Captive Power Plants, 2004 Recycling Energy A Bridge to the Future Thomas R. Casten Chairman WADE World Alliance for Decentralized Energy.

Captive Power Plants, 2004

Recycling EnergyA Bridge to the Future

Thomas R. CastenChairman WADE

World Alliance for Decentralized Energy

World Energy SituationWorld Energy Situation

Growing energy demand is driving up Growing energy demand is driving up fossil fuel prices fossil fuel prices

132 nations increased energy use faster than 132 nations increased energy use faster than USA last decade, including India and ChinaUSA last decade, including India and China

““Hubbert’s Peak” says world oil production Hubbert’s Peak” says world oil production will peak in the 2003 to 2005, then declinewill peak in the 2003 to 2005, then decline

Oil purchases are a massive wealth transfer, Oil purchases are a massive wealth transfer, propping up dictators, religious zealots, and propping up dictators, religious zealots, and those supporting global terrorismthose supporting global terrorism

Fossil Use is Changing ClimateFossil Use is Changing Climate

Increasing atmospheric COIncreasing atmospheric CO22 is warming the is warming the

globe, causing:globe, causing: Increased frequency and severity of stormsIncreased frequency and severity of storms Threatens to flood low countries, such as Threatens to flood low countries, such as

BangladeshBangladesh More rapid species extinction & disease spreadMore rapid species extinction & disease spread

Developing countries can save money by Developing countries can save money by reducing generation and transmission reducing generation and transmission losses, and also reduce COlosses, and also reduce CO22 emissions emissions

Cost of Work Drives Income per Cost of Work Drives Income per CapitaCapita

Recent economic analysis attributes 80% Recent economic analysis attributes 80% of per/capita income growth to changes in of per/capita income growth to changes in the real cost of workthe real cost of work Physicists “work” is useful changes – moving Physicists “work” is useful changes – moving

people, transforming product, illuminating, etcpeople, transforming product, illuminating, etc Cost of work effected by: 1) fuel prices, 2) Cost of work effected by: 1) fuel prices, 2)

conversion efficiencies, 3) transmission conversion efficiencies, 3) transmission losses, 4) appliance and vehicle conversion losses, 4) appliance and vehicle conversion efficiency; 5) any other steps from fuel to efficiency; 5) any other steps from fuel to useful work.useful work.

But Cost of Work Is RisingBut Cost of Work Is Rising Real fuel prices are increasingReal fuel prices are increasing Central electric generation efficiency has Central electric generation efficiency has

been frozen for 40 years at 33%been frozen for 40 years at 33% T&D losses are rising, due to grid T&D losses are rising, due to grid

congestioncongestion Appliance efficiency gains are slowingAppliance efficiency gains are slowing Mandated growth of renewable energy will Mandated growth of renewable energy will

raise electric prices raise electric prices Without efficiency improvement, per capita Without efficiency improvement, per capita

incomes could begin shrinking.incomes could begin shrinking.

Transporting EnergyTransporting EnergyRule of SevensRule of Sevens

One key to saving energy is choice of One key to saving energy is choice of energy transmission, following rule of 7’senergy transmission, following rule of 7’s Moving fuel (coal, gas, or oil) takes 7 times less Moving fuel (coal, gas, or oil) takes 7 times less

energy than moving electricity, in best T&D energy than moving electricity, in best T&D (larger penalty with undersized T&D wires)(larger penalty with undersized T&D wires)

Moving thermal energy takes 7 times more Moving thermal energy takes 7 times more energy moving electricityenergy moving electricity

Thus, moving thermal energy takes 49 times Thus, moving thermal energy takes 49 times more energy than moving fuel.more energy than moving fuel.

Diseconomies of ScaleDiseconomies of Scale

Large central power plants cost less to Large central power plants cost less to build than smaller local power plants, but:build than smaller local power plants, but: One new KW delivered from central power One new KW delivered from central power

plants requires 1.5 kW new plant (55,500 plants requires 1.5 kW new plant (55,500 Rupees) and 1.5 KW new T&D, (87,000 Rupees); Rupees) and 1.5 KW new T&D, (87,000 Rupees); total of 142,000 Rupeestotal of 142,000 Rupees

One new kW delivered from DG requires 1 kW One new kW delivered from DG requires 1 kW new generation (50,000 Rupees) plus 0.1 kW new generation (50,000 Rupees) plus 0.1 kW new T&D (3,700 Rupees); total of 53,700 new T&D (3,700 Rupees); total of 53,700 Rupees per delivered kW.Rupees per delivered kW.

