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Combined Heat and Power:

Introduction to the Technology and its Uses

Glenn Mauney

Southern Alliance for Clean Energy

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About SACE

Southern Alliance for CleanEnergy is celebrating 25 yearsas a leading advocate for clean,

responsible energy choices. Looking to the future, SACE is

even more committed to thepreservation, restoration and

protection of our environment.

For more information, please visit

www.cleanenergy.org


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Why Combined Heat and Power?

CHP technology can reach90% efficiency in combinedelectricity and thermal

generation

Emissions Reductions: Itsthe unsung pollution control

technology

As compared to separategeneration, CHP can reduce

CO2 over half, and

significantly reduce SOx and

NOx emissions


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Why Combined Heat and Power?

Doubling CHP use nationwide by 2030, a veryachievable goal, would add 1 million new jobs

Energy Independence and Security


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What is SACE doing?

Collaborating with environmental, state, industry

& utility allies:

Regulatory concept for gas & electric energyefficiency programsAdvancing CHP in the Tennessee Valley andthe Carolinas

NC CHP Initiative


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CHP: Using energy twice toreduce cost and emissions

Presentation to Southern Alliance forClean Energy webinar on CHPThomas R. Casten,

Chairman

Recycled Energy Development, LLC

September 28, 2011

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


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Presentation Summary

Relationship of standard of living, environmental impact of energyproduction and value of efficiency

Electricity generation is 33% efficient, has not improved for 50years, while good CHP is 80% efficient

Deploying optimal CHP would stimulate $500 million ofinvestment, cut U.S. fuel and CO2 by 20% and produce 20% plus

return on investment

Regulations are changing to encourage CHP

RED | the new green


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The CHP Story

Conclusions

RED | the new green - 3 - www.recycled-energy.com


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Energys Impact on Standard of livingand Environment

Standard of living is a function of access to useful energyservices:

Useful energy services include comfortable and lightedspaces, energy embodied in goods and services,refrigeration, and moving goods and services.

Environmental damage is a function of how much fossil fuel isburned

The U.S. burns 8 units of fuel per unit of useful energyservices, wasting 7 units, or 12.5% efficiency

Some countries burn 5 units of fuel/unit of useful energy Replacing obsolete central generation with optimal CHP would cut

U.S. emissions and fuel costs by 20% and significantly boostmanufacturing competitiveness.



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Fuel to useful energy services since1900 (Courtesy of Dr. Robert U. Ayres)

RED | the new green


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Fuel to useful energy services since1960

RED | the new green 6


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Electricity generation is thelargest source of CO2 and growing


Source: RED calculations based on data from Emissions of Greenhouse Gases in the United States 2007;State Energy Data Report; and Annual Energy Review.

0%

10%

20%

30%

40%

50%

1950 1960 1970 1980 1990 2000

CO2 Emissions by theU.S. Electric Power Sector

%o

fUSCO2Emissions


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Inefficient heat and power generationresponsible for two-thirds of CO2


Heat & power account for69% of fossil fuel emissions

Efficiency has been flatfor 50 years

Emissions of U.S. CO2 from Fossil Fuels

Source: RED calculations based on data from the U.S. Energy Information Agencyand the U.S. Department of Transport


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US electricity generation is inefficient andhas not improved in 5 decades


Source: U.S. Energy Information Agency

Wastedenergy

U.S. Delivered Electric Efficiency

System wastes energy Inflates costs Increases pollution

Why stagnant for 50 years?


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Generation inefficiency the elephant in the room

Im right there in the roomand no one even acknowledges me



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Conclusions

The Energy/Carbon Story



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Combined Heat and Power Defined

1978 Public Utility Policy Regulatory Policies Act (PURPA) definedCogeneration (AKA CHP) as, The simultaneous production of

electricity or mechanical energy and useful thermal energy

Topping Cycle: Produce electricity/mechanical energy, thenrecycle exhaust into useful thermal energy

Examples: engine and turbine generation with exhaust heatrecovery, high pressure steam through backpressure turbinegenerator and then process

Bottoming Cycle: Produce process thermal energy first, thenrecycle waste energy stream into electricity

Examples: hot exhaust from glass, lime, cement, metals,chemical manufacturing or gas compressor stations to boilwater and drive steam turbines, burning flare gas from Blastfurnaces, refineries to boil water and drive steam turbines

RED | the new green


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CHP advantages over centralelectricity-only generation

CHP does two jobs with one fire, increasing delivered efficiencyfrom grid average of 33% to 80% or higher

CHP eliminates line losses on power it produces and, by loweringcurrent flow reduces line losses on remaining central generation

CHP eliminates much of water use; instead of condensing steam,low pressure steam is sent to host for process use.

RED | the new green


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Whats wrong with electricity onlygeneration?

The best electricity-only generation wastes 50% of input energy The average U.S. central plant wastes 65% of input energy

Good CHP cuts net fuel per kilowatt-hour in half, using all but10% to 20% of fuels energy.

Remote generation causes line losses and requires expensiveT&D:

2010 U.S. 6.5% line losses cost $26 billion and wereresponsible for 185 million tons of CO2.

Peak line losses up to 25%, so at peak, system: Generates 1.3 MWh for every 1 MWh to users Requires 1.3 MW of T&D for every MW of peak load

CHP could cut line losses by 50% to 60%, eliminate need for 100gigawatts of peaking capacity

RED | the new green


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Why does power industry buildelectricity-only plants?

