RED | the new greenwww.recycled-energy.com Profitably Reducing Carbon Emissions in Maine Presentation to Governor Baldacci’s Energy Efficiency Summit Thomas R. Casten Chairman, Recycled Energy Development, LLC April 3, 2008

RED | the new greenwww.recycled-energy.com Thoughts on Global Warming  Global Warming threatens life as we know it.  Overwhelming evidence that human actions are causing climate change.  Conventional wisdom assumes energy system is optimal. We know this is not true  Electricity is protected from competition, but pundits assume free market principles prevail. We know this is not true  The world must improve electric generation efficiency to mitigate climate change

RED | the new greenwww.recycled-energy.com Presentation Summary: Profitably Mitigating Climate Change  Describe economic and environmental inefficiency of electric generation  Show how to reduce US carbon emissions by 20% and save $70 billion/year  Describe Recycled Energy Development’s Approach  Propose Maine Actions to promote profitable greenhouse gas reductions

RED | the new greenwww.recycled-energy.com Homer Simpson’s Power Plant (Springfield, ?)

RED | the new greenwww.recycled-energy.com Electric Generation Plant (Craig, CO) Two-thirds of the fuel’s energy is vented to atmosphere.

RED | the new greenwww.recycled-energy.com U.S. Delivered Electric Efficiency Wasted Energy Excess Costs Excess Pollution Inefficient US Electric Generation Related Headlines: Energy Costs Push Consumer Prices Higher” -Associated Press “US Manufacturing Jobs Fading Away Fast” -USA Today “Recent Warming of Arctic may Affect World Climate” -NASA

RED | the new greenwww.recycled-energy.com Electric Generation’s Increasing Contribution to Domestic CO 2 Emissions US Electric Power Sector’s CO 2 Emissions

RED | the new greenwww.recycled-energy.com US Carbon Dioxide Emissions, 2005 Breakdown of Emitting Sources: Heat & Power; 69% of all fossil fuel CO 2 emissions

RED | the new greenwww.recycled-energy.com U.S. Electric System Efficiency Since 1960 Pollution Fuel 100 units Power Plant = 67 units Waste Energy 33 units Electricity End User Waste Heat Transmission Line Losses 3 units (9.0%)

RED | the new greenwww.recycled-energy.com Combined Heat and Power Options Pollution Recycle Waste Heat CHP Plant End User Site 33 units Waste Energy = 66 units Useful Work 33 units Electricity 33 units Thermal Energy Fuel 100 units

RED | the new greenwww.recycled-energy.com Recycling Industrial Energy Even Better Electricity Steam Hot Water End User Site Energy Recycling Plant Electricity Process Fuel Finished Goods Waste Energy Saved Energy Input

RED | the new greenwww.recycled-energy.com US Energy Recycling Potential  EPA and DOE studies identify 200,000 megawatts CHP & waste energy recycling potential  (750,000 MW US peak load)  Capital investment of $350 billion  Society could save $70 billion per year  Energy Recycling can profitably eliminate 20% of U.S. CO 2 emissions (1.4 of the 7.2 gigatons)

RED | the new greenwww.recycled-energy.com CHALLENGE & OPPORTUNITY ~$70 billion potential energy savings if U.S. returned to 1920s model 1.4 gigaton GHG reduction/year U.S. Grid is Less Efficient than 100 Years Ago

RED | the new greenwww.recycled-energy.com US Energy Recycling (CHP) Potential  EPA and DOE studies identify 200,000 megawatts CHP & waste energy recycling potential  Capital investment of $350 billion  Society could save $70 billion per year  Profitably eliminate 1.4 gigatons of CO 2 emissions  Many other benefits including:  Improve manufacturing competitiveness, add jobs  Reduce need for transmission wires  Reduce vulnerability to extreme weather and terrorists  Improve balance of payments

RED | the new greenwww.recycled-energy.com Examples of Local Generation Projects that Recycle Waste Energy Projects RED and its predecessor companies have developed

RED | the new greenwww.recycled-energy.com U.S. Delivered Electric Efficiency Efficiencies of Energy Recycling Projects Steam Pressure Recovery (190 Projects) Combined Heat & Power (56 Projects) Industrial Waste Heat Recovery (6 Projects)

RED | the new greenwww.recycled-energy.com 95 MW Recycled from Coke Production (Gary, IN)

RED | the new greenwww.recycled-energy.com Silicon Production, Alloy WV  Plant uses 135 MW  $60 million investment  Recycles exhaust into 44 megawatts  Plant will use power to expand production by 20%  We are taking silicon production back from China!

