Post on 16-Aug-2020
Turning Off the HeatTurning Off the Heat
Thomas R. CastenThomas R. CastenPresident and CEO,Trigen EnergyPresident and CEO,Trigen Energy
How to save money & mitigate climate change by unleashing competition and eliminating barriers to efficiency
Presentation SummaryPresentation Summary
•• Situation ReportSituation Reportll U.S. energy infrastructure is obsolete.U.S. energy infrastructure is obsolete.
ll Climate change is a problemClimate change is a problem
ll U.S. wastes > $100 billion/year on energyU.S. wastes > $100 billion/year on energy
ll Why no electric generation efficiency gains inWhy no electric generation efficiency gains in40 years?40 years?
•• Trigen has pioneered economical solutionsTrigen has pioneered economical solutions
•• A proposed solution -- ERRATA -- EnergyA proposed solution -- ERRATA -- EnergyRegulatory Reform And Tax ActRegulatory Reform And Tax Act
Situation ReportSituation Report
External Forces that CauseExternal Forces that CauseInefficient, Dirty, ExpensiveInefficient, Dirty, Expensive
Energy Production,Energy Production,Distribution, and UseDistribution, and Use
US Energy Infrastructure OldUS Energy Infrastructure Old•• Average US electric plant built in 1964Average US electric plant built in 1964
ll 33% delivered efficiency, wastes the rest33% delivered efficiency, wastes the rest
ll 100 times more polluting than today’s best100 times more polluting than today’s best
•• Costs 2 to 2.5 ¢ / kWh to transmit powerCosts 2 to 2.5 ¢ / kWh to transmit power
•• Thermal energy is non-core & neglectedThermal energy is non-core & neglectedll Little investment for efficiencyLittle investment for efficiency
ll Skill sets inadequateSkill sets inadequate
ll Massive distribution & conversion lossesMassive distribution & conversion losses
ll Little physical arbitrage capabilityLittle physical arbitrage capability
Energy Generation EfficiencyEnergy Generation EfficiencyCurveCurve
0%0%
10%10%
20%20%
30%30%
40%40%
50%50%
60%60%
70%70%
80%80%
90%90%
100%100%
18801880 18901890 19001900 19101910 19201920 19301930 19401940 19501950 19601960 19701970 19801980 19901990
Monopoly Efficiency Gap
Trigen CHP Plants
Best Electric Only Plants
U.S. Average Electric Only
Estimated U.S. Average with Market Competition
Climate Change is a ProblemClimate Change is a Problem
00
11
22
33
44
55
66
77
00 200200 400400 600600 800800 10001000 12001200 14001400 16001600 18001800 20002000
YearYear
Population in Population in BillionsBillions
World Population GrowthWorld Population Growth
00
11
22
33
44
55
66
77
18501850 18701870 18901890 19101910 19301930 19501950 19701970 19901990
YearYear
Billion Metric Billion Metric Tons Tons
of Carbonof Carbon
World Carbon Dioxide EmissionsWorld Carbon Dioxide Emissionsfrom Fossil Fuelsfrom Fossil Fuels
Atmospheric COAtmospheric CO2 2 Concentration andConcentration andAssociated Temperature ChangesAssociated Temperature Changes
140140
160160
180180
200200
220220
240240
260260
280280
300300
320320
340340
360360
002020404060608080100100120120140140160160-10-10
-5-5
00
55
1010
1515
TemperatureTemperatureChangeChange
(degree C)(degree C)
COCO2 2 ConcentrationConcentration
(parts per million)(parts per million)
Thousand Years Before PresentThousand Years Before Present
1700AD Level
Current Level
CO2 Concentration
Temperature Change
Global Temperature AnomaliesGlobal Temperature Anomalies(1880 - Present)(1880 - Present)
-1-1
-0.5-0.5
00
0.50.5
11
1.51.5
18801880 18901890 19001900 19101910 19201920 19301930 19401940 19501950 19601960 19701970 19801980 19901990
Temperature Deviation Temperature Deviation from 1880-1998 Mean from 1880-1998 Mean
