Energy Efficiency: A Capital Offense

Energy Efficiency:A Capital Offense

Comments to MIT NESCAUM Symposium

Thomas R. Casten,Chairman

Recycled Energy Development, LLC

August 12, 2009

RED | the new greenwww.recycled-energy.com

Presentation Summary

• To reduce CO2 emissions, look at the main sources – generation of electricity and thermal energy

• Generation efficiency could be doubled, but deploying such efficiency is a capital offense under the Clean Air Act, causing loss of permit to operate

• The failure to focus on the main sources of CO2 emissions results in costly, inefficient regulations that force citizens to pay more to heat the planet

• The single most important action is to modernize rules to eliminate barriers to efficiency and allow waste energy recycling to capture most of the value it creates.

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The Energy/Carbon Story

The Generation Story

Conclusions

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The history of accessto energy services

• Our standard of living depends on access to energy services:• Heat, power, mechanical energy

• Until recently, homo sapiens depended only on metabolic energy:100,000 years ago: Fire tamed10,000 years ago: Animals domesticated5,000 years ago: Power from wind 2,000 years ago: Power from water

• Recent use of ‘Ancient Sunlight’ – fossil fuel:1760: First significant use of coal1859: Oil discovered 1885: Natural gas first used

• Access to energy services allowed population to explode


World population hasgrown dramatically


1999

1987

1975

1925

1810

1957

3 millionca. 1760:Watt’s steam engineallows coal to be used for power

A.D.B.C.

Source: various authors cited by the U.S. Bureau of Census

Source: Arulf Grubler (1998), BP Statistical Review of World Energy (2008), US Bureau of Census (2008)


Increases in world population andenergy consumption 1850-2007

100%

80%

60%

40%

20%

0%

100%

80%

60%

40%

20%

0%

100%

80%

60%

40%

20%

0%

Populationup 430%

Consumption per Capitaup 760%

Total Consumptionup 4600%

1850 1900 1950 2000 1850 1900 1950 2000 1850 1900 1950 2000

Nuclear

Natural Gas

Oil

Coal

Hydro

Wood

0 bn

1 bn

2 bn

1750 1800 1850 1900 1950 2000

Natural GasOilCoal

Ninety percent of human greenhouse gas emissions during the past century

100%

50%

0%1979

Emissions of Greenhouse Gasesfrom Fossil Fuels(cumulative, in MT CO2e)


Source: RED calculations based on data from BP Statistical Review andJ. David Hughes, Geological Survey of Canada (ret.)

90% GHG emissions since 1909


Conclusions



Looking for CO2 in all the wrong places

• Analysts slice the world into transportation, residential, commercial, and industrial and then look for ways to reduce CO2

• For example, latest McKinsey study of options uses this framework

• Others put faith in technology, calling for more R&D, without asking why generation efficiency has been stagnant for 50 years

• Others demand a specific path – inducing renewable energy – and thus emasculate market forces ability to optimize clean energy generation

• Electricity generation is the elephant in the room

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Generation efficiency –the elephant in the room

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


Electricity generation is thelargest source of CO2 emissions


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

f US

CO2 E

mis

sion

s

Inefficient heat and poweremits two-thirds of CO2


12%

14%

27%

42%

0% 25% 50%

Other Transport

Cars

Thermal

Electricity• Heat & power account for

69% 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

0%

50%

100%

1900 1920 1940 1960 1980 2000

US electricity generation is inefficient


Source: U.S. Energy Information Agency

Inefficientgeneration

U.S. Delivered Electric Efficiency

• Wastes energy• Inflates costs• Increases pollution

Homer Simpson’s power plant Springfield, ?


Two-thirds ofthe energy generated is released

into the atmosphere

Electricity generation plant Craig, CO


PollutionFuel

100%

Generation Consumption

Conventional electricity generation1960 (& 2009)


WasteHeat

65%

Transmission

UsefulPower

33%

WasteHeat 2%

Fuel

PollutionFuel

100%


WasteHeat33%

Combined Heat and Power Plant

UsefulPower

33%

Fuel

Decentralized generation, combined heat and power

UsefulThermalEnergy

33%

RecycleWaste

Heat

66%Efficient

No LineLosses

ElectricitySteam

Hot Water

End User Site

Energy Recycling Plant

Electricity

Process Fuel

Finished Goods

Waste Energy

SavedEnergyInput

Recycling industrial waste energy: Cost effective clean energy


Produces as much clean

energy each year as all

grid-connected photo-voltaic

solar generation produced in

2004

Recycling industrial waste energyCokenergy Mittal Steel, Northern Indiana



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

Waste energy recyclingis cost-effective

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

Average 2008 Retail Cost

Use Energy Twice


Cost of reducing CO2 vs. old CoalUS$ per ton

Only waste energy recycling lowers the cost of avoiding CO2 emissions

Use Energy Twice

The potential to use energy twice is enormous

• EPA study identifies 64,000 MW potential to recycle waste energy in 16 industries

• DOE study identifies 135,000 MW potential for fueled CHP that replaces thermal generation with waste heat from new electricity generation

• World Alliance for Decentralized Energy (WADE) study found potential to reduce U.S. CO2 by 20% and save $80 to $100 billion per year

• By contrast, deploying new renewable electricity generation will strongly raise electric costs.

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Policy observations

• All currently profitable low-carbon options involve recycling waste energy to increase efficiency

• But; the Clean Air Act, as administered, treats investments in generation efficiency as a ‘Major Modification’ and allows EPA to void the operating permit.

• Most existing electrical and thermal generation plants cannot economically meet current BACT to obtain a new permit

• Capital punishment may or may not deter crime, but it certainly deters investments in generation efficiency.

• Penalizing all carbon emissions won’t spur new and more efficient thermal and electric generation

• Old inefficient plants with free allowances are cheaper to operate than new efficient plants that must buy allowances


0%

50%

100%

1900 1920 1940 1960 1980 2000

U.S. Delivered Electric Efficiency

Steam Pressure Recovery190 Projects

Combined Heat & Power56 Projects

Industrial Waste Heat Recovery 14 Projects


We have proven this thesis with 200 projects ($2.0 billion)with double

conventional efficiency



Conclusions


Conclusions

• Using energy twice could cut CO2 by 20% while saving $80 to $100 billion per year, but:

• Current policies largely ignore options that use energy twice

• Changes to existing thermal or electric generating plant are a capital offense, potentially costing the operator the right to operate

• Laws, new an old, need to pay attention to encouraging efficiency – using energy twice.

• Willie Sutton robbed banks because that was where the money was. To profitably lower CO2 emissions, we must change the way the world generates electric and thermal energy.


Thank you


Documents

Energy Efficiency: A Capital Offense