled
Energy
Other Recycled Energy Benefits
 Induces new investment
 Creates high quality jobs
 Creates new revenue streams for industry
 Improves industrial competitiveness
 Significantly reduces health and
environmental costs, saving public sector
costs
Why Don’t Markets Force More
Efficiency and Recycling?
 Markets need accurate price signals: energy is
subsidized
 Markets require free entry & exit: illegal to run a
private wire, utilities not allowed to fail
 Markets need level playing field:


Central generation is financially guaranteed
Old plants allowed up to 100 times more emissions
than new plants
 Perverse incentives distort market decisions:


Under typical rate structures, 5% electric sales drop
causes 59% drop in utility profits, 12 to 1 ratio.
Thus, utility CEO’s are closet opponents of end use
efficiency and sworn enemies of local generation
Conclusions: A Convenient Truth
Energy Recycling Solves Multiple Problems
 Entrepreneurs should be encouraged to
‘mine’ industrial waste energy, create
added revenue streams for industry
 This requires better governance

Remove barriers to efficiency

Pay local generation for values it creates

Remove perverse incentives for utilities to
increase sales and fight efficiency
Denmark Changed in Two Decades
Source: Danish Energy
Center
do UK
ne
s
Fr i a
an
ce
Br
az
il
I
Ar nd
ge ia
nt
in
a
In
US
De
Ne nm
th ar
er k
la
n
Fi ds
nl
an
Ru d
G ss
er ia
m
an
Po y
la
n
Ja d
pa
n
Ch
Po ina
rtu
g
Ca al
na
d
M a
ex
i
W co
O
R
LD
DE share as a % of total power generation
Comparative Deployment of Combined Heat
and Power in 2004
60
50
Feasible Target of 30% CHP in US
40
30
20
10
0
My Goal:
Change the Way the World
Makes Power
Lead the way to profitably
reducing GHG emissions, raise
income and mitigate climate
change
Thank you
Future Generation Options
20
Renewable Energy
Options
Central
Generation
Options
Coal Gas with CO2
Sequestration
Cents / kWh
15
10
No incremental
fossil fuel line
New Combined Cycle
Gas Turbine
New Coal
Coal Gassification CCGT
Remote Wind
Avg. Retail Power Price
8.1¢ / kWh
Recycled Energy
Options
Avg. Industrial Power
Price 5.5¢ / kWh
5
Recycled Industrial
Energy
Balanced CHP
Existing Coal Fossil Plant
- No new T&D
0
3
(33% efficiency)
2
1
(50% efficiency)
(100% efficiency)
0
-1
(net fossil savings)
Average Fossil Heat Rate (Units of fossil fuel per unit of delivered electricity)