Local Generation Enables Energy Local Generation Enables Energy RecyclingRecycling

What is Recycled Energy?What is Recycled Energy?

Most fuel and electricity is used once, with all Most fuel and electricity is used once, with all waste discardedwaste discarded

Power plants burn fuel and then discard 2/3’s as heatPower plants burn fuel and then discard 2/3’s as heat Industry transforms raw materials to finished goods Industry transforms raw materials to finished goods

and then vents heat, pressure, & waste fuelsand then vents heat, pressure, & waste fuels

Captive power plants combine heat and power Captive power plants combine heat and power generation to recycle normally wasted heat generation to recycle normally wasted heat

Recycling industrial waste energy produces clean Recycling industrial waste energy produces clean power; no extra fossil fuel or pollution. power; no extra fossil fuel or pollution.

Can recycled power from bagasse, blast furnace gas, Can recycled power from bagasse, blast furnace gas, carbon black gas, hot exhaust, pressure dropcarbon black gas, hot exhaust, pressure drop

Recycled Energy Recycled Energy ((At user sites)

Waste Energy

100%

10% Waste Heat

Steam Generator

70%

Steam

25% Electricity

BP Turbine Generator

No Added Pollution

Capital costs similar to other CHP or DG plants

Recycled Energy Case Study: Recycled Energy Case Study: Primary EnergyPrimary Energy

We invested We invested $360$360 million in six projects to million in six projects to recycle blast furnace gas and coke oven recycle blast furnace gas and coke oven exhaust in four steel plants.exhaust in four steel plants. 440 MW electric and 460 MW steam capacity. 440 MW electric and 460 MW steam capacity.

Return on assets exceeds 15% Return on assets exceeds 15%

Steel mills save over Steel mills save over $100$100 million per year million per year and avoid significant air pollution and avoid significant air pollution

Reduced COReduced CO22 equals uptake of one million equals uptake of one million

acres of new trees.acres of new trees.

90 MW Recycled from Coke Production90 MW Recycled from Coke ProductionChicago in BackgroundChicago in Background

What is Optimal Way to Meet What is Optimal Way to Meet Electric Load Growth; with CG Electric Load Growth; with CG

or DG?or DG?

Central Versus Distributed GenerationCentral Versus Distributed Generation

WADE model includes all generation WADE model includes all generation choices; calculates costs to meet 20 year choices; calculates costs to meet 20 year expected load growth with CG or DGexpected load growth with CG or DG DG scenarios include good CHP (4,000 Btu DG scenarios include good CHP (4,000 Btu

heat recovery per kWh electric,) industrial heat recovery per kWh electric,) industrial recycled energy, and renewable DGrecycled energy, and renewable DG

Central generation scenario is user specified Central generation scenario is user specified mix of electric-only plants, including renewablemix of electric-only plants, including renewable

Can model any country; need local data on Can model any country; need local data on existing generation, load growth, T&D lossesexisting generation, load growth, T&D losses

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

ItemItem All CG All DG Savings % Saved

Capacity + T&D $831 $504 $326 39%

Power CostPower Cost $145 $92 $53 36%36%

Tons NOxTons NOx 288288 122122 166166 58%58%

Tons SOTons SO22 333333 1919 314314 94%94%

MM Tonnes COMM Tonnes CO22 776776 394394 381381 49%49%

Extrapolating US Analysis the WorldExtrapolating US Analysis the World

Insufficient data to run WADE model for the Insufficient data to run WADE model for the worldworld

We believe US numbers are directionally We believe US numbers are directionally correct for CG versus DGcorrect for CG versus DG

We analyzed conventional approach of IEA We analyzed conventional approach of IEA Reference Case versus optimal solutions Reference Case versus optimal solutions with DG using US valueswith DG using US values

Conventional Central GenerationConventional Central Generation

Fuel

100%

33% delivered electricityPower Plant

T&D and Transformers

Pollution

67% Total Waste

Line Losses 9%

Generation:$890 / kW4,800 GW worldwide

$4.2 trillion

Transmission:$1,380 / kW4,800 GW

$6.6trillion

To end users:$2,495 / kW4,368 GW

$10.8 trillion

Combined Heat and Power (CHP)Combined Heat and Power (CHP)

Fuel

100% Steam

Electricity

Chilled Water

90%

10% Waste Heat, no T&D loss

Pollution

(At or near thermal users)

CHP Plants

Generation:$1,200/kW 4,368 GWWorld Cost: $5.2 trillion

DG vs. CG: ($1.0 trillion)

Transmission $138/kW (10% Cap.) 0.44 GW DG$600 billion

$6.0 trillion

To End Users$1,338/kW 4,368 GW$5.8 trillion

$5.0 trillion

What is Lost if World Opts for DG?What is Lost if World Opts for DG?