(deg. F) (deg. F)
Greenhouse Gas ProblemGreenhouse Gas Problem•• Highest level of COHighest level of CO22 in 160,000 years in 160,000 years
•• Ice core data shows ten times theIce core data shows ten times thecorrelation of COcorrelation of CO22 and temperature and temperature
•• Government leaders seek ways to reduceGovernment leaders seek ways to reduceCOCO22 that won’t disrupt the economy that won’t disrupt the economy
•• 68% of CO68% of CO22 comes from heat and power comes from heat and powerproductionproduction
•• Combining heat and power generationCombining heat and power generationon-site saves money and cuts COon-site saves money and cuts CO22
COCO22 Emissions by Sector Emissions by Sector
21%
7% 5%33%Thermal 35%
32%
Electric
Generation
Transportation
Industrial
Residential
Com
mercial
CO2 from
heat &
power
68%
U.S. Wastes > $100U.S. Wastes > $100Billion/Year on EnergyBillion/Year on Energy
Real Cost SavingsReal Cost Savings10 Years after Deregulation10 Years after Deregulation
0%0%
10%10%
20%20%
30%30%
40%40%
50%50%
60%60%
70%70%
AirlinesAirlines RailroadsRailroadsGasGas
27%
57%
LongLongDistanceDistanceTelecomTelecom
40%
47%
TruckingTrucking
28%
58%
ElectricElectricPowerPower
30%
40%
29%
44%
EIAEstimate
U.S. Energy Market 1995U.S. Energy Market 1995
$207 Billion$207 Billion All U.S.All U.S.ElectricElectric
$157 Billion$157 Billion All U.S.All U.S.HeatingHeating
Annual Costs - $364 BillionAnnual Costs - $364 Billion
U.S. Energy Cost with DeregulationU.S. Energy Cost with Deregulation
$255 Billion$255 BillionAll U.S Heating All U.S Heating
and Electricand Electric
CHP, otherCHP, other
Customer Savings per Year = $109 BillionCustomer Savings per Year = $109 Billion
Why No Electric IndustryWhy No Electric IndustryProgress in 40 Years?Progress in 40 Years?
•• Intelligent energy policy must answer thisIntelligent energy policy must answer thisquestion. Subordinate questions:question. Subordinate questions:ll Is better technology available?Is better technology available?
ll Will replacing present generation lower costs.Will replacing present generation lower costs.
ll Will new plants decrease pollution?Will new plants decrease pollution?
ll Does central generation idea block progress?Does central generation idea block progress?
ll Does monopoly protection block progress?Does monopoly protection block progress?
ll Have environmental regulations kept up withHave environmental regulations kept up withtechnology?technology?
Is better technologyIs better technologyavailable?available?
YES
Generating Efficiencies of VariousGenerating Efficiencies of VariousTechnologies TodayTechnologies Today
85%85%
66%66%
0%0%
20%20%
40%40%
60%60%
80%80%
100%100%
COALCOALCHPCHP
45%45%
Fuel Cell Fuel Cell Fuel CellFuel CellCHPCHP
39%39%
GTGTSIMPLESIMPLECYCLECYCLE
55%55%
GTCCGTCC GTCCGTCCCHPCHP
GTCCGTCCCHP w/CHP w/sup firesup fire
U.S. AverageEfficiency
33%
COALCOAL
40%40%
ELECTRIC ONLY
78%78%
CHP90%90%
Supplemental Firing
GTCC = Gas Turbine Combined Cycle
CHP = Combined Heat and Power
Conventional ThermalConventional ThermalGenerationGeneration
Fuel 100% Electricity 33%
(Remote from thermal users)
67% Waste Heat
Pollution
Power Plant
Combined Cycle GasCombined Cycle GasTurbine GenerationTurbine Generation
Fuel 100% Electricity
55%
(Remote from thermal users)
45%WasteHeat
Pollution
Power Plant
Combined Heat and PowerCombined Heat and Power(CHP)(CHP)
Fuel100%
(On or near thermal user sites)
Steam
Electricity
ChilledWater
90%
10% Waste Heat
Pollution
CHP Plants
Will replacing existingWill replacing existinggeneration lower costs?generation lower costs?
