# Presentation: 327128

## Industrial CHP - The Trend Toward Outsourcing and Efficiency

***Industrial CHP - The Trend Toward Outsourcing and Efficiency***

**  **
**Don Leibowitz**
** ****Vice President, Trigen Energy**

## Presentation Summary

**U.S. energy infrastructure is obsolete**
**U.S. wastes > $100 billion/year on energy**
**CHP - the ideal use of technology to achieve economic and environmental benefits**
**Building tomorrow’s efficient energy systems TODAY**

## Situation Report External forces driving a new paradigm for  energy production, distribution, and use

**  **

## US Energy Infrastructure Old

**Average US electric plant built in 1964**
**33% delivered efficiency & wastes the rest**
**100 times more polluting than today’s best**
**Costs 2 to 2.5 ¢ / kWh to transmit power**
**Thermal energy is non-core &  neglected**
**Little investment for efficiency**
**Skill sets inadequate**
**Massive distribution & conversion losses**
**Little physical arbitrage capability**

## Energy Generation Efficiency Curve

**Energy Generation Efficiency Curve**

- 0%

- 10%

- 20%

- 30%

- 40%

- 50%

- 60%

- 70%

- 80%

- 90%

- 100%

- 1880

- 1890

- 1900

- 1910

- 1920

- 1930

- 1940

- 1950

- 1960

- 1970

- 1980

- 1990

**Monopoly **
**Efficiency Gap**

**Best Electric Only Plants**

**Notes:**
The power generation efficiency of the overall industry started at 8% and rose steadily to 20%, then in the early 1950’s rose again to 33% fuel to electric efficiency, where it has been frozen since 1959.  During the same time, technology improved rapidly.

The diamonds show  the best electricity only generation plants available at various times since 1960, showing that industry knows how to build substantially more efficient generation. The best electricity only generation being built today is about 57% efficiency and 60% is promised. 

Actual CHP plants have been built that are dramatically more efficient, approaching 90% fuel to useful energy conversion.  Clearly, there are choices for improving the efficiency, and they are economic, because profit seeking businesses are building these plants in competition with other technologies.

However, the ninety year old monopoly protection of electric generation and sales and regulatory approach that focuses on limiting monopoly rent has result in stagnant overall efficiency levels.  The line of efficiency with competition is the author’s estimate of efficiency had competition of electric sales been allowed, and the fill area is the monopoly efficiency gap. The challenge for policy makers is to craft modernized approaches that unleash the market to close the monopoly efficiency gap.
Guy: I need a slide that magnifies just the Trigen cogen installations, starting with Trenton, and shows the years with dots for each separate installation.  Can you make the dots color coded to represent ranges of output like the other charts, I.e. >56 mw, 14 - 56, 4-14, .5 to 4 and under .5?  Talk to me asap, as this is urgent.

## U.S. Wastes > $100 Billion/Year on Energy

## Real Cost Savings 10 Years after Deregulation

- 0%

- 10%

- 20%

- 30%

- 40%

- 50%

- 60%

- 70%

- Airlines

- Railroads

- Gas

- Long
- Distance
- Telecom

- Trucking

- Electric
- Power

## Is better technology available? 

**YES**

## Optimal Electric Gen. Plant Size

***Optimal Electric Gen. Plant Size***

- 0

- 200

- 400

- 600

- 800

- 1000

**($/MW)**

- Source: Charles Bayless, Chairman, Illinova Power, IL

## Conventional Thermal Generation

**Fuel **
**100%**

**(Remote from thermal users)**

**Power   Plant**** **

**Notes:**
	To understand what is very wrong with how  energy is produced all over the world, look at this diagram of a typical electric generation plant.  It is located well away from built up areas, because, historically, these plants were dirty and not something someone wanted to site near housing or industry.  New plants are so clean that it becomes hard to measure the pollutants they emit, but this remote siting notion is a part of our received wisdom.

	One hundred units of fuel go into the plant and are combusted, releasing all of their carbon as carbon dioxide.  About a third of the energy in the fuel is converted to electricity, less by the time it is delivered to users, and the rest of the energy is dumped into the environment as waste heat.  This inefficiency is little known, but is in fact the average production efficiency for all US fossil fired utility generation.

