1. Energy Efficiency: A Capital Offense Comments to MIT NESCAUM Symposium Thomas R. Casten, Chairman Recycled Energy Development, LLC August 12, 2009 RED | the new greenwww.recycled-energy.com

2. Presentation Summary To reduce CO2 emissions, look at the main sources – generation of electricity and thermal energy Generation efficiency could be doubled, but deploying such efficiency is a capital offense under the Clean Air Act, causing loss of permit to operate The failure to focus on the main sources of CO2 emissions results in costly, inefficient regulations that force citizens to pay more to heat the planet The single most important action is to modernize rules to eliminate barriers to efficiency and allow waste energy recycling to capture most of the value it creates. RED | the new green

3. The Energy/Carbon Story The Generation Story Conclusions RED | the new green- 3 -www.recycled-energy.com

4. The history of access to energy services Our standard of living depends on access to energy services: Heat, power, mechanical energy Until recently, homo sapiens depended only on metabolic energy: 100,000 years ago:Fire tamed 10,000 years ago:Animals domesticated 5,000 years ago:Power from wind 2,000 years ago:Power from water Recent use of ‘Ancient Sunlight’ – fossil fuel: 1760:First significant use of coal 1859:Oil discovered 1885:Natural gas first used Access to energy services allowed population to explode RED | the new green- 4 -www.recycled-energy.com

5. World population has grown dramatically RED | the new green- 5 -www.recycled-energy.com 1999 1987 1975 1925 1810 1957 3 million ca. 1760:Watt’s steam engine allows coal to be used for power A.D.B.C. Source: various authors cited by the U.S. Bureau of Census

6. Source: Arulf Grubler (1998), BP Statistical Review of World Energy (2008), US Bureau of Census (2008) RED | the new green- 6 -www.recycled-energy.com Increases in world population and energy consumption 1850-2007 100% 80% 60% 40% 20% 0% 100% 80% 60% 40% 20% 0% 100% 80% 60% 40% 20% 0% Population up 430% Consumption per Capita up 760% Total Consumption up 4600% 185019001950200018501900195020001850190019502000 Nuclear Natural Gas Oil Coal Hydro Wood

7. Ninety percent of human greenhouse gas emissions during the past century 100% 50% 0% 1979 Emissions of Greenhouse Gases from Fossil Fuels (cumulative, in MT CO 2 e) RED | the new green- 7 -www.recycled-energy.com Source:RED calculations based on data from BP Statistical Review and J. David Hughes, Geological Survey of Canada (ret.) 90% GHG emissions since 1909

8. The Generation Story Conclusions The Energy/Carbon Story RED | the new green- 8 -www.recycled-energy.com

9. Looking for CO 2 in all the wrong places Analysts slice the world into transportation, residential, commercial, and industrial and then look for ways to reduce CO2 For example, latest McKinsey study of options uses this framework Others put faith in technology, calling for more R&D, without asking why generation efficiency has been stagnant for 50 years Others demand a specific path – inducing renewable energy – and thus emasculate market forces ability to optimize clean energy generation Electricity generation is the elephant in the room RED | the new green

10. Generation efficiency – the elephant in the room “I’m right there in the room and no one even acknowledges me” RED | the new green- 10 -www.recycled-energy.com

11. Electricity generation is the largest source of CO 2 emissions RED | the new green- 11 -www.recycled-energy.com Source:RED calculations based on data from Emissions of Greenhouse Gases in the United States 2007; State Energy Data Report; and Annual Energy Review. 0% 10% 20% 30% 40% 50% 195019601970198019902000 CO 2 Emissions by the U.S. Electric Power Sector % of US CO 2 Emissions

12. Inefficient heat and power emits two-thirds of CO 2 RED | the new green- 12 -www.recycled-energy.com Heat & power account for 69% of fossil fuel emissions Efficiency has been flat for 50 years Emissions of U.S. CO 2 from Fossil Fuels Source:RED calculations based on data from the U.S. Energy Information Agency and the U.S. Department of Transport

