CHP: One of the answers (but not the question)

CHP: One of the answers (but
not the question)

Presentation to Efficient Enterprises:
Powering American Industry

Sean Casten,
President & CEO
Recycled Energy Development LLC
Development,

June 23, 2009
US Capitol Building, Room HC-7

1
RED | the new green www.recycled-energy.com

Asking the right questions

• Technology-specific questions have minimal policy merit
merit.
• How could we deploy more CHP, how much CHP could we deploy, how
does CHP work are not especially enlightening.

• Much more constructive to ask questions about how to
better realize our goals
• How can we quickly and cost-effectively lower CO2 emissions?

• How can we enhance the competitive position of the US economy?

• How can we induce rapid, large scale private sector investment in the
nation’s aging (and increasingly, unacceptably dirty) energy
infrastructure?

• Understanding the potential for CHP is key to answering
these questions – but it is not the question.

2

Things you think are true aren’t.

1.
1 The past is a good predictor of the future

2.
2 The US energy sector is too big too capital intensive and
big, capital-intensive
too politically powerful to accommodate rapid,
transformative change.

3. Significant reductions in CO2 emissions will require
increased energy costs and/or technological breakthrough

In other words: Unexpected, transformative
changes can quickly reduce our CO2 emissions and
grow our economy… so long as we don’t constrain
economy don t
our future with our present conventional wisdom.
3

Transformative changes in our fossil
energy use are inevitable.

• Current fossil fuel extraction rates are unsustainable
• 50% of all the coal we have ever burned has been burned since 1970.

• 50% of all the oil we have ever burned has been burned since 1986.

• 50% of all the natural gas we have ever burned has been burned since
1990.

• Our choice is one of adaptation:
• Proactively, by increasing our energy efficiency?

• Reactively, forced to act by resource constraints?

• “If you choose not to decide, you still have made a choice”
h t t d id till h d h i ”
(Neal Peart)

4

Transformative shifts in our fossil
fuel use are inevitable.

5


1.

2.


6

Potential pace of electric sector
p
reform: 20% of US fleet built in just
10 years!
US Installed Generation Capacity, by Fuel Type

450
Natural Gas
400
Nuclear
350 Coal
Installe d GW

300
250
200 Final FERC rehearing
of 888
150
100
FERC O d 888 mandates
Order d t
50 1992 Energy Policy Act opens non-discriminatory
competitive markets transmission access
0
1975 1985 1995 2005

Source: US DOE, Energy Information Administration (www.doe.eia.gov)
7

New England’s FCM success is even
more dramatic.
• Typical NE power peak = 19 000 – 24 000 MW
19,000 24,000
• All time peak = 28,160 MW (8/6/06)

• ISO NE s
ISO-NE’s forward capacity market closed their first
capacity auction on 3/1/07; they have now completed two
forward capacity auctions (FCAs)
• FCM allowed demand resources (including, but not limited to CHP and
other behind-the-meter generation) to bid into markets and compete
with new-build generation to meet system supply needs.

• As of their most recent auction (FCA#2), they have 2,936
MW of demand resources that have been brought forward
under this program.
• Met over 10% of the system peak in under 3 years without
building a single power plant
plant.

Source: ISO-NE; website and personal correspondence.
8


1.

2.


9

CO2 reduction is not constrained by
technology nor economics.
1.
1 Non-renewable CO2 release comes from the combustion of
(previously sequestered) fossil carbon fuels.
• Uniquely among pollutants, the thing which causes the pollution costs
money; ergo, reducing CO2 pollution saves money.

• If done with greater efficiency, this cost reduction need not be coupled to
a reduction in standard of living.

2.
2 Current regulations generally do not encourage energy
efficiency, and in some cases discourage it.
• Clean Air Act has the right intent, but is methodologically flawed;
efficiency doesn’t count as a pollution control strategy!

