Modern Grid Initiative November 15, 2006

Energy Recycling – Enhancing the Grid

Thomas R. Casten

Past Chairman & CEOPrimary Energy, LLC

Conference MissionConference Mission(From Conference Invitation)(From Conference Invitation)

Create a shared national agenda for modernizing the electrical system.

Create a framework for upgrading the U.S. electric infrastructure

Actions taken will shape the direction of the grid for years, even decades

Collect best ideas from a broad group of stakeholders

An Inconvenient TruthAn Inconvenient Truth Al Gore has described global warming Al Gore has described global warming

as an ‘Inconvenient Truth’ – a reality that as an ‘Inconvenient Truth’ – a reality that we would rather not facewe would rather not face

Conventional wisdom: policy changes Conventional wisdom: policy changes that mandate GHG (Greenhouse Gas) that mandate GHG (Greenhouse Gas) reductions will increase energy costs reductions will increase energy costs and penalize industryand penalize industry

Electric generation produces 38% of US Electric generation produces 38% of US GHG emissionsGHG emissions

More ‘Inconvenient Truths”More ‘Inconvenient Truths” US industrial production shrinking at an US industrial production shrinking at an

alarming rate, especially in Midwestalarming rate, especially in Midwest

Electricity prices under pressure from Electricity prices under pressure from CAIR, added T&D system capital and CAIR, added T&D system capital and permanently higher fossil fuel pricespermanently higher fossil fuel prices

Our fossil fuel addiction dictates foreign Our fossil fuel addiction dictates foreign policy (and expensive wars), bloats balance policy (and expensive wars), bloats balance of payments deficits, and exacerbates of payments deficits, and exacerbates pollution control costspollution control costs

Final ‘Inconvenient Truth’Final ‘Inconvenient Truth’

Adding T&D does little to Adding T&D does little to mitigate the major energy mitigate the major energy

problems we faceproblems we face

‘‘A Convenient Truth’ A Convenient Truth’ Energy RecyclingEnergy Recycling

US industrial waste energy could produce 20% US industrial waste energy could produce 20% of US electricityof US electricity

Recycling creates significant new revenue streams Recycling creates significant new revenue streams for US manufacturers and reduces emissionsfor US manufacturers and reduces emissions

Power generation that recycles waste heat uses Power generation that recycles waste heat uses half of the fossil fuel of conventional generationhalf of the fossil fuel of conventional generation

Recycling cuts power costs, reduces emissionsRecycling cuts power costs, reduces emissions

US industries single best hope to regain US industries single best hope to regain competitiveness:competitiveness: recycle waste energy recycle waste energy

Examining Energy TrendsExamining Energy Trends New work by Robert U. Ayres examines New work by Robert U. Ayres examines

relationship of energy, conversion to relationship of energy, conversion to useful work, and GDP (Gross domestic useful work, and GDP (Gross domestic product)product)

Raw energy use and GDP do not Raw energy use and GDP do not correlate, economists treat energy as correlate, economists treat energy as simply a 4% factor in overall economysimply a 4% factor in overall economy

Ayres finds changes in useful work Ayres finds changes in useful work explain over 50% of past century’s explain over 50% of past century’s economic growtheconomic growth

Economic Growth Driven by Economic Growth Driven by Improving Energy EfficiencyImproving Energy Efficiency

Long trend of falling energy use per dollar Long trend of falling energy use per dollar of GDP, does not correlate with rising GDPof GDP, does not correlate with rising GDP

Also long trend of increasing efficiency of Also long trend of increasing efficiency of converting potential energy to useful workconverting potential energy to useful work

Useful work per $ of GDP was remarkably Useful work per $ of GDP was remarkably constant, explains most economic growthconstant, explains most economic growth

However, energy efficiency trends have However, energy efficiency trends have reversed, largely due to electric industry reversed, largely due to electric industry stagnationstagnation

US Exergy and Useful Work per $ GDP

-

2

4

6

8

10

12

14

16

18

Year

kWh

/ $G

DP

watts total exergy / $GDP watts useful work / $GDP 10 year moving average

KWh Useful Work / $GDP

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Year

kWh

/ $G

DP

kWh of useful work per $GDP 10 per. Mov. Avg. (kWh of useful work per $GDP)

Conversion Efficiency, Exergy to Useful Work

0%

2%

4%

6%

8%

10%

12%

14%

Year

Per

cent

of r

aw e

xerg

y to

use

ful w

ork

Conversion efficiency to useful work

5 per. Mov. Avg. (Conversion efficiency to useful work)

Conversion Efficiency, Exergy to Useful Work work 1960-2005

9%

10%

11%

12%

13%

14%

Year

% e

ffic

ienc

y of

con

vers

ion

% input exergy to useful work 5 per. Mov. Avg. (% input exergy to useful work)

Potential Energy (exergy) Conversion to Potential Energy (exergy) Conversion to Useful work by SectorUseful work by Sector

Look at the % of exergy converted to useful work Look at the % of exergy converted to useful work in low temperature heat, high temperature heat, in low temperature heat, high temperature heat, lighting, and electricitylighting, and electricity

Electricity is by far the most efficient way to use Electricity is by far the most efficient way to use energy, butenergy, but

Efficiency has stagnated in electricity productionEfficiency has stagnated in electricity production Stagnant power industry efficiency is key to many US Stagnant power industry efficiency is key to many US

problems, including industrial competitiveness, problems, including industrial competitiveness, pollution, jobs, balance of payments, and global pollution, jobs, balance of payments, and global warmingwarming