Yes
Marginal Electric CostsMarginal Electric Costs
$0$10
$20$30$40
$50$60$70$80$90
GTCC(EIA/DLJ)
CHP (Trigen)
$/MWh
Coal (EIA/DLJ)
Net Fuel, O&M T&D CapitalAverage US electric price in 1997
Merchant Power Approach
B PressTurbine
001.01.0
2.02.03.03.04.04.05.05.06.06.0
8.08.0
7.07.0
9.09.0cents/kWh
Closing Monopoly Efficiency GapClosing Monopoly Efficiency GapDollar value/dollar fuel cost
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
Heatonly
Electonly
CWonly
CHP
Will new plants decreaseWill new plants decreasepollution?pollution?
YESYES
New Technology Emits 1%New Technology Emits 1%of the Pollution of Olderof the Pollution of Older
PlantsPlants
Average age of US generationAverage age of US generationplant is 1964 -- 35 years oldplant is 1964 -- 35 years old
History of Gas Turbine NOx ControlsHistory of Gas Turbine NOx Controls
0
20
40
60
80
100
120
140
160
180
200
1975 1980 1985 1990 1995 2000Year
NOx Emissions (parts per million)
Water/Steam Injection
SCRSCONOX
Dry Low-NOx Burners
Expected Catalytic
Combustor
Pollution/mWh of Energy OutputPollution/mWh of Energy Output
050
100150200250300350400450500
Pre 1972Central Plant
1980 CentralPlant
1999 CHPPlant
2005 CHPplant
Input Based NOx PPM Output Corrected NOx PPM
Uncontrolled CHP plants
that are denied permits
Average Output Corrected NOx For Each State
Does the central generationDoes the central generationparadigm block progress?paradigm block progress?
YesYes
Energy Market Failures FromEnergy Market Failures FromCentral Generation ParadigmCentral Generation Paradigm
•• 90 years of monopoly have created central90 years of monopoly have created centralgeneration paradigmgeneration paradigmll Distributed power blocked by monopoliesDistributed power blocked by monopolies
ll Failure to focus on using waste heatFailure to focus on using waste heat
ll Unintentional barriers to efficiency enactedUnintentional barriers to efficiency enacted
•• Regulations lock in obsolete generationRegulations lock in obsolete generation
•• Environmental laws penalize efficiencyEnvironmental laws penalize efficiency
Monopoly Protection BlocksMonopoly Protection BlocksEfficiencyEfficiency
•• Regulator focus on rate of returnRegulator focus on rate of returnll Utilities seldom allowed to keep efficiencyUtilities seldom allowed to keep efficiency
savings -- savings -- YOU GET WHAT YOU REWARDYOU GET WHAT YOU REWARD
ll Monopolies over built to increase profitsMonopolies over built to increase profits
ll Long lived plants are economically obsolete &Long lived plants are economically obsolete &protected; result is needless cost and pollutionprotected; result is needless cost and pollution
•• Competition blocked -- slows innovationCompetition blocked -- slows innovation
•• Utilities’ costs of fighting distributed powerUtilities’ costs of fighting distributed powerare added to rates -- consumers pay twiceare added to rates -- consumers pay twice
State Rules Block Efficient andState Rules Block Efficient andCheap GenerationCheap Generation
•• Non-utility retail sales prohibitedNon-utility retail sales prohibited
•• Connection to neighbors prohibitedConnection to neighbors prohibited
•• Third parties banned from generationThird parties banned from generation
•• Manning rules based on 1930Manning rules based on 1930technology penalize distributed powertechnology penalize distributed power
•• Market sourcing of backup power illegalMarket sourcing of backup power illegal
Other State Laws AreOther State Laws AreBarriers to EfficiencyBarriers to Efficiency
•• Siting review of all power plantsSiting review of all power plants
•• Electric companies allowed to bundleElectric companies allowed to bundleservices (Violation of antitrust laws?)services (Violation of antitrust laws?)
