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
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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.
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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.
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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)
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Transformative shifts in our fossil
fuel use are inevitable.
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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
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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)
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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.
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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
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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.
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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
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Homer Simpson’s plant wastes
Simpson s
lots of energy.
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So do ours.
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Energy flows in the US electric
sector.
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Energy flows in a fueled CHP plant
(“topping cycle cogen”)
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Energy flows in an energy
recycling plant (“bottoming cycle
( bottoming
cogen”)
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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
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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
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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.
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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
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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
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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
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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.
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