Energy: Profitable mitigation

ACEEE 30th Anniversary Symposium: Energy Efficiency as an Economic Imperative April 26, 2010

Thomas R. Casten Chairman Recycled , LLC

RED | the new green 1 Presentation Summary

• Stagnate generation is causing many problems including climate change

• Conventional separate heat and power generation is inherently inefficient and mature

• Combining heat and power generation is essential to U.S. economic and environmental future.

RED | the new green 2 Electricity Generation is Key

Conventional Generation

Combined Heat & Power

RED | the new green 3 Electricity generation efficiency is low and stagnant

100%

• Raises industrial costs 75% Wasted • Needless Heat Ike in the White House, Casten in 50% high school

Lost Opportunity

Energy Efficiency% 25%

U.S. Delivered Electric Efficiency

0% 1900 1920 1940 1960 1980 2000

RED | the new green 4 Electric Generation is a major source

of fossil CO2 emissions in the US 50%

40%

30%

20% US Electric Power

Sector’s CO2 Emissions 10%

0% Percent of Total US Emissions CO2 Total of Percent

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Year RED | the new green 5 InefficientEmissions heat and of power U.S. CO generation2 emitsfrom two fossil-thirds fuels of CO2

Other Transport 13%

Electricity Passenger 40% Vehicles 21%

Thermal 26%

Source: Historical Data Series: Energy-Related Carbon Dioxide Emissions by Fuel Type, 1949-2006

RED | the new green 6 Generation inefficiency is the elephant in the room

“I’m right there in the room and no one even acknowledges me”

RED | the new green 7 Conversion of exergy to useful work

% input exergy to useful work 5 year average efficiency 14%

14%

13%

13%

12%

12%

11% No gain in two 11% decades 10% % efficiency of conversion

10%

9%

Year

RED | the new green 8 US electric sales history; rebound?

Mortgage Crisis: 125% Note: 12-month trailing averages to smooth seasonality 17 months & counting

September 11th: 100% 20 months

75% Gulf War: 12 months (baseline) (baseline) 50%

S&L Crisis:

Percentage Gain from 1975 20 months 35 year electricity sales 25% growth trend: 2.4% per year, population growth: 1.03%

0% 1975 1980 1985 1990 1995 2000 2005 2010 Source: EIA’s Monthly Energy Review: Table 7.6. Electricity End Use 9 RED | the new green 9 Current retail electric sales (monthly, actual)

350,000

325,000 January 2010 300,000 -latest data- set a new record for 275,000 electricity sales

250,000 (GWh)

225,000 Electricity Retail Sales 200,000

175,000

150,000 10 05 00 95 90 85 80 75 ------Jan Jan Jan Jan Jan Jan Jan Jan

Source: EIA’s Monthly Energy Review: Table 7.6. Electricity End Use 10 RED | the new green 10 Physics sets limits to fuel conversion efficiency

• Burning fuel releases exergy – ability to do work • Some exergy can be converted to work, always losses • All else becomes heat without producing any useful work

• Burning fuel just to make electricity exergy: • Limits energy services per unit of input energy

• Burning fuel to make low temperature creates little work, wastes exergy : • Limits energy services per unit of input energy

• Burning fuel to make heat and power extracts maximum work from exergy in input energy • Maximizes energy services per unit of input energy

RED | the new green 11 Electric Generation is Key

Conventional Generation

Combined Heat & Power

RED | the new green 12 Homer Simpson’s power plant exhausts 2/3rds of the input energy

RED | the new green 13 Most electric-only generation plants vent 2/3rds of input energy 600 MW plant, Craig, CO

RED | the new green 14 Conventional electricity generation 1960 (& 2010)

Fuel Waste Pollution Heat 100% 65%

Line Losses2% Useful Power 33%

Fuel Generation Transmission Consumption

RED | the new green 15 US generating assets rely on aging technology 2008 US generation weighed average: 29.3 years old 50 44.7 Baseload Non-baseload

40 35.0 33.2

30 27.4 years) ( 20 16.5

10 9.0 Weighted Average Generator Age Age Generator Average Weighted

0 Hydro Coal Oil Nuclear Natural Gas Renewable Source: EIA’s Electricity Generating Capacity file, 2008 capacity additions RED | the new green 16 16 Electric Generation is Key

Conventional Generation

Combined Heat & Power

RED | the new green 17 Topping cycle Local generation producing heat and power

Fuel 100% 34% No Line Useful Losses Thermal Energy 66% 33% Efficient Useful Recycle Power Waste 33% Heat

Fuel Combined Heat and Power Plant

RED | the new green 18 Bottoming cycle cogeneration Recycling industrial waste energy

Saved Energy Input

Energy Electricity Finished Goods Recycling Plant

Process Waste Fuel Energy

Electricity Steam Hot Water

End User Site

RED | the new green 19 U.S. potential to recycle waste energy

• New CHP could replace 50% of US fossil generation, per EPA and DOE studies

• This new CHP would reduce U.S. CO2 by 20% and save $80 to $100 billion per year, World Alliance for Decentralized Energy (WADE) study