•• Utilities use interconnection rules toUtilities use interconnection rules todiscourage distributed powerdiscourage distributed power
•• Revisit history to learn what could haveRevisit history to learn what could havehappened to US generation efficiencyhappened to US generation efficiency
Have environmentalHave environmentalregulations kept up withregulations kept up with
technology?technology?
NO
Emission Rules Block EfficiencyEmission Rules Block Efficiency
•• Input based standards ignore efficiencyInput based standards ignore efficiency
•• Old plants main pollution source, butOld plants main pollution source, butgrandfatheredgrandfatheredll Old plants are up to 100 times moreOld plants are up to 100 times more
polluting than new plants, 1/2 as efficientpolluting than new plants, 1/2 as efficient
•• Air rules make modernizing old plantsAir rules make modernizing old plantsprohibitively expensiveprohibitively expensive
•• Ever tougher standards for new plantsEver tougher standards for new plantsraise costs, slow deploymentraise costs, slow deployment
Trigen Energy CorporationTrigen Energy CorporationHas Pioneered SolutionsHas Pioneered Solutions
What Can Be Learned fromWhat Can Be Learned fromTrigen’s Approach andTrigen’s Approach and
Experience?Experience?
Trigen Energy CorporationTrigen Energy CorporationMission StatementMission Statement
Provide heating, cooling and electricityProvide heating, cooling and electricity
with half the fossil fuel and half thewith half the fossil fuel and half the
pollution of conventional generationpollution of conventional generation
Reasons for Mission: Reasons for Mission:
•• Electric generation efficiency is very lowElectric generation efficiency is very lowand stagnant -- market failuresand stagnant -- market failures
•• All vectors point to CHPAll vectors point to CHP
•• Best ways to mitigate climate changeBest ways to mitigate climate changemust:must:ll Extract more value from all fuelExtract more value from all fuel
ll Reduce fossil fuel use and pollution.Reduce fossil fuel use and pollution.
ll SAVE USERS MONEY!SAVE USERS MONEY!
Total Trigen Capacity inTotal Trigen Capacity inMegawattsMegawatts
010002000300040005000600070008000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Signed
CAGR = 34%/Year
GHG Saved by TrigenGHG Saved by Trigen
0
500
1000
1500
2000
2500
1997 1998
GHC M Tons
Criteria Pollutants Saved byCriteria Pollutants Saved byTrigenTrigen
0
5000
10000
15000
20000
25000
1997 1998
M tons
Why Haven’t More Followed?Why Haven’t More Followed?•• Difficult to generate profits with on-siteDifficult to generate profits with on-site
CHP because of barriers to efficiencyCHP because of barriers to efficiencyll Protected distribution monopolies block on-Protected distribution monopolies block on-
site generationsite generation
ll Environmental rules preserve status quoEnvironmental rules preserve status quoand penalize efficiencyand penalize efficiency
•• Energy entrepreneurs thus focus onEnergy entrepreneurs thus focus oncentral generation - AES, central generation - AES, CalpineCalpine, others, others
•• Equipment suppliers follow, focus onEquipment suppliers follow, focus oncentral generation sized plantscentral generation sized plants
Who Will Invest in Conservation?Who Will Invest in Conservation?
