Turning Down the Heat

1
Captive Power Plants, 2004 Recycling Energy A
Bridge to the Future Thomas R. Casten Chairman
WADE World Alliance for Decentralized Energy
2
World Energy Situation

• Growing energy demand is driving up fossil fuel
  prices
• 132 nations increased energy use faster than USA
  last decade, including India and China
• Hubberts Peak says world oil production will
  peak in the 2003 to 2005, then decline
• Oil purchases are a massive wealth transfer,
  propping up dictators, religious zealots, and
  those supporting global terrorism

3
Fossil Use is Changing Climate

• Increasing atmospheric CO2 is warming the globe,
  causing
• Increased frequency and severity of storms
• Threatens to flood low countries, such as
  Bangladesh
• More rapid species extinction disease spread
• Developing countries can save money by reducing
  generation and transmission losses, and also
  reduce CO2 emissions

4
Cost of Work Drives Income per Capita

• Recent economic analysis attributes 80 of
  per/capita income growth to changes in the real
  cost of work
• Physicists work is useful changes moving
  people, transforming product, illuminating, etc
• Cost of work effected by 1) fuel prices, 2)
  conversion efficiencies, 3) transmission losses,
  4) appliance and vehicle conversion efficiency
  5) any other steps from fuel to useful work.

5
But Cost of Work Is Rising

• Real fuel prices are increasing
• Central electric generation efficiency has been
  frozen for 40 years at 33
• TD losses are rising, due to grid congestion
• Appliance efficiency gains are slowing
• Mandated growth of renewable energy will raise
  electric prices
• Without efficiency improvement, per capita
  incomes could begin shrinking.

6
Transporting EnergyRule of Sevens

• One key to saving energy is choice of energy
  transmission, following rule of 7s
• Moving fuel (coal, gas, or oil) takes 7 times
  less energy than moving electricity, in best TD
  (larger penalty with undersized TD wires)
• Moving thermal energy takes 7 times more energy
  moving electricity
• Thus, moving thermal energy takes 49 times more
  energy than moving fuel.

7
Diseconomies of Scale

• Large central power plants cost less to build
  than smaller local power plants, but
• One new KW delivered from central power plants
  requires 1.5 kW new plant (55,500 Rupees) and 1.5
  KW new TD, (87,000 Rupees) total of 142,000
  Rupees
• One new kW delivered from DG requires 1 kW new
  generation (50,000 Rupees) plus 0.1 kW new TD
  (3,700 Rupees) total of 53,700 Rupees per
  delivered kW.

8
Local Generation Enables Energy Recycling
9
What is Recycled Energy?

• Most fuel and electricity is used once, with all
  waste discarded
• Power plants burn fuel and then discard 2/3s as
  heat
• Industry transforms raw materials to finished
  goods and then vents heat, pressure, waste
  fuels
• Captive power plants combine heat and power
  generation to recycle normally wasted heat
• Recycling industrial waste energy produces clean
  power no extra fossil fuel or pollution.
• Can recycled power from bagasse, blast furnace
  gas, carbon black gas, hot exhaust, pressure drop

10
Recycled Energy (At user sites)
No Added Pollution
Capital costs similar to other CHP or DG plants
11
Recycled Energy Case Study Primary Energy

• We invested 360 million in six projects to
  recycle blast furnace gas and coke oven exhaust
  in four steel plants.
• 440 MW electric and 460 MW steam capacity.
• Return on assets exceeds 15
• Steel mills save over 100 million per year and
  avoid significant air pollution
• Reduced CO2 equals uptake of one million acres of
  new trees.

12
90 MW Recycled from Coke ProductionChicago in
Background
13
What is Optimal Way to Meet Electric Load Growth
with CG or DG?
14
Central Versus Distributed Generation

• WADE model includes all generation choices
  calculates costs to meet 20 year expected load
  growth with CG or DG
• DG scenarios include good CHP (4,000 Btu heat
  recovery per kWh electric,) industrial recycled
  energy, and renewable DG
• Central generation scenario is user specified mix
  of electric-only plants, including renewable
• Can model any country need local data on
  existing generation, load growth, TD losses

15
US Results, CG versus DG, for Next 20 years
(Billion Dollars)
16
Extrapolating US Analysis the World

• Insufficient data to run WADE model for the world
• We believe US numbers are directionally correct
  for CG versus DG
• We analyzed conventional approach of IEA
  Reference Case versus optimal solutions with DG
  using US values

17
Conventional Central Generation
33 delivered electricity
Generation 890 / kW 4,800 GW worldwide 4.2
trillion
Transmission 1,380 / kW 4,800 GW 6.6trillion
To end users 2,495 / kW 4,368 GW 10.8 trillion
18
Combined Heat and Power (CHP)
Transmission 138/kW (10 Cap.) 0.44 GW DG 600
billion 6.0 trillion
Generation 1,200/kW 4,368 GW World Cost 5.2
trillion DG vs. CG (1.0 trillion)
To End Users 1,338/kW 4,368 GW 5.8
trillion 5.0 trillion
19
What is Lost if World Opts for DG?