Simplifies transaction, one large central plant versus many smallCHP plants, no need to negotiate multiple contracts to sell

thermal energy or to purchase waste energy streams

Regulatory system does not reward efficiency History favored remote central electricity generation:

Local coal plants were bad neighbors, easier to build remotegeneration, even though this killed waste energy recycling

Coal without mandatory pollution control was least cost fuel No natural gas or gas turbines were available Local generation cut utility sales and profits and weakened

the logic for continued monopoly protection of generation

Building new transmission used to be easy, and the capitalwent into rate base and increased utility profits.

RED | the new green


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Homer Simpsons power plantSpringfield, ?



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Two-thirds ofthe energygeneratedis released

into theatmosphere

Electricity generation plantCraig, CO



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PollutionFuel

100%

Generation Consumption

Conventional electricity generation1960 (& 2009)


WasteHeat

65%

Transmission

UsefulPower

33%

Line Losses

2%

Fuel


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PollutionFuel

100%


Waste Heat

20%

Combined Heat and Power Plant

UsefulPower

33%

Fuel

CHP, using energy twiceLocal generation producing heat and power

UsefulThermalEnergy

47%

RecycleWaste

Heat

80%Efficient

Reduces

LineLosses


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ElectricitySteam

Hot Water

End User Site

EnergyRecycling

Plant

Electricity

ProcessFuel

Finished Goods

WasteEnergy

SavedEnergyInput

Recycling industrial waste energy:Cost effective clean energy



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U.S. Delivered Electric Efficiency

Steam Pressure Recovery190 Projects

Combined Heat & Power56 Projects

Industrial Waste Heat Recovery14 Projects


We have proven this thesis:275 projects, 11,000 MW, with double

conventional efficiency


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RED | the new green

Silicon Furnace Alloy WV

This $250million project

will recover

65 MW,equivalent to325 MW solar

that wouldcost $1.6

billion



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Glass plant waste energy



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Using energy twiceRecycled CHP


Use wasteheat tomake

steam,drive aturbinegenerator,and supply

thermalenergy to

dairyacross theroad.


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Produces asmuch clean

energy eachyear as all

grid-connectedphoto-voltaic

solar generationproduced in

2004

Recycling industrial waste energyCokenergy Mittal Steel, Northern Indiana



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* Includes T&D, line losses, backup generation and subsidies

CHP/WERis least cost new generation

All-in Cost ofClean Energy Generation*US$ per delivered MWh

Average 2009 Retail Cost

CHPusingenergytwice


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Cost of reducing CO2 vs. old CoalUS$ per ton

Only CHP CO2 reduction is currentlyprofitable to society

CHPusingenergytwice


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RED | the new green


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CHP can balance wind variability andfree up transmission

Grid managers must match generation to load every second there is no cost-effective way to store electricity at grid levels

Wind generation is fuel and CO2 free, but varies dramatically,creating balancing problems for grid managers

Oversized CHP can ramp up quickly and provide spinningreserves for wind without fuel penalties

Wind growth blocked by lack of transmission capacity Two major studies say U.S. needs 10,000 to 15,000 miles of

new transmission lines, but past ten years average build was62 miles per year.

CHP can provide voltage support to reduce line losses, and bygenerating load near users, free existing wires to carry more wind

power.

RED | the new green


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CHP/spinning reserves versusconventional approaches

RED | the new green


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CHP/spinning reserve savings versusconventional wind backup

To back up a 120 megawatt wind farm with spinning reserves: Using part-loaded electricity-only plant burns an incremental

$4.3 million of natural gas per year

Using the same turbine in CHP mode, with the part loadwaste heat displacing host boiler fuel saves $7.7 million per

year, a difference of $12 million per year CHP/spinning reserve support of wind farm saves society up

to $34 per MWh of wind generation

RED | the new green


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U.S. CHP potential

U.S. EPA study identified 64,000 MW potential to recycle wasteenergy in 16 industries

U.S. DOE study identified 150,000 MW potential for fueled CHPthat replaces thermal generation with waste heat from new

electricity generation

The World Alliance for Decentralized Energy (WADE) said CHPcould reduce U.S. CO2 by 20% and save $80 to $100 billion/year

Replacing obsolete (and old) central generation with good CHPwould substitute $350 to $500 billion of capital to save $80 to

$100 billion per year, or a 4.2 to 5 year payback ~ 20% to 22%unlevered return on investment to society.

RED | the new green


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Is there something wrong with the CHPthesis?

If CHP truly has all these advantages, then why havent wealready replaced all of the more expensive generation?Something must be wrong with this thesis

Something is wrong, but not with the CHP thesis. Obsoletepolicies have long kept CHP from monetizing the values it

provides to society

Until recently, no tax credits, no renewable energy credits,no payment for reducing T&D capital or line losses, and then

clean CHP had to compete with old dirty coal

Each policy barrier is under attack, with much progress,making CHP cost effective across the U.S.

Policy makers are increasingly asking why electric efficiency hasbeen stagnant for 50 years. CHPs day is coming.



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The Energy/Carbon Story

The CHP Story

Conclusions



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Conclusions

Optimal CHP deployment would require $500 billion ofinvestment, save $80 to $100 billion per year, produce abovemarket ROE of 20% to 35% and cut U.S. CO2 by 20%

Changing regulations allow CHP to help manufacturers andcommercial complexes save money, reduce their environmentalfootprint, and improve their competitive position.

Governance is being improved, though efforts by SACE andothers, and new rules increasingly make efficiency the fuel of

the future.



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RED | the new green

For moreinformation,see my 1998

book,Turning Offthe Heat,PrometheusPress


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Thank you

For more information:

www.recycled-energy.com, or

Email Tom Casten [email protected], orCall 630-590-6030


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