Probably the least understood major climate solution is the simultaneous generation of electricity and heat, called cogeneration, combined heat and power (CHP) or recyled energy. You can read the basics here.
I have proposed one “stabilization wedge” of CHP (here). Some people, like my friend Tom Casten of Recycled Energy, think it could be multiple wedges. He is probably right — when you consider that the energy now lost as waste heat just from U.S. power generation exceeds the energy used by Japan for all purposes.
We could take the 42 percent of carbon dioxide that comes from electricity and cut it in half and save $70 billion.
By generating electricity and capturing the waste heat in a cogen system, we can avoid the energy wasted by generating electricity and heat separately. Overall system efficiencies can exceed 80 percent. Since cogen typically generates its power near the end user, powerline losses, which can easily reach 7% to 8% of the delivered electricity, can be all but eliminated. Total greenhouse gas emissions can be cut in sharply.
Many studies have shown that the potential market for cogen is enormous. For instance, a 2000 study for DOE (here) found that the market potential for combined heat and power at commercial and institutional facilities alone was 75,000 megawatts, about one-tenth of current U.S. power generation capacity. The remaining potential in the industrial sector is about 88,000 megawatts.
Cogen and other on-site power systems, such as solar panels, are called distributed energy as opposed to large central station power plants, like coal or nuclear. Their market penetration is limited by barriers that have nothing to do with their cost or performance — especially the countless obstacles and fees that major utilities can place in the way of on-site generation projects. My former office at the Department of Energy launched a study of these barriers in the late 1990s. The result was a July 2000 report (here) that documented the results of studying 65 distributed energy projects. The report offered a variety recommendations that are still worth embracing:
- Adopt uniform standards for interconnecting distributed power to the grid.
- Adopt testing and certification procedures for interconnection equipment.
- Develop tools for utilities to assess the value and impact of distributed power.
- Develop new regulatory principles compatible with distributed power choices.
- Adopt regulatory tariffs and utility incentives to fit a distributed power model.
The strategies we need to avoid climate catastrophe are not about imposing the heavy hand of government on the marketplace, but rather are about leveling the playing field, and giving an extra push to low-carbon technologies.
If you want to learn more about this core climate solution, you can find (here) recent publications and presentations by Casten, who is probably the world’s leading practitioner of an advocate for large-scale recycled energy. You can also read a four-part interview that Grist did with him in 2007:
- What recycled energy is
- Why people aren’t already doing it
- Why efficiency is the key to reducing CO2
- Making money cutting carbon
And you can read the transcript of the E&ETV interview with him below:
Monica Trauzzi: Welcome to OnPoint. I’m Monica Trauzzi. Joining me today is Tom Casten, chairman of Recycled Energy Development. Tom, thanks for coming on the show.Tom Casten: Thank you for having me.
Monica Trauzzi: Tom, your company, Recycled Energy Development, seeks to reduce greenhouse gas emissions by essentially recycling energy that is emitted from smokestacks. Explain what the process is here and what you’re trying to achieve more specifically.
Tom Casten: There’s a tremendous amount of waste. Industry uses energy once to convert some kind of raw material into a good or finished good and then they typically throw the rest of it away. They’re not in the electric business. And we can go to the hot exhaust or to other waste energy forms and build equipment, convert that into electricity and power. I’ll give you an example maybe that will help clarify. There’s a plant that makes blast furnace coke on the shores of Lake Michigan and they basically bake coke for 48 hours and turn it into the material you need to make iron ore in a blast furnace, to make iron ore into iron.
We take the heat off the top of that with, oh, 16 different furnaces. We convert it into 95 megawatts and almost a million pounds of steam. I say we, I was involved in it. That company has been sold. That project produces about 1.7 billion kilowatt of absolutely clean energy. There’s no fossil fuel. There is no global greenhouse gas in the global warming issue. The number doesn’t mean much, except that in 2004 all of the grid-connected solar collectors in the world produced 1.7 billion kilowatt hours of clean energy. We did it in a plant that cost about 165 million versus 3 billion for the solar and we sell the energy for 2-and-a-half cents a kilowatt hour or the plant does. So, it’s a …
Monica Trauzzi: And you sell it back to the original company?