World will consume 122 billion fewer World will consume 122 billion fewer barrels of oil equivalent (½ Saudi reserves)barrels of oil equivalent (½ Saudi reserves)

Fossil fuel sales down $2.8 trillionFossil fuel sales down $2.8 trillion

Medical revenues from air pollution related Medical revenues from air pollution related illnesses may drop precipitouslyillnesses may drop precipitously

Governments might spend much of the Governments might spend much of the savings to supply electric services to savings to supply electric services to entire population entire population

Global warming might slow downGlobal warming might slow down

Potential Indian SavingsPotential Indian Savings

No one has yet run WADE model for IndiaNo one has yet run WADE model for India

We believe Indian analysis will show similar We believe Indian analysis will show similar savings and support a future built on savings and support a future built on distributed generation that recycles distributed generation that recycles normally wasted energy, avoids T&D normally wasted energy, avoids T&D capital and T&D lossescapital and T&D losses

Part II A Case StudyPart II A Case Study

Indian DG MiracleIndian DG Miracle

India’s Potential FutureIndia’s Potential Future

The Indian economy has many elements in The Indian economy has many elements in place for rapid economic growth place for rapid economic growth

900 million person common market900 million person common market Many well educated peopleMany well educated people Solid basic industrySolid basic industry

However, inadequate access to electricity and However, inadequate access to electricity and frequent outages block progress.frequent outages block progress.

Until 1994, Indian policy absolutely favored Until 1994, Indian policy absolutely favored central generation – like every other countrycentral generation – like every other country

The Indian Power SystemThe Indian Power System

India has 100,000 megawatts of mostly India has 100,000 megawatts of mostly central generationcentral generation Only 60% of generated power reaches paying Only 60% of generated power reaches paying

end users, due to line losses and theftend users, due to line losses and theft Many people lack access to, or only receive Many people lack access to, or only receive

power a few hours per daypower a few hours per day Government goal is to double delivered power Government goal is to double delivered power

in next decade. in next decade.

What has DG contributed?What has DG contributed?

Central Power Historically FavoredCentral Power Historically Favored

State Electricity Boards were given monopoly State Electricity Boards were given monopoly rights to generate and distribute powerrights to generate and distribute power

Federal government focused on new central Federal government focused on new central generation, assumed all generation equal, but:generation, assumed all generation equal, but:

1 kWh generated locally replaces 1.5 to 1.8 kWh 1 kWh generated locally replaces 1.5 to 1.8 kWh generated centrally and avoids T&D capital costsgenerated centrally and avoids T&D capital costs

Historically, state grids refused to purchase or Historically, state grids refused to purchase or offered a fraction of the value of local power offered a fraction of the value of local power

These policies isolated wasteful monopolies, These policies isolated wasteful monopolies, blocked innovation and efficiency, hurt industryblocked innovation and efficiency, hurt industry

Sugar Cane DG Success StorySugar Cane DG Success Story

Sugar cane converts sunlight efficiently Sugar cane converts sunlight efficiently to hydrocarbonsto hydrocarbons

Indian has 457 sugar cane millsIndian has 457 sugar cane mills

Bagasse is incinerated at sugar millsBagasse is incinerated at sugar mills

40% of bagasse can satisfy mill’s thermal 40% of bagasse can satisfy mill’s thermal and electric needs, rest could provide and electric needs, rest could provide power for local areapower for local area

Policies ChangedPolicies Changed

In 1994, Ministry for Unconventional Energy In 1994, Ministry for Unconventional Energy encouraged SEB’s to pay full value, pay half of encouraged SEB’s to pay full value, pay half of interconnection costs and offer 13 year power interconnection costs and offer 13 year power purchase contracts with inflation adjustmentpurchase contracts with inflation adjustment

Most states in cane producing areas agreed and Most states in cane producing areas agreed and encouraged sugar industry to invest in modern encouraged sugar industry to invest in modern power plants, selling surplus power to gridpower plants, selling surplus power to grid

The results are historic, not seen in any other The results are historic, not seen in any other country!country!

A DG Miracle is Underway!A DG Miracle is Underway!

