Profitably reducing greenhouse gas emissions

Posted by Tom Casten on March 27th, 2008 |

 
McKinsey & Company recently highlighted 78 approaches to increasing energy productivity and reducing greenhouse gas emissions, half of which save money. Most of the consulting firm’s recommendations involve using electricity and thermal energy more efficiently. 

The elephant in the room, however, is the highly inefficient production of electricity and thermal energy. Only two of McKinsey’s 78 approaches address the efficiency of producing electricity and thermal energy. Today’s electric-only generation is wasteful and costly, and is needlessly forcing climate change. Energy waste, however, also represents an economic opportunity.

Everyone seems to know about electric plant waste. Television cartoon fans can picture how the nuclear plant employing Homer Simpson features cooling towers that reject enormous amounts of heat. At every real-life electric-only generation plant, two thirds of the fuel’s energy is vented to atmosphere. The electric industry apparently reached the thermodynamic limits of central generation efficiency in the 1950’s. Efficiency has not increased by one percentage point in 50 years.

Electric generation waste grows in importance as electricity replaces other energy forms. The percentage of CO2 emissions from electric generation rose from 11 percent to 42 percent since 1949.

The other large source of CO2 emission is thermal production. By 2005, 69 percent of U.S. fossil greenhouse gas emissions were from the generation of heat and power. Compare 69 percent to the 19 percent from automobiles, which were the main focus of the U.S. Energy Independence and Security Act of 2007. We are missing the elephant in the room.

We must reduce electric generation waste to mitigate climate change.

There is good news. We can do two jobs with one fire. Combined heat and power plants (CHP) near thermal loads achieve double efficiency by recycling the byproduct thermal energy to displace boiler fuel. Waste energy recycling plants convert industrial waste energy into heat and power with no additional fossil fuel, and create added revenue for manufacturers.

Consider the energy-recycling plant at a steel smelter located on the southern shore of Lake Michigan. In the past, 268 coke ovens, which bake metallurgical coal in order to produce blast furnace coke, vented the waste heat into the air. The energy-recycling facility captures and recycles that exhaust gas to produce 95 megawatts of electricity and up to 980,000 pounds of steam for the smelter. This power is pristine, as clean as any from renewable energy sources because it results without burning any additional fuel or emitting any additional pollutants or greenhouse gases. In fact, this single facility generates roughly the same amount of clean energy as is produced by all the grid-connected solar collectors throughout the world. Critical to the climate-change debate, this coke energy project earned a profit and sold power to the steel mill for 25 percent of average US retail electricity prices.

In another example, West Virginia Governor Joe Manchin recently announced Recycled Energy Development’s $60-million investment to recycle energy from a silicon manufacturer that is the life blood of Fayette County’s 48,000 residents. Capturing the waste heat from the plant’s furnaces will generate nearly a third of the factory’s 135 megawatts of electric demand, guarantee stable energy prices, and enable a 20-percent expansion of silicon production capacity. This project, as a result, will secure the facility’s existing 200 jobs, add 25 to 30 new manufacturing jobs, cut line losses, avoid 300,000 tons of carbon dioxide emissions per year, and take silicon production back from China. It demonstrates the profitable reduction of greenhouse gases.

There are many more examples. Companies I have led have developed and invested two billion dollars in 250 energy recycling plants that are all over North America. The worst is twice as efficient as the US electric system. Each year, these plants save over 60 trillion Btus of fossil fuel, avoid over 50 million tons of greenhouse gas emissions and save the industrial and commercial hosts nearly $400 million.

The United States and Canada, unfortunately, are international laggards when it comes to generation efficiency. Denmark over the past two decades raised cogeneration’s share of total electricity production to more than 50 percent. Netherlands, Finland, and Russia also have substantial combined heat and power applications, while several other developed countries — including Germany, Poland, Japan, and China — have rates more than twice the 8 percent in the United States.

We have identified opportunities to build $350 billion of energy recycling projects, using proven technology. These projects would reduce society’s cost of heat and power by $70 billion per year and double the 1.3 gigatons of profitable greenhouse reductions identified by the McKinsey study. This is a huge opportunity to profitably reduce greenhouse gas emissions.

This opportunity raises the obvious question: why does inefficiency prevail?

Our energy laws and regulations are outmoded, designed for an era before climate change was an issue. Changing those rules and regulations will not be easy because policy losers scream louder than the winners cheer.

Nowhere is the task more difficult than in the debate about the so-called costs of greenhouse gas reduction. Profitably lowering greenhouse gas emissions means burning less fossil fuel, which means we must increase the efficiency of converting fossil fuel into useful energy services. This will create massive economic gain… but with a wealth transfer from fossil fuel producers and inefficient energy converters to energy efficiency entrepreneurs and to energy consumers.

The good news is that the winners outnumber the losers. The economic and environmental health of the U.S. and Canada depends on how fast governments modernize energy regulations to give clean energy a chance to profitably reduce greenhouse gas emissions.