1. WADE 5 th 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 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 “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 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 CO 2 is warming the globe, causing: Increased frequency and severity of storms Increased frequency and severity of storms Rising seal level could flood low countries, such as Bangladesh Rising seal level could flood low countries, such as Bangladesh More rapid species extinction & disease spread More rapid species extinction & disease spread  Failure to recycle energy, and over reliance on central generation adds needless costs and CO 2 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. 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 Increasing energy conversion efficiency in all sectors – heat and power generation, appliances, manufacturing Reducing losses and costs of transmitting energy Reducing losses and costs of transmitting energy Recycling 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% Central electric generation efficiency has been frozen for 40 years at 33% Electric T&D losses rising, due to grid congestion, remote generation Electric T&D losses rising, due to grid congestion, remote generation Appliance efficiency gains are slowing Appliance efficiency gains are slowing Mandated growth of renewable energy will raise electric prices 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 Sevens Facts 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 Question Challenges 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 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 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 Recycled Challenging 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 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 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 Use blast furnace gas, carbon black gas, hot exhaust, pressure drop, combustible wastes, agricultural wastes

12. 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

13. 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

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. 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 CO 2 equals uptake of one million acres of new trees.

15. 90 MW Recycled from Coke Production Chicago 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 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 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) ItemAll CGAll DGSavings% Saved Capacity + T&D $831$504$32639% Power Cost $145$92$5336% Tons NOx 28812216658% Tons SO 2 3331931494% MM Tonnes CO 2 77639438149%

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 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. Worldwide CG for 2030 Load Growth Fuel 100% 33% delivered electricity Power Plant T&D and Transformers Pollution 67% Total Waste Line Losses 9% 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. Worldwide DG for 2030 Load Growth 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 GW World Cost: $5.2 trillion DG vs. CG: ($1.0 trillion) Transmission: $138/kW (10% Cap.) 0.44 GW DG $600 billion $6.0 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!