Conversion Efficiency of Low Temp Heat

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Year

Eff

icie

ncy

of C

on

vers

ion

Conversion Efficiency of High Temp Heat

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Year

Eff

icie

ncy

of C

onve

rsio

n

Conversion Efficiency of Electricity to Light

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Year

Effi

cien

cy o

f Con

vers

ion

US Electric Efficiency,1900-2005

0%

5%

10%

15%

20%

25%

30%

35%

Year

% E

ffic

ien

cy

Primary Efficiency, Delivered Electricity

Conversion Efficiency of All Electric Uses

46%

48%

50%

52%

54%

56%

58%

60%

2005

1995

1985

1975

1965

1955

1945

1935

1925

1915

1905

Year

Ele

c. C

on

vers

ion

to

Use

ful W

ork

US Electric Efficiency,1900-2005

0%

5%

10%

15%

20%

25%

30%

35%

Year

% E

ffic

ien

cy

Primary Efficiency, Delivered Electricity Final Efficiency raw energy to useful work

Ten year Moving Average 10 year moving average

We Need Better Generation We Need Better Generation OptionsOptions

Recycle energy to reduce cost Recycle energy to reduce cost and reduce pollutionand reduce pollution

Energy Recycling: Impact on Energy Recycling: Impact on the Gridthe Grid

Only local generation can recycle waste Only local generation can recycle waste energy – impossible to recycle waste energy – impossible to recycle waste energy from remote generation plantsenergy from remote generation plants

Local generation reduces loads on grid, Local generation reduces loads on grid, line losses, and need for new T&Dline losses, and need for new T&D

Local generation stabilizes voltages, can Local generation stabilizes voltages, can provide active capacitance and provide active capacitance and inductance, and reduces vulnerability to inductance, and reduces vulnerability to extreme weather and terroristsextreme weather and terrorists

Defining Recycled EnergyDefining Recycled Energy Recycled energy is useful energy Recycled energy is useful energy

derived from:derived from: Exhaust heat from any industrial process or Exhaust heat from any industrial process or

power generation power generation Industrial tail gas that would otherwise be Industrial tail gas that would otherwise be

flared, incinerated or vented, flared, incinerated or vented, Pressure drop in any gas Pressure drop in any gas

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%)

Decentralized Generation Option Decentralized Generation Option Combined Heat and PowerCombined Heat and Power

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

Recycling Industrial EnergyRecycling Industrial Energy

ElectricitySteam

Hot Water

End User Site

Energy Recycling

Plant

Electricity

Process Fuel

Finished Goods

Waste Energy

SavedEnergy Input

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%

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

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

Power Cost and COPower Cost and CO22 Policy Choices Policy Choices

Cost down Cost / MWh Cost up

CO

2 dow

n

CO

2/M

Wh

C

O2 u

p

Coal gasification, CCGT,

Cost up, CO2 up

Central generation with coal, no criteria pollutant control

Cost down, CO2 up

Wind, Geothermal, CO2 sequestering, on grid solar

Cost up, CO2 down

CHP, industrial energy recycling(Requires local generation) off

grid solar, local hydro

Cost down, CO2 down

Cost and Emissions Today

Policy Goal

How Can Policy Spur Recycled How Can Policy Spur Recycled Energy? Energy?

Modernize old rules that are now Modernize old rules that are now barriers to modern technologybarriers to modern technology

Enable Enable recycled energyrecycled energy projects to projects to capture more of value they createcapture more of value they create Reward local generation for avoiding T&D Reward local generation for avoiding T&D

capital and line lossescapital and line losses Pay part of health and environmental Pay part of health and environmental

savings to savings to energy recyclingenergy recycling facilities facilities

More Specific SuggestionsMore Specific Suggestions Provide open standard offer for power Provide open standard offer for power

from energy recycling facilitiesfrom energy recycling facilities

Provide limited loan guarantees for Provide limited loan guarantees for industrial energy recycling plants, valid industrial energy recycling plants, valid only if waste energy supply ceases only if waste energy supply ceases

Identify specific barriers to efficiency Identify specific barriers to efficiency and enact new rules that serve the social and enact new rules that serve the social purpose but do not block efficiency.purpose but do not block efficiency.

Convenient Truth:Convenient Truth:Energy Recycling Solves Multiple ProblemsEnergy Recycling Solves Multiple Problems US can ‘mine’ industrial waste energy, create US can ‘mine’ industrial waste energy, create

added revenue streams for industryadded revenue streams for industry Recycle presently wasted energy streams to provide Recycle presently wasted energy streams to provide

affordable, clean energyaffordable, clean energy

Requires unconventional, innovative governanceRequires unconventional, innovative governance Remove barriers to efficiencyRemove barriers to efficiency Pay part of health savings to recycled energy facilities Pay part of health savings to recycled energy facilities

that create those savingsthat create those savings Pay T&D savings to energy recycling facilitiesPay T&D savings to energy recycling facilities Permit energy recycling as pollution control device Permit energy recycling as pollution control device

Denmark Changed in Two DecadesDenmark Changed in Two Decades

Source: Danish Energy CenterSource: Danish Energy Center

Conclusions:Conclusions: A modern infrastructure must address A modern infrastructure must address

more than transmission failures. more than transmission failures. Consider impact on local pollution, global Consider impact on local pollution, global

warming, and industrial competitiveness warming, and industrial competitiveness

Energy recycling reduces power costs Energy recycling reduces power costs and emissions and largely eliminates the and emissions and largely eliminates the need for more T&D investmentsneed for more T&D investments

Our collective future depends on how Our collective future depends on how fast governments remove barriers to fast governments remove barriers to efficiency and encourage clean energyefficiency and encourage clean energy

Thank you for listening