13. US electricity generation is inefficient RED | the new green- 13 -www.recycled-energy.com Source: U.S. Energy Information Agency Inefficient generation U.S. Delivered Electric Efficiency Wastes energy Inflates costs Increases pollution

14. Homer Simpson’s power plant Springfield, ? RED | the new green- 14 -www.recycled-energy.com

15. Two-thirds of the energy generated is released into the atmosphere Electricity generation plant Craig, CO RED | the new green- 15 -www.recycled-energy.com

16. Pollution Fuel 100% GenerationConsumption Conventional electricity generation 1960 (& 2009) RED | the new green- 16 -www.recycled-energy.com Waste Heat 65% Transmission Useful Power 33% Waste Heat 2% Fuel

17. Pollution Fuel 100% RED | the new green- 17 -www.recycled-energy.com Waste Heat 33% Combined Heat and Power Plant Useful Power 33% Fuel Decentralized generation, combined heat and power Useful Thermal Energy 33% Recycle Waste Heat 66% Efficient No Line Losses

18. Electricity Steam Hot Water End User Site Energy Recycling Plant Electricity Process Fuel Finished Goods Waste Energy Saved Energy Input Recycling industrial waste energy: Cost effective clean energy RED | the new green- 18 -www.recycled-energy.com

19. Produces as much clean energy each year as all grid-connected photo-voltaic solar generation produced in 2004 Recycling industrial waste energy Cokenergy Mittal Steel, Northern Indiana RED | the new green- 19 -www.recycled-energy.com

20. RED | the new green- 20 -www.recycled-energy.com * Includes T&D, line losses, backup generation and subsidies Waste energy recycling is cost-effective All-in Cost of Clean Energy Generation* US$ per delivered MWh Average 2008 Retail Cost Use Energy Twice

21. RED | the new green- 21 -www.recycled-energy.com Cost of reducing CO 2 vs. old Coal US$ per ton Only waste energy recycling lowers the cost of avoiding CO2 emissions Use Energy Twice

22. The potential to use energy twice is enormous EPA study identifies 64,000 MW potential to recycle waste energy in 16 industries DOE study identifies 135,000 MW potential for fueled CHP that replaces thermal generation with waste heat from new electricity generation World Alliance for Decentralized Energy (WADE) study found potential to reduce U.S. CO2 by 20% and save $80 to $100 billion per year By contrast, deploying new renewable electricity generation will strongly raise electric costs. RED | the new green

23. Policy observations All currently profitable low-carbon options involve recycling waste energy to increase efficiency But; the Clean Air Act, as administered, treats investments in generation efficiency as a ‘Major Modification’ and allows EPA to void the operating permit. Most existing electrical and thermal generation plants cannot economically meet current BACT to obtain a new permit Capital punishment may or may not deter crime, but it certainly deters investments in generation efficiency. Penalizing all carbon emissions won’t spur new and more efficient thermal and electric generation Old inefficient plants with free allowances are cheaper to operate than new efficient plants that must buy allowances RED | the new green- 23 -www.recycled-energy.com

24. U.S. Delivered Electric Efficiency Steam Pressure Recovery 190 Projects Combined Heat & Power 56 Projects Industrial Waste Heat Recovery 14 Projects RED | the new green- 24 -www.recycled-energy.com We have proven this thesis with 200 projects ($2.0 billion)with double conventional efficiency

25. The Energy/Carbon Story The Generation Story Conclusions RED | the new green- 25 -www.recycled-energy.com

26. Conclusions Using energy twice could cut CO2 by 20% while saving $80 to $100 billion per year, but: Current policies largely ignore options that use energy twice Changes to existing thermal or electric generating plant are a capital offense, potentially costing the operator the right to operate Laws, new an old, need to pay attention to encouraging efficiency – using energy twice. Willie Sutton robbed banks because that was where the money was. To profitably lower CO2 emissions, we must change the way the world generates electric and thermal energy. RED | the new green- 26 -www.recycled-energy.com

27. Thank you RED | the new green- 27 -www.recycled-energy.com