There’s something a little stirring about the president of the United States praising your efforts. It’s particularly heartwarming when he does it before a national audience and a gathering of all the key federal policymakers. So there were understandable cheers among clean energy advocates when President Obama embraced industrial energy efficiency in his State of the Union Address.

Here’s the actual quote, delivered from the podium before a joint session of Congress:

“Of course, the easiest way to save money is to waste less energy. So here’s another proposal: Help manufacturers eliminate energy waste in their factories and give businesses incentives to upgrade their buildings. Their energy bills will be $100 billion lower over the next decade, and America will have less pollution, more manufacturing, and more jobs for construction workers who need them. Send me a bill that creates these jobs.”

Pundits, of course, have suggested several of the president’s proposals are not Republican favorites. Yet enhancing manufacturing efficiency and productivity is as bipartisan as you can get. Which party would ever be in favor of energy waste?

The challenge, of course, is having the two parties act together. Opportunities abound, including an extension of the Treasury grant program, expansion of the combined heat and power (CHP) tax credit, and a clean energy standard that highlights efficient CHP and clean waste heat recovery.

More than 200 companies signed a full-page advertisement placed in three Capitol Hill newspapers declaring industrial energy efficiency will put a million Americans to work. The ad, coordinated by The Pew Charitable Trusts, explains that U.S. utilities and factories send enough heat up their chimneys to power all of Japan. But with existing, proven technologies, we can harness that wasted energy, dramatically cut electricity costs, and make our manufacturers more competitive.

The print ad references the Oak Ridge National Laboratory study explaining how increased use of combined heat and power would “spur more than $200 billion in new private investment in the U.S., and create up to 1,000,000 jobs.”

Signers include major corporations like DuPont and Dow Chemical Company, labor unions like Sheet Metal Workers’ International Association and United Steelworkers, trade associations like the American Gas Association, environmental groups like the Union of Concerned Scientists, and small firms like Recycled Energy Development.

Learn more about industrial energy efficiency here.

Probably the biggest barrier to clean energy development is the lack of markets. Utility monopolies traditionally blocked independent generators from competing with their own power plants, even if the utilities’ facilities were more expensive and polluting. Congress tackled this problem in 1978 with the passage of the Public Utility Regulatory Policies Act (PURPA) and many states responded with policies that launched aggressive growth of renewables and cogeneration. The concept was simple – clean energy projects should be able to compete with traditional generators and receive power purchase contracts equal to what a utility would pay to generate and deliver its own electricity.

PURPA’s influence, unfortunately, waned in the 1990s, largely because of continued utility opposition and the growth of wholesale-power suppliers not focused on renewables or cogeneration. Yet the challenge of creating markets for clean power remains. Without such competition, opportunities to cut costs and lower pollution are being lost.

In states that maintained power monopolies, utilities remain opposed to independent developers, preferring to build their own power plants. In many states, the regional transmission operators allow only day-ahead power markets and fail to offer the long-term contracts needed to finance clean-energy projects.

In a little understood recent decision, however, the Federal Energy Regulatory Commission (FERC) declared PURPA is still an effective tool and can be used to provide technology-specific long-term contracts for clean power. (See below for a summary of the decision.)  The case began when California passed legislation to provide standardized contracts (or feed-in tariffs) for efficient cogeneration (sometimes known as combined heat and power or CHP). Utilities fought the legislation and then challenged its implementation before the state regulatory commission and twice before FERC, which instead embraced competition and the state’s ability to set long-term power purchase agreements for cogeneration, renewables, and other specific technologies.

A new report encourages FERC to go further, to build on the California decision and encourage the development of clean and efficient power technologies. Written by Carolyn Elefant and commissioned by the Southern Alliance for Clean Energy, Reviving PURPA calls on FERC to clarify and reform the Byzantine state patchwork that sets unreasonably low prices for electricity from renewable energy and cogeneration.

Reviving PURPA provides a comprehensive review, the first in more than a decade, of the different ways by which state regulators calculate avoided cost rates under PURPA. Based on this review, the report found many alternative-energy developers face complex and difficult -cost ratemakings at the state level. Further complicating the problem, in some states like Florida, utilities are vested with broad latitude to determine the data inputs for PURPA’s calculations, thereby allowing monopolies to control the market and block clean energy projects.

