Pollution Probe
August 2, 2006
Profitably Reducing CO2 by
Recycling Energy
Some ‘Convenient Truths’
Thomas R. Casten
Chairman & CEO
Primary Energy, LLC
Presentation Summary
 Ontario can profitably eliminate coal
fired generation with unconventional,
innovative governance
 Must remove barriers to efficiency and
encourage local generation in order to:

stimulate energy recycling,

Avoid new T&D capital

Cut fossil fuel use

Improve manufacturing competitiveness
Climate Change Mitigation
A Governance Dilemma?
 The declining cost of energy services has
driven income growth throughout history



Exploiting fossil fuel has produced 150 years of per
capita income gains, but
Resultant CO2 emissions are changing climate
2/3’s of fossil fuel use is for heat and power
 The Governance Dilemma: How to supply
affordable energy services and maintain a
healthy biosphere?
False Prophets Say We Must Chose
Between Economy and Environment
Pollution
Cost
But North American Energy
Systems Are Far from Optimal
 Regulations ignore new technologies
 Regulations block innovation
 Energy price signals do not include
externality costs
 Utilities are seldom rewarded for fossil
efficiency or conservation
 These many rules are ‘barriers to
efficiency’
Conventional Central Approach
1960 Data (& 2003 Data)
Pollution
Waste Heat
Transmission Line Losses
3 units (9.0%)
67 units
Waste
Energy
Fuel
=
100
units
33 units
Electricity
End User
Power Plant
Recycling Thermal Energy with
Combined Heat and Power
Pollution
33 units
Waste
Energy
Fuel
100
units
=
33 units
Thermal
Energy
CHP Plant
33 units
Electricity
Recycle
Waste
Heat
End User
Site
66 units
Useful
Work
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rtu
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Ca al
na
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M a
ex
i
W co
O
R
LD
DE share as a % of total power generation
Comparative Deployment of Combined Heat
and Power in 2004
60
50
40
30
20
10
0
Ontario CHP Potential
 Current CHP @ 10%
2,600 MW
 If German CHP @ 19%
4,900 MW
 If Netherlands CHP @ 39%
10,400 MW
 If Denmark CHP @ 52%
13,520 MW
 Compare with current coal
7,000 MW
Affordable Clean Energy Potential
Recycling Industrial Waste Energy
 Recycled energy is useful energy
derived from:



Exhaust heat from any industrial process or
power generation
Industrial tail gas that would otherwise be
flared, incinerated or vented,
Pressure drop in any gas
Fuel-Free Heat and Power
Recycling Industrial Energy
Saved
Energy Input
Energy
Recycling
Plant
Electricity
Finished Goods
Process
Fuel
Waste
Energy
Electricity
Steam
Hot Water
End User
Site
Primary Energy’s Approach
90 MW Recycled from Coke Production
Ontario Energy Recycling Potential
(Rough Estimate 2,300 MW)
 Steel (Defasco, Stelco, Algoma) est. 400 MW

Blast furnace gas, exhaust heat, pressure drop
 Refineries and chemical factories est. 900 MW
 Natural gas pumping station exhaust – 560 MW
of fuel-free power
 Pressure drop at gas delivery points est. 100 MW
 Glass & fiberglass factory exhaust heat
 Sewage gas, landfill gas, biomass, construction
waste, recycled carpet, other.
Ontario CHP Potential
 Gas fired combined cycle plants next to
thermal energy users to recycle heat