Tom Casten: In this case, the energy gets sold to middle who uses it to make steel. And they’re saving money. They’ve said in a recent article that the four projects there save them a hundred million dollars a year and this knocks off something like in excess of a million tins one of greenhouse gas a year. So, my fundamental message is that the climate debate has got two very big flaws in it. Number one, it assumes that this is going to cost us money. This is a fantastic economic opportunity. In case you hadn’t looked lately, it costs a lot of money to make carbon dioxide. The price of fuel is up three to 11 times. To make carbon dioxide you have to buy that fuel. So, if we can substitute capital for fuel, get the energy out of energy that we were throwing away, we end up saving money.
Monica Trauzzi: But becoming green can also be expensive for companies, you know, becoming more energy efficient, using renewables, just the start-up cost can be expensive.
Tom Casten: Well, this is what gets debated on both sides and they’re both wrong. Our mission in life is to profitably lower greenhouse gas emissions. We raised a billion and a half dollars for that mission and we didn’t get the money because our investors were looking for green wash. We got the money because it is an extremely profitable area and there’s a reason for that. If I give you a bit of background, 42 percent of all of our greenhouse gases come from making electricity. Another 27 percent come from making heat. So, 70 percent almost of what we put out as greenhouse is from heat and power. Do you ever hear anybody talk about how can we improve electric generation? It’s the elephant in the room. It hasn’t improved since Eisenhower.
Monica Trauzzi: But this technology that you’re talking about is not new. I mean this has existed, so why …
Tom Casten: All the patents have run out.
Monica Trauzzi: Why hasn’t it been implemented large-scale? Where’s the disconnect here?
Tom Casten: The economy that has served us so well allows market forces and a process called creative destruction goes on. Schumpeter talked about it, that somebody comes along and builds a new factory that’s better than the old factory and actually destroys value in the old factory. But as Schumpeter puts it, the net benefit to society is positive because the benefit that the new factory creates is more than the old factory gone away. That’s the way a free market works. Electricity is not a free market. The bureaucrats, the regulators, never think that way, so we preserve all these old power plants. The average power plant in the United States today is 40 years old. It is using technology that was perfected in the mid-50s. We are able to build power plants that are twice as efficient. We could take the 42 percent of carbon dioxide that comes from electricity and cut it in half and save $70 billion. And yet we’re having an argument between conservatives and liberals about whether we can afford greenhouse gas reduction.
Monica Trauzzi: What’s your take on carbon capture and sequestration technology?
Tom Casten: I think it’s the carnival for the weak. It hasn’t been proven. Why spend a whole ton of money to capture carbon when you could spend a fraction of that money and not release it to begin with? The electricity system is only 33 percent efficient. We’ve got Congress trying to support people to build another 33 percent efficient power plant and spend a bunch of money capturing the carbon, putting it in a hole in the ground, and hope it stays. Why don’t we just build 70 percent efficient power plants? Duh.
Monica Trauzzi: I’m guessing that you’re not getting happy phone calls from the coal industry. If that was a large-scale implementation of this type of technology and this process, what would that mean for the future of coal-fired power plants?
Tom Casten: I’m talking about efficiency, not about fuel. Five of the plants that we built in my past were coal-fired cogeneration plants. Coors Beer, big coal plant, makes the electricity first and then the steam. That plant has about 80 percent efficiency versus 33 at the grid. Coors makes a lot of money from having that up. We built it, or we were involved in it, years ago. Another plant serves a big ethanol plant, an Archer Daniels Midland ethanol plant. This is not about switching fuel. It’s about getting more efficiency. Yes, if you make 33 percent efficient electricity with natural gas you’ll make less carbon. You’ll also pay more money because gas is pretty expensive. The typical gas plant that we are able to build, by recycling the exhaust that would have been thrown away, is 70 percent efficient. Half as much gas cost, half as much carbon dioxide. The thing that frustrates me so much is that the reason we ought to be addressing greenhouse gas is an economic imperative. The economy is really taking a hit from the high price of fuel. If we only burned half as much fuel we could keep jobs here.
Monica Trauzzi: Environmentalists are not fully in support of this though because they feel like it’s detracting from the push on renewables. But you consider yourself an environmentalist.