In 5 years, 87 projects with 710 megawatts In 5 years, 87 projects with 710 megawatts capacity have been built or are under contractcapacity have been built or are under contract

Adds 1% to Indian generation, but no line losses, so Adds 1% to Indian generation, but no line losses, so adds 2% to delivered poweradds 2% to delivered power

This new clean energy is five times the power This new clean energy is five times the power that will be generated worldwide by solar PVthat will be generated worldwide by solar PV

Total potential from Indian bagasse is 5,000 Total potential from Indian bagasse is 5,000 megawatts – a sevenfold increase is possible megawatts – a sevenfold increase is possible

Economics of Bagasse based DGEconomics of Bagasse based DGItemItem Local bagasseLocal bagasse Central powerCentral power

Delivered MW Delivered MW 710710 710710

Delivered MWDelivered MW 710710 1,1831,183

Capital CostCapital Cost 2.15 B Rupees2.15 B Rupees 7.18 B Rupees7.18 B Rupees

Fuel per kWh (del.)Fuel per kWh (del.) 00 1.08 Rupees1.08 Rupees

Capital AmortizationCapital Amortization N/AN/A 3.30 Rupees3.30 Rupees

Total Cost/kWhTotal Cost/kWh 2.92 Rupees2.92 Rupees 4.9 Rupees4.9 Rupees

Total Cost/yearTotal Cost/year 12.3 B Rupees12.3 B Rupees 20.7 B Rupees20.7 B Rupees

Incremental Carbon Incremental Carbon DioxideDioxide

NilNil 7 MM tons7 MM tons

Inc. Sulfur DioxideInc. Sulfur Dioxide NilNil 40,000 tons40,000 tons

Savings w/ Full DeploymentSavings w/ Full Deployment Add 5,000 megawatts local power, avoids 8,330 Add 5,000 megawatts local power, avoids 8,330

MW of new central power and T&DMW of new central power and T&D

Will reduce power costs by 39 billion Rupees/yearWill reduce power costs by 39 billion Rupees/year

Will reduce carbon dioxide by 50 million metric Will reduce carbon dioxide by 50 million metric tons per yeartons per year

Will cut sulfur dioxide emissions by 310,000 Will cut sulfur dioxide emissions by 310,000 metric tons per yearmetric tons per year

Can provide 12.5% addition to delivered power in Can provide 12.5% addition to delivered power in India, without new government investmentIndia, without new government investment

Lessons and ObservationsLessons and Observations

Policy changes have induced renewable energy Policy changes have induced renewable energy development on a vast scale, exceeding every development on a vast scale, exceeding every other country and;other country and;

Indian society already saving 5.6 billion Rupees Indian society already saving 5.6 billion Rupees per year, could rise to 39 billion savings/yearper year, could rise to 39 billion savings/year

Next step: recycle industrial waste including blast Next step: recycle industrial waste including blast furnace gas, carbon black gas, exhaust heat, furnace gas, carbon black gas, exhaust heat, refinery off-gas to generate 20 to 30,000 added refinery off-gas to generate 20 to 30,000 added local megawatts with no incremental pollutionlocal megawatts with no incremental pollution

ImplicationsImplications

Current trends hurt per capita income in all Current trends hurt per capita income in all countriescountries

India has started to reduce real cost of India has started to reduce real cost of work by inducing captive power plants that work by inducing captive power plants that recycle sugar mill waste, avoid T&D capital recycle sugar mill waste, avoid T&D capital and lossesand losses

More regulatory changes are needed to More regulatory changes are needed to induce recycling of all industrial waste induce recycling of all industrial waste energy and to induce all other new energy and to induce all other new generation to recycle waste heat.generation to recycle waste heat.

Implications for CIIImplications for CII

Revenues and cost avoidance from Revenues and cost avoidance from recycled energy essential to remaining recycled energy essential to remaining competitivecompetitive

Growth of generation near users is the Growth of generation near users is the least costly way to end energy poverty least costly way to end energy poverty

Changing Indian policy to favor all DG that Changing Indian policy to favor all DG that recycles energy is key to economic growthrecycles energy is key to economic growth

Electricity is too important to be left to Electricity is too important to be left to central planning and regulated monopoliescentral planning and regulated monopolies

Importance of DG RevolutionImportance of DG Revolution

The DG revolution may, in time, match The DG revolution may, in time, match importance of the Green Revolutionimportance of the Green Revolution

We hope the DG revolution spreads beyond We hope the DG revolution spreads beyond India, perhaps even to the US some dayIndia, perhaps even to the US some day

We tip our hats to the enlightened We tip our hats to the enlightened government officials in India who have government officials in India who have fostered a DG revolutionfostered a DG revolution

We encourage CII to help open energy We encourage CII to help open energy industry to competitionindustry to competition

Thank you for listening!