darden school social responsibility and entrepreneurship april 2, 2007 recycling energy: profitably...
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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
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