1. Creating Value from Steam Pressure FREE ELECTRICITY Making the most of a CHP System Design Presented to the World Energy Engineering Congress Atlanta, GA November 12, 2003 Sean Casten Chief Executive Officer 161 Industrial Blvd. Turners Falls, MA 01376 www.turbosteam.com

2. The economics of all power generators are based on a few very simple calculations: What is my fuel cost? What is my electricity value? How much spread do I need to cover O&M, capital recovery & profit? When one considers real-world, location-specific fuel and electric rates, it becomes apparent that even with a very modest 3 c/kWh spark spread, the market for power-only generation is nearly non-existent (see next) –This forces DG designers to add ancillary value to their system designs.

3. 30 – 40% efficient generation isn’t enough!

4. So how do you make the economics of DG work? 1.Only target states with attractive spark-spreads –No surprise that most DG installers market heavily into CA, NY, MA, NJ 2.Chase higher value power –“Premium power” market is real, but limited 3.Chase lower-cost fuel –Wood-waste, coal, landfill gas all present more favorable economics – but are much harder than gas to site or permit 4.Chase efficiency –CHP systems recover “free heat” to realize added value, bump efficiency up.

5. However, while CHP is typically understood to take a “power- first” approach to generate free heat… Power Generator Fuel Electricity Waste Heat Heat Recovery Device Free Heat Fuel Cost Cost of Power Generation Without Heat Recovery With Heat Recovery

6. …there are many opportunities to take an inverse, “heat-first” approach to generate free electricity. Heat Generator Fuel Useful Heat Waste Heat Power Recovery Device Free Electricity Electric Cost Cost of Heat Generation Without Power Recovery With Power Recovery

7. Properly designing “heat-first” CHP is a near-exact inversion of “power-first” approaches. “Power-first” design: prime mover + heat recovery  Recovered thermal energy displaces boiler fuel, reducing the delivered cost of electricity.  Focus is electricity with steam as a byproduct  Usually designed to maximize power output, then recover as much heat as is economically feasible. “Heat first” designs: steam boiler + power recovery  Recovered electricity displaces purchased electricity, reducing the cost of steam.  Focus is on thermal with electricity as a byproduct  Usually designed to maximize thermal output, then recover as much electricity as is economically feasible.

8. One flavor of “heat first CHP”: typical steam plant design Boiler Fuel Feed water H.P. steam Header High pressure steam process load Medium pressure steam process load Low pressure steam process load Pressure Reducing Valve (PRV) PRV

9. Turbine-generators deliver the same pressure drop as a PRV – but produce useful electricity in the process. Low Pressure steam out Electricity High Pressure steam in Note that this generator is sized to the thermal rather than electric load (thus “heat-first”)

10. Turbosteam has installed 164 systems worldwide following this approach. >10,000 kW 5001 – 10000 kW 1001 – 5000 kW 501 – 1000 kW 1 – 500 kW Non-U.S. 17 countries 63 installations 35,900 kW

11. A closer look at heat-first economics. Retail Electricity Rate “All-In Cost of Generated Heat” Cost of delivered thermal energy before power recovery Cost of delivered boiler fuel Note 1: At all electricity rates, the cost of steam is reduced Note 2: In many cases, the cost of steam is reduced to less than the cost of fuel for steam generation! Where note 2 applies, plants develop substantial downstream flexibility, since steam-driven equipment – e.g., dryers, chillers, etc. – becomes more cost-effective than direct-fueled alternatives. Cost of delivered thermal energy after power recovery

12. The opportunity for heat-first CHP is entirely a function of a given facility’s thermal load. Recover electric power from existing pressure reduction stations  Sized to downstream thermal load  Maximize value by increasing thermal loads or pressure drop Create pressure reduction opportunities in existing steam networks  Increase boiler pressures – design and/or operating  Reduce steam utilization pressure (often possible due to existing safety factors) Convert mismatches in thermal generation and consumption into electricity  Condense steam generated in waste-disposal boilers (sawdust boilers, thermal oxidizers, etc.)  Recover steam energy from existing vents

13. Sample installation: Brattleboro Kiln Dry (Vermont) Largest custom-lumber dryer in New England Startup: 1989 Sawdust-fired boiler converts millwaste into steam which is used to heat on-site lumber kilns PRV replacement Turbosteam system generates 380 kW, reduces steam costs by $1.75/Mlb, reduces CO 2 emissions by 570 tons/year 35% Project ROA

14. Sample installation: Morning Star Packing Company (California) Tomato processor – produces 40% of tomato paste used in U.S. during 3 month operating season Startup: 1995 (2 systems), 1999 (3 rd system) High pressure boilers produce steam for tomato cookers PRV replacement + boiler pressure increase Turbosteam systems generate 3,000 kW, reduces steam costs by $2.50/Mlb, reduces CO 2 emissions by 2,700 tons/year. Plant completely insulated from CA power crisis in 2000 >60% Project ROA

15. Implications Power-first CHP Heat-first CHP Capital Costs Cheap steam boiler No need for fuel train, exhaust treatment, etc. Cheap power generator No need for fuel train, exhaust treatment, cooling tower, etc. $300 – 1000/kW installed Operating Costs Free heat (very minor O&M) Free Electricity (very minor O&M) EnvironmentalZero-emission heatZero-emission ElectricityBottom Line Environmental performance of a solar panel Capital costs of a reciprocating engine Maintenance costs less than a gas turbine

16. So what is heat-first CHP? The only distributed generation technology that is proven to be economically and environmentally beneficial on every corner of the globe.