RED | the new greenwww.recycled-energy.com Operating Maine Projects by RED Subsidiary Turbosteam  Livermore Falls, ME  2002  2,980 kW  4,713 tons CO 2 saved annually  Colby College Waterville, ME  1998  600 kW  480 tons CO 2 saved annually  Huhtamaki Waterville, ME  2004  605 kW  1,043 tons CO 2 saved annually

RED | the new greenwww.recycled-energy.com Potential Clean Energy Project: University of Maine at Orono Profitably reduce greenhouse gas emissions by recycling waste energy with a backpressure steam turbine. The University currently generates steam at 150 psig and distributes at 50 psig A Turbosteam backpressure steam turbine could generate 684 kW of electricity for roughly 3 cents per kWh and avoid 540 tons per year of CO 2/ year RED offers greater savings and emission reductions could by replacing oil boilers with biomass Project delayed by interconnection agreement with Bangor Hydro

RED | the new greenwww.recycled-energy.com RED’s Goals with Respect to Climate Change Mitigation  Deploy $1.5 billion to profitably reduce greenhouse gas emissions  Cause a societal ‘tipping point’, with public demanding removal of all barriers to efficiency  Change the debate from  “Who pays to mitigate climate change?” to  “How can we induce profitable climate change mitigation?”

RED | the new greenwww.recycled-energy.com Maine Actions to Spur Profitable Carbon Reduction  Enact a Clean Energy Standard Offer Program (CESOP)  Allow all clean energy to qualify for Maine renewable portfolio standard rules  Remove barriers to efficiency  Treat clean energy projects as ‘Pollution Control’ devices for environmental permitting

RED | the new greenwww.recycled-energy.com Clean Energy Standard Offer (CESOP)  Calculate delivered cost of electricity from best new base load central electric-only plant  Include generation and T&D capital amortization, fuel & O&M, line losses, utility profits and expected carbon costs  Offer 20 year contracts for CESOP power at 80% of the delivered cost from the best new base load central station.  Define ‘Clean Energy’ as all power plants with 60% or better annual fossil efficiency, and include power from recycling waste energy  Contract for up to projected 10-year net load growth  Distribution utility keeps retail load, but buys power  Distribution utility designs and installs interconnection to Clean Energy Projects, puts capital in rate base.

RED | the new greenwww.recycled-energy.com CESOP Advantages  Guarantees improved efficiency - requires 60% overall efficiency versus 33% grid average  Guarantees savings – contract prices 80% of delivered cost of new central generation  But calculation includes full avoided long run marginal costs, including transmission, line losses and carbon  Utility keeps customers and its historic profits from distribution of electricity  No standby rates to slow or discourage Clean Energy  Utility manages interconnection at their expense, adds to rate base, just like central generation

RED | the new greenwww.recycled-energy.com Effects of CESOP  Induces power industry to build clean energy plants of all types  Government does not pick technology or fuel, just forces economic and environmental efficiency  Gives local clean energy projects benefit of low cost financing, comparable to financing costs of less efficient central plants  All renewable energy qualifies along with all projects that recycle industrial waste energy  Maine never builds another inefficient electric-only fossil fueled plant unless CESOP response falls short of needs.

RED | the new greenwww.recycled-energy.com Possible Objections to CESOP  Some clean energy projects will make extraordinary profits.  Public can cry all the way to the bank  Fossil fueled CHP could push out more expensive renewable projects  CESOP keeps economic pressure on all technologies to reduce costs and at least double fossil efficiency  The distribution utilities cannot control generation  This is a soluble technical problem, worth the gain in efficiency

RED | the new greenwww.recycled-energy.com Other Actions to Speed Clean Energy Deployment in Maine  Broaden Maine RPS to all clean energy  Include all power from renewable energy sources and all power that meets ‘clean energy’ definition in RPS and rename ‘Clean Energy Portfolio Standard”  Strengthen percentages of Clean Energy required, but include new power under CESOP contract  Treat clean energy project as a ‘pollution control’ permit application for environmental approvals, greatly reducing time and cost of developing projects

RED | the new greenwww.recycled-energy.com Thank You