Turning Down the Heat

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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
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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.
  

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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

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Conventional Central Approach1960 Data ( 2003
Data)
End User
Power Plant
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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

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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

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Local Generation that Recycles Industrial Waste
Energy
Electricity Steam Hot Water
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Local Generation that Combines Heat and Power
Production
33 units Waste Energy
CHP Plant
Recycle Waste Heat
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Industrial Energy Recycling 90 MW Recycled from
Coke Production
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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
SourceUSEPA 2004 Study
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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

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What About Economies of Scale?

• Skeptics claim local generation will raise
  capital costs

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Economies of Scale? Central versus Decentralized
Generation
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Cost and CO2 per Delivered MWh
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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

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Why Dont 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 CEOs are closet opponents of end
  use efficiency and sworn enemies of local
  generation

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Conclusions A Convenient TruthEnergy 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

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Denmark Changed in Two Decades
Source Danish Energy Center
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Comparative Deployment of Combined Heat and Power
in 2004
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My GoalChange the Way the World Makes Power

• Lead the way to profitably reducing GHG
  emissions, raise income and mitigate climate
  change

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Thank you
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Future Generation Options
Renewable Energy Options
Central Generation Options
No incremental fossil fuel line
Avg. Retail Power Price 8.1 / kWh
Recycled Energy Options
Avg. Industrial Power Price 5.5 / kWh
(33 efficiency)
(50 efficiency)
(100 efficiency)
(net fossil savings)