• Good CHP, by recycling exergy, saves $20 to $90 per ton of avoided carbon

RED | the new green 20 Waste energy recycling is the lowest cost EPA compliant new generation

Average 2008 Retail Cost

All-in cost of new energy generation* US$ per delivered MWh Use Energy Twice

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

RED | the new green 21 U.S. electricity markets are economically inverted

Delivered power prices (up to ($/MWh) $400/MWh) $175

$150 Existing Lowest cost generation, new generation $125 largely brown power $100

$75 ($/MWh) ($/MWh) $50 EPA compliant new Average Power Power Average Price $25 generation options

$0 Large Industrial Regional New Energy New Fossil New Renewable Retail Rates Wholesale Recycling Generation Markets

22 RED | the new green 22 Industrial Waste Energy Recycling Examples

RED | the new green 23 Recycling industrial waste energy Cokenergy, Mittal , Northern Indiana

Produces as much clean energy each year as world’s grid- connected photo- voltaic solar generation in 2004

RED | the new green 24 Glass plant waste energy

RED | the new green 25 Using energy twice Recycled CHP

RED | the new green 26 WVA Manufacturing (Alloy, WV)

This $170 million project will recover 65 MW, equivalent to 325 MW solar that would cost $1.6 billion

RED | the new green 27 27 WVA: Existing Process

Silicon tap Furnace top

Hairpin Coolers

Coal-fired generation 28 RED | the new green 28 Current silicon metal production

360 MW Energy 800°F Input 200°F

Batch RED-WVA’s Project Design: Electrodes Baghouse Air-cooled Radiator (dissipates heat) Air leakage

Quartz

Silicon

RED | the new green 29 Silicon metal with energy recycling

Heat Recovery 360 MW 1,400°F Steam Generator Energy Input 200°F

Continuous Electrodes Baghouse Doors Steam Rotating Quartz/ Crucibles carbon Silicon 65 MW Clean Turbine Energy

30 RED | the new green 30 WVA heat recovery and power generation plant arrangement

WVA Manufacturing (Alloy, WV)

65 MW

3 1 4 2 F3 5 F14 F6 F15 F7

RED | the new green 31 31 Bottoming cycle opportunities

With proven recovery With advanced recovery technologies: technologies:

• Metals • Aluminum • Lime & cement • Transportation (train and • Glass (plate, bottles, truck engines) fiberglass) • Smaller pressure reducing • Blast furnace coke valves • Carbon black • Power boiler exhausts (biomass) • Gas compressor stations • Foundries • Brick making • Chemicals • Refineries • Large pressure reducing valves

RED | the new green 32 Topping cycle opportunities

With proven recovery With advanced recovery technologies: technologies:

• food processing • Single family homes • breweries • strip malls • all industrial process heating, • big box retailers commercial heating and cooling • schools • hospitals, universities, large shopping centers • high rise housing/planned communities • chemicals • refineries • Paper products • wallboard • ceramics, bricks, etc

RED | the new green 33 Why do $100 bills litter the ground? Policies block efficiency

• Utilities not rewarded for efficiency

• Monopoly rules shelter utilities from competition

• Old plants allowed 50 to 99 times the emissions of new plants, which gives old plants immortality

• Efficiency investments to existing thermal or electricity plants void the operating permit

• Environmental rules are pass/fail, with no value for reducing pollution below permitted level

• CHP plants capture only part of value they create

RED | the new green 34 Subsidies & uncosted externalities distort investment decisions

Average U.S. Societal Costs by Fuel Source, (in $ / MWh Generation) $100.0 $90.0 hour - $80.0

$60.0

$37.6 $40.0

$20.0 $13.5 $10.5 $7.6 $1.4 Subsidy / megawatt Subsidy lifetime $0.0

RED | the new green 35 275 projects avoid 5 million tons CO2 and capture <1% of opportunity

100% Industrial waste heat recovery 14 Projects

75% Steam pressure recovery 205 Projects

50% Combined Heat & Power 56 Projects Energy Efficiency%

25%

U.S. Delivered Electric Efficiency

0% 1900 1920 1940 1960 1980 2000

RED | the new green 36 Rapid move to CHP is possible: Denmark decentralized generation in 2 decades

Centralized System: 1980’s Decentralized System: 2010

Centralized Generation

RED |RED the new| the green new green 37 What if US had mimicked Denmark?

17%

16% Assumes a 20 year increase to 50% 15% electricity generation efficiency

14%

13%

12%

11% % efficiency of conversion Actual US efficiency 10%

9%

Year

RED | the new green 38 Conclusion: Using energy twice addresses many key problems

• Using energy twice could cut U.S CO2 by 20% while reducing the cost of useful energy services, thus promoting economic growth

• U.S. would use energy twice, but for regulations that ignore efficiency, distort prices and block competition

• Unintended consequence of overall energy and environmental regulations: We force citizens to pay to heat the planet

• To prosper & survive, the world must fix heat and power generation efficiency

RED | the new green 39 Thank you

RED | the new green 40