Toronto and London district energy systems,
hospitals, breweries, refineries, universities,
industrial plants using heat
 Biomass fueled plants for greenhouses,
agricultural processing, paper, paper recycling
 Other opportunity fuels including tires,
sludge, wood waste, construction waste,
petroleum coke
Conventional Power Thinking:
Local Generation Saves Fuel, But
Economies of Scale Make Central
Generation Optimal
Economies of Scale?
Central versus Decentralized Generation
(US Dollars)
KW
Total costs/
Transmission Total / kW
Generation & Distribution
of
required/ kW New
Generation kW Load
Load
Central Generation
$890
$1380
$2,270
1.44
$3,269
Local Generation
$1,200
$138
$1,338
1.07
$1,432
Savings (Excess) of
Central vs. Local
Generation
$310
$1,242
$1,068
0.37
$1,837
74%
1000%
213%
135%
228%
Central generation
capital as a % of
local capital
What is Optimal New Generation
 Reduced cost versus present systems
(including all subsidies and externality
costs)
 Reduced overall capital investment
 Reduced criteria pollutant emissions
(NOx, SOx, particulates, mercury, CO)
 Reduced green house gas (GHG)
emissions
 Society should demand win/win answers
Future Generation Options
20
Renewable Energy
Options
Central
Generation
Options
Coal Gas with CO2
Sequestration
Cents / kWh
15
10
No incremental
fossil fuel line
New Combined Cycle
Gas Turbine
New Coal
Coal Gassification CCGT
Remote Wind
Avg. Retail Power Price
8.1¢ / kWh
Recycled Energy
Options
Avg. Industrial Power
Price 5.5¢ / kWh
5
Recycled Industrial
Energy
Balanced CHP
Existing Coal Fossil Plant
- No new T&D
0
3
(33% efficiency)
2
1
(50% efficiency)
(100% efficiency)
0
-1
(net fossil savings)
Average Fossil Heat Rate (Units of fossil fuel per unit of delivered electricity)
CO2 down
CO2/MWh
CO2 up
Power Cost and CO2 Policy Choices
Cost and Emissions Today
Central generation with coal,
no criteria pollutant control
Cost down, CO2 up
Coal gasification, CCGT,
Cost up, CO2 up
Policy Goal
CHP, industrial energy recycling
(Requires local generation) off
grid solar, local hydro
Cost down, CO2 down
Cost down
Wind, Geothermal,
CO2 sequestering, on grid solar
Cost up, CO2 down
Cost / MWh
Cost up
Ontario Recycled Energy Potential
 Avoid 730 trillion Btu’s of fossil fuel per year
 Add 9,000 megawatts of clean generation
 Largely eliminate need for added T&D
 Reduce annual energy costs by $3 billion
 Reduce CO2 and other emissions by 20%
 Preserve manufacturing jobs, stimulate
construction jobs
 Reduce electric system vulnerability
 Force bordering U.S. states to follow or lose
jobs to Ontario
How Can Ontario Governance Spur
Profitable CO2 Reduction?
 Modernize old rules that are now
barriers to modern technology
 Raise energy taxes to cover the
externality costs of burning fossil fuel,
cut other taxes, send accurate price
signals
 Reward local generation for avoiding
T&D capital and line losses
 Encourage all clean energy, including
recycled energy
Specific Suggestions
 Provide standard offer for CHP, no time limits
 Provide Provincial loan guarantees for
industrial energy recycling plants
 Shift energy subsidies into cost of energy
services and lower tax rates to remain revenue
neutral
 Tax externality costs of fossil fuel and then
lower other taxes to stay revenue neutral but
send clear signal
 Ask all to identify specific barriers to efficiency
and suggest new rules that serve the social
purpose but do not block efficiency.
Convenient Truth:
Energy Recycling Can Profitably Reduce CO2
 Ontario can profitably replace coal with
9,000 megawatts of recycled energy – all
affordable and clean
 Requires innovative governance
 The biggest challenge is to change
conventional thinking!
 Denmark made this change in two
decades, and we can do better
Denmark Changed in Two Decades
Source: Danish Energy
Center
Conclusions:
 Global warming a very serious problem
 Mitigating climate change will require all clean
energy solutions. to reduce atmospheric CO2
buildup
 Recycling energy will reduce the cost of
energy services and lower CO2

This will buy time for development of lower cost
renewable energy
 Our collective future depends on how fast
governments remove barriers to efficiency
and encourage clean energy
Thank you for listening