## Combined Heat and Power (CHP)

**Fuel**
**100%**

**(On or near thermal user sites)**

**CHP  Plants**

**Notes:**
	The technology has been developed, put into service, and proven over the past 30 years to make power a different way -- to combine the production of heat and power.  In this approach, many smaller plants, using modern and very clean technology, are sited at or near customer sites -- customers who need thermal energy for space conditioning or processes.  The same 100 units of fuel energy now becomes 90 units in total of three useful energy products, electricity, steam, and chilled water.  Only 10% of the input energy is wasted, and the pollution is reduced by dramatic amounts.  It would have taken 200 units of fuel to produce this same useful energy in the conventional way, with some burned to make electric power and the rest burned to make heat, or more electric power for cooling.

	The carbon dioxide reduction is at least 50%, if there is no fuel switch, and if as is typically the case, the new  smaller combined heat and power plants are gas fired, the carbon dioxide reduction can reach 80% for the same end use energy.

	Because the new technologies are so clean, the regulated pollutants fall to 6% of what would have come from conventional separate generation with old plants.  Trigen is operating several plants that achieve a 94% reduction in pollution, and we expect to use new combustors in the near future that will cut regulated pollutants to 2% of conventional.

## Generating Efficiencies of Various Technologies Today

- 0%

- 20%

- 40%

- 60%

- 80%

- 100%

- GTCC = Gas Turbine Combined Cycle
- CHP = Combined Heat and Power

**Notes:**
The various technologies are shown relative to the average US electrical generating efficiency.  In every case, recovering heat for CHP lowers the electric output somewhat, but does greatly increases the percentage of input energy that is captured as useful energy.

The fuel cell has great interest as the technology of tomorrow, and perhaps further advances and lowering of cost will make this true.  However, note that the gas turbines already beat the best hoped for on fuel cells, and have been applied with over 90% total efficiency.  We welcome new technology and will use it as available, but do not need new  technology to more than double the efficiency of US power generation

## Will replacing existing generation lower costs? 

**Yes**

## Marginal Electric Costs

**$0**

**$10**

**$20**

**$30**

**$40**

**$50**

**$60**

**$70**

**$80**

**$90**

**$/MWh**

**0**

**1.0**

**2.0**

**3.0**

**4.0**

**5.0**

**6.0**

**8.0**

**7.0**

**9.0**

**cents/kWh**

**Notes:**
Matt Steinwald.  Can you show me how to animate this chart so that it builds first with the marginal central plant fuel, next click the transmission, and then builds the combined heat and power fuel bar first, then the capital recovery.  I have changed it to show the profits the central plant as well.

## Will new plants decrease pollution?

**YES**
** ****New Technology Emits 1% of the Pollution of Older Plants**

## Pollution/mWh of Energy Output

## CHP Challenge

**DOE and EPA have established a program to highlight the benefits of CHP**
**Involves several DOE and EPA programs, the National Labs and State Energy Offices**
**Established a National CHP Target to Double CHP capacity by 2010 from ~45 GW to 90 GW**

## Trigen Energy Corporation Is Building Tomorrow’s Energy Systems

**Changing the way  power is generated, distributed and converted to comfort and  satisfaction**

## Trigen Energy Corporation Mission Statement

***Trigen Energy Corporation Mission Statement***

**Provide heating, cooling and electricity with half the fossil fuel and half the pollution of conventional generation**

## Trigen Core Business 

**Build Own & Operate on-site, CHP plants serving  North American facilities that require significant thermal & electric energy**
**Apply thermal sciences to optimize on-site generation & distribution and use of  energy**
**Produce energy conversion products and services that enhance value  **

## Advantages of On-Site CHP

**Apparent advantage -- recover heat and cut fuel use in half**
**Insufficient savings to overcome barriers**
**Real economics -- avoid 2 cents/kWh T&D**
**Compelling unless transition charges**
**Outsourcing -- Facility energy savings**
**Outsourcing firms invest in efficiency**
**20% to 30% energy use reduction common by 3rd anniversary of outsourcing**

##  Recent Energy Outsourcing Contracts * Includes CHP 

**Coors Brewing Co.***
**Equistar - several* plants**
**Millennium Chemicals - 5 plants***
**Boeing**
**Gillman Paper***
**Baxter Labs***
**National Textiles**

**AC Humko**
**Univ. of Maryland***
**Sweetheart Cup***
**Lafarge Gypsum***
**McCormack Place***
**Primex Plastics***
**Kimberly Clark**
**Cargill***

