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Tenth Annual Midwest Energy Conference March 7, 2007 How Best Satisfy Midwest Electric Load Growth? Thomas R. Casten Ch

Tenth Annual Midwest Energy Conference March 7, 2007 How Best Satisfy Midwest Electric Load Growth? Thomas R. Casten Chairman Recycled Energy Development. Four Questions . Where are electricity prices headed over next five to ten years? What is optimal new generation?

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Tenth Annual Midwest Energy Conference March 7, 2007 How Best Satisfy Midwest Electric Load Growth? Thomas R. Casten Ch

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  1. Tenth Annual Midwest Energy Conference March 7, 2007 How Best Satisfy Midwest Electric Load Growth? Thomas R. Casten Chairman Recycled Energy Development

  2. Four Questions • Where are electricity prices headed over next five to ten years? • What is optimal new generation? • What blocks optimal generation choices? • What changes would induce better choices?

  3. Electricity Prices Likely to Double in Five to Ten Years • Emission rules force coal plants to invest $300- $800/kW and lower efficiency, or to retire plants • Long-term fuel contracts below spot market • Massive investment in T&D will raise rates • Carbon credits inevitable, $20/ton adds 2 cents/kWh to Midwest delivered power costs • New coal plants require 10 to 12 cents per delivered kWh, plus carbon permit costs • These factors will add 6 to 8 cents/kWh to average retail rates.

  4. Midwestern Plant Closing Risk

  5. How Best Satisfy Electric Load Growth and Plant Retirement? • Lowest delivered cost per kilowatt-hour? • Least criteria pollutant emissions? • Least greenhouse gas (GHG) emissions? • Least requirement for system redundancy? • Lowest line losses? • Best power quality? • Least grid vulnerability?

  6. Future Generation Options Renewable Energy Options Central Generation Options No incremental fossil fuel line Avg. Retail Power Price 8.1¢ / kWh Recycled Energy Options Avg. Industrial Power Price 5.5¢ / kWh (33% efficiency) (net fossil savings) (100% efficiency) (50% efficiency)

  7. Local Options that Recycle Energy Central Gen Options Lowest Cost Central Option

  8. Pollution 67% Total Waste Line Losses 9% Fuel 100% Power Plant T&D and Transformers Conventional Central Generation 33% delivered electricity Generation: $1200-$2500/kW Transmission: $1,400/kW End user: .91 kW: $2,900-$4,100/peak kW

  9. 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) Generation: $1,200 -$1,600/kW DG vs. CG: Transmission $140/kW (10% CG) End users: .98 kW $1,400 -$1,800/kW Saves $1,100-$1,700/kW

  10. 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

  11. 90 MW Recycled from Coke ProductionChicago in Background

  12. Potential to Recycle Energy • Convert industrial waste energy into heat and power with on-site energy recycling plants • 95,000 megawatts potential , 9,900 MW in service • Build Combined Heat and Power (CHP) near thermal users to recycle waste thermal energy • Potential for up to ½ of all US generated power with CHP plants

  13. Best New Generation: Recycle Industrial Energy • Wasted energy streams in nineteen industries could generate 19% of US electricity Recycled Energy in the US 9,900 MW Recycled Energy in Service 95,000 MW Identified Opportunities Source:USEPA 2004 Study

  14. US Industrial Recycled Energy Potential . • Gas compressor stations: 16,200 GWh • Flare & stack gas: 148,000 GWh • Steam pressure drop: 78,000 GWh • Estimated exhaust heat: 300,000 GWh • Total Potential: 492,000 GWh • Est. Recycled Energy Cap. 95,000 MW • For all remaining thermal load, install CHP plants, fueled with gas, coal, and biomass

  15. Local Generation Options Central Generation Options CO2 Emissions Per Delivered MWHBy Generation Type

  16. Central Plants Local Plants that Recycle Energy Cost and CO2 per Delivered MWh

  17. Unique Midwest Option for Load Growth Induce CHP at every ethanol plant 50 MW each plant, 90% efficient, avoids transmission investments, less GHG, AND Slashes cost of ethanol

  18. Ethanol Hosted CHP

  19. CO2/Year from 55 Million Gallon Ethanol Plant & 50 MW Electricity/hr

  20. What Blocks Optimal Local Generation? • Conventional wisdom is biased to CG • CG easier to plan and control • Decisions based on cost at generation plant, instead of on cost of delivered kWh • Monopoly protection creates barriers to local gen • Local gen not paid for values it creates, including T&D capital savings, line loss avoidance, CO2 reduction, and health savings • Central gen and associated T&D guaranteed by rate payers, local gen not guaranteed

  21. What Would Induce Optimal Generation Choices? • Long-term contracts for best delivered kWh • Pay local generation plants for grid support • Factor in health and environmental costs in generation decisions • Insure new industrial energy recycling plants against risk of host ceasing to supply waste heat • Monetize carbon emissions

  22. Summary • Power prices will likely double in 5-10 years • Best option for new generation is local generation that recycles waste energy. • CHP at ethanol plants saves 36% to 54% versus new central coal plant generation, and makes ethanol competitive • Barriers and denial of benefits blocks good generation choices • Regulators can fix the bias and induce best new generation.

  23. Thank you for listening!

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