A Call to Action: Use energy twice to profitably avert climate change

A Call to Action:Use energy twice to

profitably avert climate change

Changing the way the world makes power

Thomas R. Casten,Chairman

Recycled Energy Development, LLC

IDEA 100th Anniversary

June 29, 2009

RED | the new greenwww.recycled-energy.com

The Energy/Carbon StoryThe Energy/Carbon StoryThe Energy/Carbon StoryThe Energy/Carbon Story

The Changing RulesThe Changing Rules

The Generation StoryThe Generation Story

ConclusionsConclusions

RED | the new green - 2 -www.recycled-energy.com

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 tamed

10,000 years ago: Animals domesticated

5,000 years ago: Power from wind

2,000 years ago: Power from water

• Recent use of ‘Ancient Sunlight’ – fossil fuel:

1760:First significant use of coal

1859: Oil discovered

1885:Natural gas first used

1909: IDEA formed to distribute thermal energy

• Access to energy services allowed population to explodeRED | the new green - 3 -

www.recycled-energy.com

World population hasgrown dramatically

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

IDEA Formed

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

Increases in world population andenergy consumption 1850-2007

Populationup 430%

Consumption per Capitaup 760%

Total Consumptionup 4600%

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

Nuclear

Natural Gas

IDEA Formed

1750 1800 1850 1900 1950 2000

Natural Gas

During IDEA’s first 100 years, 90% of human greenhouse gas emissions

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 IDEA Formed

Climate change is occurringfaster than predicted

• Science has no experience with the rising concentrations of greenhouse gases:

• Feedback effects are happening faster than predicted by any model

• E.g., melting ice caps, rising sea levels, increasing ocean acidity

• Growing species extinction, caused by human actions

• 1,000 times the background rate

The Generation StoryThe Generation StoryThe Generation StoryThe Generation Story

The Energy/Carbon StoryThe Energy/Carbon Story

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.

1950 1960 1970 1980 1990 2000

CO2 Emissions by theU.S. Electric Power Sector

% of US CO2 Emissions

Inefficient heat and poweremits two-thirds of CO2

0% 25% 50%

Other Transport

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

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

Generation efficiency –the elephant in the room

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

PollutionFuel

Generation Consumption

Conventional electricity generation1960 (& 2009)

WasteHeat

Transmission

UsefulPower33%

WasteHeat 2%

PollutionFuel

WasteHeat

Combined Heat and Power Plant

UsefulPower33%

Decentralized generation, combined heat and power

UsefulThermalEnergy33%

RecycleWasteHeat

Efficient

No LineLosses

IDEA Roles

Electricity

SteamHot Water

End User Site

Energy Recycling Plant

Electricity

Process Fuel

Finished Goods

Waste Energy

SavedEnergyInput

Recycling industrial waste energy the IDEA way

Produces as much clean energy each year as all

grid-connected photo-voltaic

solar generation produced in

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

IDEA Role

Cost of reducing CO2 vs. old Coal

US$ per ton

Only waste energy recycling lowers the cost of avoiding CO2 emissions

IDEA Role

Photovoltaic Solar

Geothermal

Onshore Wind

Offshore Wind

Concentrated Solar

Recycled & CHP

Traditional Coal

Recycled Energy

Fossil CHP

Biomass CHP

Biomass

$0/ MWh $50/ MWh $100/ MWh

Qualifying Renewable

Waste Energy Recycling

Traditional Coal

Cost of avoiding CO2 vs. old Coal

US$ per ton

Waste energy receives lowest lifetime MWh subsidies

* Healthcare costs, calculated as average of two peer-reviewed reports released by Harvard University and the Ontario Medical Center

FromTax

Credits

Cost of Healthcare and Environment*

Policy observations

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

• But; numerous policies induce or mandate high-cost low-carbon power generation, responding to vested interests

• Possible unintended consequences:

• Increased global CO2 emissions

• Higher power prices could drive manufacturing to low cost high-carbon nations, increasing carbon emissions

• Lower standard of living

• Loss of jobs reduces income

• IDEA mission: Push for policies that induce markets to deploy profitable clean generation options

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

The Changing RulesThe Changing RulesThe Changing RulesThe Changing Rules

Federal tax credits for clean energy

EnergyProperty

2007 2009

§45PTC

§45ITC

RefundableITC

§45PTC

§48ITC

RefundableITC

CHP/RecycledEnergy

- - - -10% of

1st 15 MW10%

Biomass –open loop

$20/MWhfor 10 yrs

- -$20/MWhfor 10 yrs

30% 30%

Wind $20/MWhfor 10 yrs

- -$20/MWhfor 10 yrs

30% 30%

Solar - 30% - - 30% 30%

Geothermal $20/MWhfor 10 yrs

10% -$20/MWhfor 10 yrs

10% 10%

If a technology is eligible for both PTC and ITC, then one of the two types of tax credit must be selected

Energy Improvement andExtension Act of 2008

• Included provisions for CHP and recycled-energy projects:

• 10% investment tax credit:

• Applicable to project of up to 50 megawatts

• Applicable to the first 15 megawatts

• Worth $1.35/MWh over project life

• 5-year accelerated depreciation:

American Recovery andReinvestment Act of 2009

• Provides “refundability” for CHP tax credit

• Allows “bonus depreciation” for CHP:

• 50% of depreciation value can be taken in the first year

• Remainder over the following four years

• Allows CHP tax credits even if projects are financed with local development bonds

• Allows biomass projects to claim a 30% investment tax credit

• Provides some $100 billion of additional government-backed loan guarantees for clean energy projects

• Offers $156 million of cost-share grants for recycled-energy, CHP, and industrial-efficiency projects

• Mandates GHG-emissions reduction by 83% by 2050

• Sets industrial plant energy efficiency standards

• Authorizes thermal waste energy recovery awards

• Mandates 20% clean energy by 2020, 8% from efficiency

• Expands biomass definition to reward co-firing

• Industrial rebates for GHG compliance costs

• Creates a Clean Energy Deployment Administration to help finance breakthrough technologies

• Allows CHP to qualify for energy saving performance contracts at federal buildings

Waxman Markey bill: Housepassed Friday, June 26 2009

Tax provisionsproposed for 2009

• Increase investment tax credit to 30% for highly efficient CHP and recycled energy projects

• Increase the ITC’s eligibility from 15 to 25 megawatts for projects of unlimited size

• Remove prohibitions against co-firing in the biomass production tax credit

Recent state innovations

State Action Timing

CaliforniaRecycled-energy projects not regulated as GHG sources

15 statesCHP and recycled energy included in portfolio standards

NV, OR, SD, ND(+ B.C. andSaskatchewan)

Waste heat recovery projects equivalent to other renewable electric generation resources

New JerseyOffers rebate ($450/kW ) for CHP and recycled energy capacity

Massachusetts Defines energy savings from CHP property 2008

ISO New England

Offers location payments to local generation

ConclusionsConclusionsConclusionsConclusions

Conclusions

• IDEA has encouraged using energy twice for 100 years,

• Progress inverse to fossil fuel subsidies and utility protection

• Life as we know it depends on increasing energy generation efficiency, but:

• Current policies largely ignore options that use energy twice

• Modest recent incentives are now law, favoring efficiency, (still ignoring thermal energy)

• Pending legislation is game-changing for waste energy recycling projects

• Thus:

After only 100 years,IDEA’s TIME HAS COME

RED | the new green

Thank you

A Call to Action: Use energy twice to profitably avert climate change

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