##  On-site CHP Market Size 

**5800 medical centers**
**1900 Universities with central heating**
**Most of US industrial production**
**Supplying 47% of US thermal needs with CHP produces 100% of US electricity**
**Market size $80 billion per year**
**US DOE estimates 125,000 megawatt potential for CHP**

## Industrial Needs

**Reduce operating costs**
**Improve efficiency & reliability**
**Reduce book assets, improve RONA**
**Cash infusion from energy asset sale**
**Non-core capital avoidance**
**Reduce environmental impacts**
**Improve overall competitiveness**

## Trigen Approach

**Core focus**
**Energy (low cost, high reliability)**
**Capital and asset optimization**
**Customized services to maximize value**
**Structures for tax, accounting and finance**
**Fuel management**
**One-stop utilities services**

## Millennium - Baltimore,MD15 year agreement to supply all steam, electricity and other utility services

**Leased the existing Baltimore plant**
**Installation of 10 MW CHP plant - first project announced after CHP Challenge**
**Reduced regional NOx and CO2 emissions substantially**
**Savings for customer of approximately $1 million/year**

## Benefits to Millennium

**Reduced energy costs **
**Avoided capital expenditures**
**Immediate energy savings**
**Predictable energy costs**
**No capital spending in utility plant**
**Electrical rate cap**
**Opportunities for additional savings**

## Millennium - Ashtabula, OH15 year agreement to supply all steam, electricity and other utility services

**Leased the existing two boiler plants**
**Installation of new cogeneration plant **
**Assumed operating responsibility **
**Responsible for environmental compliance**

## Benefits to Millennium

**Reduced energy costs **
**Avoided capital expenditures**
**Immediate energy savings**
**Predictable energy costs**
**No capital spending in utility plant**
**Electrical rate cap**
**Opportunities for additional savings**
**Compressed air system**

## Equistar-Tuscola, IL

***15-year agreement to supply steam, electricity,***
***de-mineralized water and compressed air.***
**Cash payment for existing plant & distribution**
**Improve electric reliability by adding more cogeneration and upgrading electrical utility systems**
**Assume operating responsibility**
**Responsible for environmental compliance**
**Provide future capital **

## Benefits to Equistar

**Improved electrical reliability**
**Reduced energy costs by **
**Avoided capital spending in utility plant**
**Immediate cost savings**

## Lafarge - Silver Grove, KY15 year agreement to supply heat and electricity

**Direct fired cage mill dryer with 5 MW gas turbine - 96% efficient**
**Meet all electric requirements**
**Installation of equipment **
**Phase-in “merchant” option for additional sales to grid**

## Benefits to Lafarge

**Reduced energy costs **
**Immediate energy savings**
**Predictable energy costs**
**Electrical rate cap**
**Opportunities for additional savings**

## Sweetheart Cup - Baltimore, MD

***20-year agreement to supply all ***
***steam and electricity***
**Leased existing boiler and air plants**
**Installation of new 15 MW CHP plant **
**Immediately assumed operating responsibility **
**Option to increase generation to 26 MW**

## Benefits to Sweetheart

**Financial benefits / cost reductions**
**Reliability improvements**
**Management can focus on core business**
**Transferred utility staff to Trigen-Cinergy**
**Low cost producer - minimizes impact of regulatory and fuel price changes**

## Coors - Golden, Colorado

***25-year agreement to supply all ***
***steam and electricity***
**Cash payment for power plant and natural gas pipeline**
**75% efficient coal-fired plant**
**Expansion of power plant **
**Continuous utility costs reduction **
**Lower prices for incremental use**

## Benefits to Coors

**Financial Benefits / Cost Reductions**
**Management can focus on core business**
**Transferred utility staff to Trigen**
**Low cost producer - minimizes impact of regulatory and fuel price changes**

## Total Trigen Capacity in Megawatts

## Why Haven’t More Followed?

**Difficult to generate profits with on-site CHP because of barriers to efficiency**
**Protected distribution monopolies block on-site generation**
**Environmental rules preserve status quo and penalize efficiency**
**Energy entrepreneurs thus focus on central generation - AES, Calpine, others**
**Equipment suppliers follow, focus on central generation sized plants**

## Thank You For Listening

***Thank You For Listening***