• World will consume 122 billion fewer barrels of
  oil equivalent (½ Saudi reserves)
• Fossil fuel sales down 2.8 trillion
• Medical revenues from air pollution related
  illnesses may drop precipitously
• Governments might spend much of the savings to
  supply electric services to entire population
• Global warming might slow down

20
Potential Indian Savings

• No one has yet run WADE model for India
• We believe Indian analysis will show similar
  savings and support a future built on distributed
  generation that recycles normally wasted energy,
  avoids TD capital and TD losses

21
Part II A Case StudyIndian DG Miracle
22
Indias Potential Future

• The Indian economy has many elements in place for
  rapid economic growth
• 900 million person common market
• Many well educated people
• Solid basic industry
• However, inadequate access to electricity and
  frequent outages block progress.
• Until 1994, Indian policy absolutely favored
  central generation like every other country

23
The Indian Power System

• India has 100,000 megawatts of mostly central
  generation
• Only 60 of generated power reaches paying end
  users, due to line losses and theft
• Many people lack access to, or only receive power
  a few hours per day
• Government goal is to double delivered power in
  next decade.
• What has DG contributed?

24
Central Power Historically Favored

• State Electricity Boards were given monopoly
  rights to generate and distribute power
• Federal government focused on new central
  generation, assumed all generation equal, but
• 1 kWh generated locally replaces 1.5 to 1.8 kWh
  generated centrally and avoids TD capital costs
• Historically, state grids refused to purchase or
  offered a fraction of the value of local power
• These policies isolated wasteful monopolies,
  blocked innovation and efficiency, hurt industry

25
Sugar Cane DG Success Story

• Sugar cane converts sunlight efficiently to
  hydrocarbons
• Indian has 457 sugar cane mills
• Bagasse is incinerated at sugar mills
• 40 of bagasse can satisfy mills thermal and
  electric needs, rest could provide power for
  local area

26
Policies Changed

• In 1994, Ministry for Unconventional Energy
  encouraged SEBs to pay full value, pay half of
  interconnection costs and offer 13 year power
  purchase contracts with inflation adjustment
• Most states in cane producing areas agreed and
  encouraged sugar industry to invest in modern
  power plants, selling surplus power to grid
• The results are historic, not seen in any other
  country!

27
A DG Miracle is Underway!

• In 5 years, 87 projects with 710 megawatts
  capacity have been built or are under contract
• Adds 1 to Indian generation, but no line losses,
  so adds 2 to delivered power
• This new clean energy is five times the power
  that will be generated worldwide by solar PV
• Total potential from Indian bagasse is 5,000
  megawatts a sevenfold increase is possible

28
Economics of Bagasse based DG
29
Savings w/ Full Deployment

• Add 5,000 megawatts local power, avoids 8,330 MW
  of new central power and TD
• Will reduce power costs by 39 billion Rupees/year
• Will reduce carbon dioxide by 50 million metric
  tons per year
• Will cut sulfur dioxide emissions by 310,000
  metric tons per year
• Can provide 12.5 addition to delivered power in
  India, without new government investment

30
Lessons and Observations

• Policy changes have induced renewable energy
  development on a vast scale, exceeding every
  other country and
• Indian society already saving 5.6 billion Rupees
  per year, could rise to 39 billion savings/year
• Next step recycle industrial waste including
  blast furnace gas, carbon black gas, exhaust
  heat, refinery off-gas to generate 20 to 30,000
  added local megawatts with no incremental
  pollution

31
Implications

• Current trends hurt per capita income in all
  countries
• India has started to reduce real cost of work by
  inducing captive power plants that recycle sugar
  mill waste, avoid TD capital and losses
• More regulatory changes are needed to induce
  recycling of all industrial waste energy and to
  induce all other new generation to recycle waste
  heat.

32
Implications for CII

• Revenues and cost avoidance from recycled energy
  essential to remaining competitive
• Growth of generation near users is the least
  costly way to end energy poverty
• Changing Indian policy to favor all DG that
  recycles energy is key to economic growth
• Electricity is too important to be left to
  central planning and regulated monopolies

33
Importance of DG Revolution

• The DG revolution may, in time, match importance
  of the Green Revolution
• We hope the DG revolution spreads beyond India,
  perhaps even to the US some day
• We tip our hats to the enlightened government
  officials in India who have fostered a DG
  revolution
• We encourage CII to help open energy industry to
  competition

34
Thank you for listening!