Tom Casten: I’ve dedicated my life, since 1975, to reducing greenhouse gases. I have a great respect for my friends in the environmental community, but I think they’re making a mistake. Most people don’t think about the future. Those of us that do are in the minority. I don’t think we’re going to solve greenhouse gases if our message is you have to sacrifice in order to get there. It won’t sell. It won’t be emulated. If the United States is truly able to lead the world, and we have to do it, we need to use our brains to show how we can profitably reduce greenhouse gases. Can I give you an example of a project doing that? We went to a plant that makes silicon. It’s been there for 80 years and basically they put into a big furnace a pile of quartz rocks and coal. They stick an electric arc furnace into it and make it 7000 degrees. It’s very hot. And for 80 years they’ve thrown away all of the heat. We’re putting $60 million into that plant to capture that energy off the top. And for every three megawatts that they put and we will get one back. Okay, we’re going to sell it to the guy for about 3 1/2 cents a kilowatt hour, fixed, for the next 25 years. That’s pretty good. It will make him the lowest cost producer of silicon in the world. He is going to open up an additional furnace and pull silicon production back from China and hire more people, because he can make silicon cheaper.
Monica Trauzzi: So, this makes him more competitive?
Tom Casten: It makes him more competitive. If our environmental purist says, no, we have to go straight to renewable energy the U.S. emissions will go down because we’ll keep driving all of our jobs to other places that won’t do it.
Monica Trauzzi: But, is there a place for renewables here?
Tom Casten: Well, the long game is that we stop burning fossil altogether. This is a bridge that gets us there. We need technology development. And think about the other side, we’re cutting the electric content of silicon by a third. That’s the silicon that gets used in a solar PV. The environmentalists have to be less lazy. They have to demand savings and environmental savings. Business has to be less lazy. They have to demand profits and environmental reduction. As soon as we accept the double goal this whole debate is going to move to where it should be. Right now, the debate seems to be a debate between cheap, dirty energy and expensive, clean energy. It’s flawed. The real debate is between expensive, dirty energy, it only got dirty because you burn three units of fuel, and cheap, clean energy, which only burns 1 1/2 units of fuel. That’s the debate we should be having.
Monica Trauzzi: In terms of a renewable portfolio standard, I know that several states have accounted for recycled energy in their RPSs.
Tom Casten: Yes.
Monica Trauzzi: And the energy bill last year, on the House side, included recycled energy as well.
Tom Casten: Yes.
Monica Trauzzi: So, how key is some form of legislation here? Would that help you with what you’re trying to do?
Tom Casten: Legislation is absolutely critical and there have been some places where, and I think, we ought to be after clean energy and not make choices. Let the market make the choices, just define clean energy. But if I can comment on legislation, the elephant in the room is that the power efficiency hasn’t improved since Eisenhower. Imagine that! It’s one of the largest industries in the world and the efficiency is the same as it was in 1955. A part of the reason that it stayed is that the Clean Air Act of 1970, in order to get a compromise, said we’ll let you keep polluting at your old level and we’ll force the new plants to clean up. Sounds like a good idea. In time, your plant will wear out and then you’ll have to build a new, clean one. We’ll all live happily ever after. A flaw in the logic, power plants don’t wear out. You can keep replacing parts in power plants. I’ve been in a power plant that was built in 1904, running! So, the rule says, if you put any money in energy productivity you lose your license. So 70 percent of the greenhouse gas is coming from plants that if the owners put any money into an improving the efficiency they lose their license to operate. This is Alice in Wonderland. This rule needs to be changed and substituted with an output allowance, number one. Number two, we’ve got to give clean energy a chance. All of the plants, and we built about $2 billion worth of plants in the last 30 years, 210 plants, we are never able to capture more than a little over half the value that we create, because it’s a regulated, bureaucratic thing. And we need to go out, we’ve got a proposal that we’re talking about in Washington today to …
Monica Trauzzi: You’re meeting with Harry Reid?
Tom Casten: Meeting with Senator Reid, yes, and saying figure out the very best alternative for a new central power plant and really figure the cost down in the end and then offer 85 percent of that to anybody that’s at least 60 percent efficient, so the public gets a discount. Oh, by the way, make them continue to deal with the utility so the utility doesn’t lose any profits. Fix what was wrong with PURPA, because the goal ought to be how can we clean up the energy? And if we confuse that with which stakeholder gets hurt, then we argue about stakeholders. PURPA gave no benefit to the utilities, so they fought it. Regulation gives no benefit to the utilities for efficiency. Do you know that if the average utility increases its efficiency it has to pass 100 percent of the benefit to the customers? Maybe that’s why we haven’t had any efficiency increase. This is not complicated.