•• Monopoly DSM is an oxymoron, willMonopoly DSM is an oxymoron, willnever produce significant savingsnever produce significant savings
•• Retail competitors for centrallyRetail competitors for centrallygenerated power lose with DSMgenerated power lose with DSM
•• On-site power provider gains sale withOn-site power provider gains sale withsavings and increased qualitysavings and increased qualityll must learn customer’s processesmust learn customer’s processes
ll specializes by industryspecializes by industry
ll reduces energy/unit of productionreduces energy/unit of production
NEEDED:NEEDED:Path to sustainable futurePath to sustainable futurewith lower costs and lesswith lower costs and less
pollutionpollution
How?How?•• Modernize regulation, eliminate barriersModernize regulation, eliminate barriers
to efficiencyto efficiency
•• Unleash competition to reduce costsUnleash competition to reduce costs
A Proposed Solution --A Proposed Solution --ERRATAERRATA
The Energy Regulatory ReformThe Energy Regulatory ReformAnd Tax ActAnd Tax Act
Energy Regulatory Reform AndEnergy Regulatory Reform AndTax ActTax Act
•• National deregulation of electricityNational deregulation of electricity
•• Repeal PUHCA and most of PURPARepeal PUHCA and most of PURPA
•• Output based environmental regulationOutput based environmental regulationll Replace BACT, LAER, NSPS with fossil andReplace BACT, LAER, NSPS with fossil and
NOx allowances/mWh of heat & powerNOx allowances/mWh of heat & power
•• Eliminate barriers to efficiencyEliminate barriers to efficiency
•• End tax penalties on efficiencyEnd tax penalties on efficiency
•• Federal purchase of energy efficiencyFederal purchase of energy efficiency
CO2 Emissions due to Monopoly Efficiency Gap
COCO22 Emissions from U.S. Electric Emissions from U.S. ElectricPower GenerationPower Generation
0.5
1
1.5
2
2.5
3
3.5
1998 2008 2018
CurrentCO2
Emissions
Further CO2 Reductions from a Fossil Fuel Efficiency Standard
Billion Tons CO2 per Year
Existing Monopoly
Market Competition
Market Competition & Fossil Fuel Efficiency Standard
1990 CO2 Emissions
Who are theWho are the WINNERS & LOSERS WINNERS & LOSERS
•• Boilermakers andBoilermakers andsteamfitterssteamfitters
•• Equipment makersEquipment makers
•• Engineering,Engineering,procurement andprocurement andconstruction firmsconstruction firms
•• Energy researchEnergy research
•• All consumersAll consumers
•• The environmentThe environment
•• The planetThe planet
•• OPECOPEC
•• Coal minersCoal miners
•• Oil lease holdersOil lease holders
•• Oil exploration firmsOil exploration firms
•• Countries that do notCountries that do notfollow suit, keepfollow suit, keepenergy protected,energy protected,efficiency low, costsefficiency low, costshighhigh
US Gains From ERRATAUS Gains From ERRATA•• $200 billion work for $200 billion work for EPCsEPCs, craft persons, &, craft persons, &
equipment manufacturersequipment manufacturersll Substitute capital and knowledge for fossil fuelSubstitute capital and knowledge for fossil fuel
•• Competition will lower costs and lessenCompetition will lower costs and lessenfossil fuel and NOx per megawatt hourfossil fuel and NOx per megawatt hourll Heat & power costs drop by > $109 billionHeat & power costs drop by > $109 billion
ll COCO22 from electric will be halved in 20 years from electric will be halved in 20 years
•• US gains competitive advantage overUS gains competitive advantage overcountries that do not follow suitcountries that do not follow suitll Inverts anti-Kyoto argumentsInverts anti-Kyoto arguments
Other Countries Gains FromOther Countries Gains FromUS Passage of ERRATAUS Passage of ERRATA
•• Companies with US operations will carryCompanies with US operations will carryon-site power globallyon-site power globally
•• Growing on-site power market --> betterGrowing on-site power market --> betterequipment value --> cheaper heat & powerequipment value --> cheaper heat & power
•• Developing economies skip centralDeveloping economies skip centralgeneration step, go directly to CHPgeneration step, go directly to CHP
•• Renewable energy and waste fuel bothRenewable energy and waste fuel bothgain from move to on-site powergain from move to on-site power
For More CompleteFor More CompleteExplanation, See:Explanation, See:
•• “Turning Off The Heat,” Prometheus Press“Turning Off The Heat,” Prometheus Pressll Published October 1998Published October 1998
ll Forward by former DOE Secretary FedericoForward by former DOE Secretary FedericoPeñaPeña
ll Recommended by Bennett Johnston, formerRecommended by Bennett Johnston, formerChair, Senate Energy CommitteeChair, Senate Energy Committee
ll Reviewed by Len Reviewed by Len HymanHyman, senior utility analyst,, senior utility analyst,Salomon Smith BarneySalomon Smith Barney
ll Available from publisher, web booksellersAvailable from publisher, web booksellers
Thank You ForThank You ForListeningListening