• Ditto for modern utility regulation, which keeps the power flowing, but
does not allow utilities to use cost-control to maximize profits.

3.
3 Most US energy capital stock is old; to the degree it was
optimized, it was for yesterday’s energy prices.
10

The costs of current policy, and
potential for CHP.

US Electric Industry Fuel-Conversion Efficiency

100%
90%
80% Energy waste = Economic
70% / Environmental
60% opportunity
50%
40%
30%
20%
10%
0%
1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990
11

Homer Simpson’s plant wastes
Simpson s
lots of energy.

12

So do ours.

13

Energy flows in the US electric
sector.

14

Energy flows in a fueled CHP plant
(“topping cycle cogen”)

15

Energy flows in an energy
recycling plant (“bottoming cycle
( bottoming
cogen”)

16

CHP’s local nature gives it an innate
capital cost advantage.
i l d

US Average Capex ($/kW installed)
Line Loss & Total $ per
Generation T&D Redundancy new kW load
Central
$1,000 - $3,500 $1,400 1.44 $3,460 - $7,000
Approach

Local $1,200 -
$140 1.07 $1,430 - $4,430
Generation $4,000

17

Supporting data from FERC
Cost of new delivered electricity
15
2007–08 industry estimates, Moody's estimate of $7500/kWe: 25 ¢/kWh
14
Credit for
13 recovered and
Keystone (June 2007) reused heat
12 Fuel minus heat
MIT (2003)
credit
11

10 Transmission and
2007 US¢ per delivered kWh

Distribution
9
Firming and
8 integration

7 Operation and
p
Maintenance
6

5 Capital

4

3

2

1

0

-1
Nuclear plant Coal plant Large combined- Large wind farm Combined-cycle Building-scale Recovered-heat End-use efficiency
cycle gas plant
l l t industrial
i d t i l cogen cogen industrial
i d t i l cogen

Courtesy Jon Wellinghoff
18

Total potential for additional US CHP
is massive and transformative.
• DOE estimate: 135+ GW of opportunity for fueled-CHP

• EPA estimate: 65+ GW of opportunity for power
generation from currently wasted energy (including, but
not limited to waste heat).

• In total, represents 20% of entire US generation fleet

• Taking capacity factor into account, represents
approximately 40% of total US power consumption.

• If fully deployed, would reduce total US CO2 emissions by
deployed
20% AND would lower our cost of energy.

19

Achieving this level of CHP has
already been done by many of our
trading partners.

Percent of Total Power Generation from CHP, By Country

50

40
30

20

10

0
Latviia

Netherland s

India

USA
A

UK
K
rk

Belgium
m
Finland
d

Russia
a

Japa n

a
Canada

China
a

EU 25
5

France
e
Denmar

Source: Energy & Environmental Analysis
20

What CHP looks like: steel
manufacturer in Gary, IN.

• 95 MW of power recovered from the exhaust of 268 coke ovens.
• Saves host ~$40 million/year with no marginal fuel combustion or
CO2 release.
• Generates more clean power in 1 year than all the world s grid-
world’s grid
connected solar panels (with less CO2/MWh!)
Courtesy Primary Energy
21

What CHP looks like: silicon
manufacturer in Alloy, WV.

• RED will recycle hot gas to generate 45 MW of power from waste
heat on 120 MW furnace
• Competitive with West Virginia (coal) power prices.
prices

22

Ask the right questions
• What regulatory barriers exist to energy efficiency (in all
its flavors), and how can we remove them?
• Lesson from FERC 888 / FCM: unleashing a flood of private sector
investment need not require tearing down an entire dam – we simply
need to remove the critical bricks, and let the blocked resource do the
rest of the work for us.

• How do we reward the goal, instead of the path?
g , p
• More incentives for CHP / solar / wind / nuclear / clean coal are not the
answer; experience teaches that approach will cause massive unintended
consequences.

• We have enough time to change course – barely.

23

CHP: One of the answers (but not the question)

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