Creating Value from Steam Pressure

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TOWARDS THE BIOREFINERY Recycling Energy Waste in
Dry Mills to Generate Electricity and Enhance
Plant Profitability Presented to the Fuel
Ethanol Workshop and Tradeshow Madison, WI June
24, 2004
Sean Casten Chief Executive Officer 161
Industrial Blvd. Turners Falls, MA
01376 www.turbosteam.com
Creating Value from Steam Pressure
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The biorefinery

• The economics of petroleum refining are
  contingent on a broad product slate to hedge
  market risk against volatile feedstock prices
• Gasoline, kerosene, carbon black, organic
  chemicals, etc.
• The economics of wet mills are contingent on a
  broad product slate to hedge market risk against
  volatile feedstock prices
• Ethanol, animal feeds, corn syrup, ascorbic acid,
  etc.
• What does this suggest about the future of dry
  mills that limit their product slate to ethanol
  and (sometimes) DDGs?
• Wouldnt you like to have a hedge against the
  crunch imposed by low ethanol prices and high
  corn prices?

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The best short-term opportunities for product
diversification lie in upgrading waste to higher
value products.

• Economic theory says 20 bills are never on the
  ground experience says otherwise
• Conventional dry mill design leaves on the
  table by failing to convert energy waste into
  high-value electricity.
• Potential to generate zero or near-zero-cost
  electricity in most mills.
• Reduce mill operating costs / boost mill
  profitability
• Can be used to enhance reliability of mill
  electric supply
• Turns pollution control technology into
  revenue-generation technology
• Reduces environmental impact of mill operations
  (eligible for -support from CO2 offsets in some
  cases).

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Understanding 75 of US power generation in 30
seconds or less
The Rankine Power Plant
Steam Turbine Generator
Fuel (Coal, oil, nuclear, gas, etc.)
Electricity to Grid
Boiler
High Pressure Steam
Low Pressure Steam
Low Pressure Water
High Pressure Water
Heat to atmosphere
Cooling Tower
Pump
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Understanding dry mill energy plants in 30
seconds or less
Ethanol Dry Mill Energy Plant
Pressure Reduction Valve
VOCs Gas
Thermal Oxidizer / Boiler
High Pressure Steam
Low Pressure Steam
Low Pressure Water
High Pressure Water
Heat to process
Evaporators Other LP loads
Boiler Pump
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The opportunity
Steam Turbine Generator
Electricity to Plant Bus
VOCs Gas
Thermal Oxidizer / Boiler
Isolation Valve
Isolation Valve
Heat to process
Evaporators Other LP loads
Boiler Pump
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Several non-intuitive benefits of this approach.

• The presence of the LP steam load makes this
  generation 3X as efficient as the central power
  it displaces.
• Average Rankine plant converts only 33 of fuel
  into useful energy 2/3rds goes to cooling
  tower.
• Use of heat in mill eliminates this efficiency
  penalty
• Ensures that marginal generation cost is always
  less than utility kWh.
• Since 75 of the power plant is already built,
  the capital costs per kW installed are much less
  than central stations, despite the relative
  diseconomies of scale.
• 1,000 MW Rankine plant typical capital costs 1
  billion (1,000/kW)
• 1 MW steam turbine generator integrated into
  existing dry mill typical capital costs
  500,000 (500/kW)
• Similar logic applies to non-fuel operating costs
• Rankine power plant typical OM costs 1 c/kWh
• Long term Turbosteam service contract on 1 MW
  unit 0.1 c/kWh

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Other design possibilities

• Value can be enhanced by boosting boiler pressure
  and/or reducing process pressure to increase kW
  production per lb of steam. (Often possible
  without modifying existing equipment simply by
  easing back on operating pressure margins built
  into existing designs)
• Generator can be designed to provide ancillary
  benefits in addition to kWh savings (e.g.,
  enhanced reliability)
• Can displace need for backup generation in plant
  capital outlay

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Turbosteam has installed 102 systems in the U.S.,
and 167 worldwide since 1986.
Non-U.S.

• 17 countries
• 66 installations
• 36,488 kW

gt10,000 kW
5001 10000 kW
1001 5000 kW
501 1000 kW
1 500 kW
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The size of the opportunity going down the PRV
is a substantial fraction of the total plant load
in most dry mills.
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By displacing purchased power, these systems
increase operating profits by 0.5 4.0 c/gallon.
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Further, the expanded product slate makes mill
operations less dependent on price fluctuations
in any single commodity.
Conventional Dry Mill
Dry Mill With Energy Recycling
2.63 gallons Ethanol
1 bushel Corn
2.63 gallons Ethanol
1 bushel Corn
17.87 lbs DDGs
17.87 lbs DDGs
46,930 Btu Natural Gas
46,930 Btu Natural Gas
.5 kWh Electricity
1.07 kWh Electricity
.57 kWh Electricity
Source Grabaowski, Dr. Michael S., Fossil
Energy Use in the Manufacture of Corn Ethanol,
Prepared for National Corn Growers Association,
August 2002. On the web at http//www.ncga.com/e
thanol/pdfs/energy_balance_report_final_R1.PDF
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These conversion ratios and historic feedstock
prices show the dramatic value that a few
c/gallon can have on operating profits.
Sources Corn Illinois Average Farm Price
http//www.farmdoc.uiuc.edu/manage/pricehistory/Pr
iceHistory.asp Natural Gas U.S. DOE/EIA
Average U.S. Industrial Price Electricity U.S.
DOE/EIA, Average US Retail Price Ethanol
Minnesota Development Authority,
http//www.mda.state.mn.us/ethanol/economicimpact.
pdf
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A final observation on system design the key to
a successful project is to customize equipment
for specific site objectives.
Example Midwest Steel Mill (Now in design
stage) PRV reduces 900 psig steam down to 150
psig for plant-wide distribution
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Our approach is to identify and design to
customer-specific financial objectives.

• Identify Design with Most Rapid Capital Recovery
• Below this flow, incremental gains in turndown
  efficiency are offset by sacrificed peak power
  and higher /kW costs
• 180,000 lbs/hr design flow
• 6.5 MW rated power output
• 1.44 million/year annual savings
• 2.2 year simple payback (46 ROA)

• 2. Identify Design with Highest Annual Energy
  Cost Savings
• Above this flow, incremental gains in peak power
  production are offset by sacrificed low-end
  efficiency
• 275,000 lbs/hr design flow
• 10 MW rated power output
• 1.59 million/year annual savings
• 2.5 year simple payback (40 ROA)

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These points bound the financial opportunity, but
do not identify the optimum financial design.
6.5 MW 1.44 million/year savings
10 MW 1.59 million/year savings
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The final design selected is customized for to
balance technical, financial and operational
constraints.
Final Design

• 7.8 MW
• 216,000 lbs/hr design flow
• 900 psig / 825 inlet ? 150 psig exhaust

Financial Performance

• 45.6 million kWh/year generation
• 1.5 million/year annual energy savings
• 45 gross ROA
• 21 marginal ROA

Key points

• Good CHP plants are necessarily custom-designed
• Optimum design must factor in variable thermal
  loads, energy rates, financial objectives,
  turndown curves and subcomponent-vendors product
  limitations / sweet spots
• Designing strictly for a payback or cash
  generation runs the risk of leaving money on the
  table OR making poor use of final capital
  dollars.
• Similar logic applies to power-first CHP
  plants.
• Find a partner who has the ability to help you
  work through these design constraints.

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So is there an opportunity in your mill?
Typical Values
Extreme Values
Target Financial Return
lt2 years simple payback from energy savings
Above-market returns and/or Non-financial drivers