WADE 5 th Intl Conference, 2004 Recycling Energy with CHP and Decentralized Energy A Bridge to the Future Thomas R. Cas

1. WADE 5th Intl Conference, 2004 Recycling Energy with CHP and Decentralized Energy A Bridge to the Future Thomas R. Casten Chairman WADE World Alliance for Decentralized Energy

2. World Energy Situation • Growing energy demand is driving up fossil fuel prices • 132 nations increased energy use faster than USA last decade, including China and India • “Hubbert’s Peak” says world oil production will peak in the 2003 to 2005, then decline • Oil purchases are a massive wealth transfer, propping up dictators, religious zealots, and those supporting global terrorism

3. Fossil Use is Changing Climate • Increasing atmospheric CO2 is warming the globe, causing: • Increased frequency and severity of storms • Rising seal level could flood low countries, such as Bangladesh • More rapid species extinction & disease spread • Failure to recycle energy, and over reliance on central generation adds needless costs and CO2 emissions to every country

4. Cost of Work Drives Income per Capita • Changes in the real cost of work explain 80% of past per/capita income growth • “Work” is useful changes – moving people, transforming materials, lighting, etc • Cost of work function of: 1) fuel prices, 2) conversion efficiencies, 3) transmission losses, 4) appliance and vehicle conversion efficiency; 5) other steps from fuel to useful work.

5. Policy Implications • To promote improved standard of living, reduce real cost of work, by: • Increasing energy conversion efficiency in all sectors – heat and power generation, appliances, manufacturing • Reducing losses and costs of transmitting energy • Recycling energy • Widespread efficiency and energy conservation policies would reduce demand for fossil fuel, reducing energy prices and thus reducing the cost of work

6. Cost of Work Rising, Worldwide • Real fuel prices are increasing • Central electric generation efficiency has been frozen for 40 years at 33% • Electric T&D losses rising, due to grid congestion, remote generation • Appliance efficiency gains are slowing • Mandated growth of renewable energy will raise electric prices • These trends hurt per capita incomes

7. Energy Myths Lead to Bad Policy Choices • Myth #1: It is cheaper to move electricity than to move fuel – build mine mouth power stations • Myth #2: Central generation has economies of scale, costs less capital than smaller decentralized generation • Myth #3: Energy can only be used once • Myth #4: Heat and power generation are optimal, given current technology

8. The Rule of SevensFacts Versus Myth #1 • Moving fuel (coal, gas, or oil) takes 7 times less energy than moving electricity • Moving thermal energy takes 7 times more energy moving electricity • Thus, moving thermal energy takes 49 times more energy than moving fuel. • Implication: Burn fuel near thermal users in CHP plants to provide local heat and power

9. Asking the Right QuestionChallenges Myth #2 • Single large power plants are cheaper per kW than smaller plants, but: • Central power requires 1.1 to 1.25 kW new generation and new T&D wires to deliver 1 kilowatt of new power to users • Local power requires 1 kW new generation plus 10% of new T&D to deliver 1 kW to users • Total capital cost for central power 1.8 times cost of DG (US$2,500 versus $1,400)

10. Energy Can be RecycledChallenging Myth #3

11. What Energy Can Be Recycled? • Fuel and electricity is typically used only one time, with all waste discarded • Power plants burn fuel and then discard 2/3’s as heat • Industry transforms raw materials to finished goods and then vents heat, pressure, & waste fuels • Local power generation of heat and power recycles normally wasted heat • Industrial waste energy can be recycled to heat & power without extra fuel or pollution. • Use blast furnace gas, carbon black gas, hot exhaust, pressure drop, combustible wastes, agricultural wastes

12. Pollution 10% Waste Heat, no T&D loss Electricity Fuel 100% CHP Plants 90% Steam Chilled Water (At or near thermal users) Combined Heat and Power (CHP)

13. 10% Waste Heat 25% Electricity Waste Energy 100% 70% Steam Steam Generator BP Turbine Generator Recycled Energy (At user sites) No Added Pollution Capital costs similar to other CHP or DG plants

14. Recycled Energy Case Study: Primary Energy • We invested $360 million in six projects to recycle blast furnace gas and coke oven exhaust in four steel plants. • 440 MW electric and 460 MW steam capacity. • Return on assets exceeds 15% • Steel mills save over $100 million per year and avoid significant air pollution • Reduced CO2 equals uptake of one million acres of new trees.

15. 90 MW Recycled from Coke ProductionChicago in Background

16. DG, Using Conventional Technology, Saves 40% versus Central Generation WADE model challenges Myth #4

17. WADE Model Description • Model database has all generation choices; calculates costs to meet 20 year load growth with CG or DG • Central generation scenarios are user specified mix of electric-only plants • DG scenarios include good CHP (4,000 Btu heat recovery per kWh electric,) industrial recycled energy, and renewable DG • Model works for any country with local data on existing generation, load growth, T&D losses

18. US Results, CG versus DG, for Next 20 years (Billion Dollars)

19. Extrapolating US Analysis the World • We do not have sufficient data to run WADE model for the world, but: • We believe US numbers are directionally correct for CG versus DG • We analyzed conventional approach of IEA Reference Case versus optimal solutions with DG using US values

20. Pollution 67% Total Waste Line Losses 9% Fuel 100% Power Plant T&D and Transformers Worldwide CG for 2030 Load Growth 33% delivered electricity Generation: $890 / kW 4,800 GW worldwide $4.2 trillion Transmission: $1,380 / kW 4,800 GW $6.6trillion Totals: $2,495 / kW 4,368 GW $10.8 trillion

21. Pollution 10% Waste Heat, no T&D loss Electricity Fuel 100% CHP Plants 90% Steam Chilled Water (At or near thermal users) Worldwide DG for 2030 Load Growth Transmission: $138/kW (10% Cap.) 0.44 GW DG $600 billion $6.0 trillion Generation: $1,200/kW 4,368 GW World Cost: $5.2 trillion DG vs. CG: ($1.0 trillion) Totals: $1,338/kW 4,368 GW $5.8 trillion $5.0 trillion

22. Worldwide Benefits of Meeting 2030 Load Growth with Decentralized Energy • Consume 122 billion fewer barrels of oil equivalent (½ Saudi reserves) • $2.8 trillion less fossil fuel purchases • Reduced illness from air pollution • Much easier to supply electric services to entire population • Global warming might slow down

23. Potential Savings for China • WADE model has been run with Chinese data • Tomorrow morning we will present results

24. Summary and Implications • Worldwide energy policies, based on four energy myths, promote excessive energy use and cost • The current energy trends hurt per capita income in all countries • By promoting energy recycling, governments can lower the real cost of work, enhance income growth, and lessen environmental damage

25. Conference Goals • Help delegates, government officials, and media move beyond today’s energy myths • Offer a vision of the future based on DG that recycles energy • Provide analytical tools and experiences to illustrate value of needed policy changes • Encourage the widest possible dialogue between top energy policy and application specialists from all over the world

26. The Coming DG Revolution • The DG revolution is as important as the Green Revolution of 30 years ago • In time, the DG revolution will spread to all countries, but first movers will have advantages • We tip our hats to our enlightened hosts who seek to foster a DG revolution in the world’s largest nation

27. Thank you for listening!