This report concludes PURPA can still serve as an important policy tool for development of renewables and cogeneration. However, states need additional guidance on which avoided cost methodologies are most favorable to clean power producers as well as an understanding of the range of options – such as resource-specific avoided-cost rates and ability to account for avoided environmental costs – available to them in setting PURPA rates. Therefore, this report recommends FERC, as the agency responsible for developing the regulations that states must follow in calculating avoided cost rates, conduct a series of technical conferences on PURPA and, based on input from stakeholders, issue a policy statement to provide additional guidance on how states can allow competition and clean energy development.

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FERC’s California Decision Summary

The Federal Energy Regulatory Commission (FERC) on 21 October 2010 issued an order (Docket Nos: EL10-64-001 and EL10-66-001) clarifying that states can offer feed-in tariffs for cogeneration and other renewable resources.

The California “Waste Heat and Carbon Emissions Reduction Act” (AB 1613) required the state’s investor-owned utilities to offer long-term power purchase contracts to cogenerators that meet certain efficiency and emission standards and do not exceed 20 megawatts of capacity.  The California utilities lobbied against the legislation and then argued to FERC that the law ran counter to the Federal Power Act and the Public Utility Regulatory Policies Act.  The FERC, however, disagreed with the utility arguments and stated state commissions can set avoided cost rates for qualifying facilities.

Overturning a previous decision (SoCal Edison), FERC endorsed multi-tiered avoided cost rate structures.  The Commission specifically stated states “may take into account obligations imposed by the state” (such as AB 1613), thereby directing utilities to purchase energy from particular sources of energy or for a long duration.

FERC also found that if environmental costs “are real costs that would be incurred by utilities” then they “may be accounted for in a determination of avoided cost rates.”

The California decision opens the door to feed-in tariffs and Clean Energy Standard Offer Programs that encourage the development of specific technologies, such a combined heat and power projects or solar collectors and wind turbines.

A recent study by Oak Ridge National Laboratory finds efficiency, particularly combined heat and power (CHP), would make U.S. industry become more competitive as it also cuts manufacturers’ energy costs and greenhouse gas emissions. “The U.S. industrial sector,” state the researchers, “presents a large and significant opportunity to promote a clean energy economy.”

Oak Ridge sought to overcome a variety of non-technical barriers to industrial energy efficiency, including capital rationing, efficiency as a non-core investment, lack of knowledge and specialized expertise, and utility disincentives. Of its seven policy options, the laboratory highlights output-based emission standards and a federal energy portfolio standard with CHP – proposals that long have been a focus of Recycled Energy Development.

An innovative financing option is Oak Ridge’s call for tax-lien financing of industrial efficiency improvements. Also known as Property Assessed Clean Energy (PACE), this program would allow municipalities to establish clean energy taxation districts that issue tax-free bonds for certified energy-efficiency and alternative energy projects. The federal government would offer loan guarantees to provide security for the bond purchasers as well as provide a standardized format for the application process.

For more details please read the full report – Making Industry Part of the Climate Solution.

The Creating Climate Wealth Summit—to be held in Washington, D.C. on May 3 and 4—will feature a track on distributed generation. The Carbon War Room, the conference’s organizer, says, “With new power plant regulations set to retire 20 percent of all coal capacity in the USA and transmission projects still facing stiff barriers, it looks like distributed generation is the way to go.”

The distributed generation track will focus on solar power, small wind, geothermal, and cogeneration. The local nature of the power production gives end users control over their electricity source and price. It also enhances security by avoiding large blackouts and vulnerabilities associated with the electricity grid.

Co-chairing the distributed generation working track are RED’s Sean Casten and Doug Payne, co-founder and executive director of SolarTech. Read more about the Creating Climate Wealth Summit.

Bloomberg Government, a new media outlet focused on the business implications of government, recently profiled the remarkable economic and environmental benefits of waste heat recovery and other energy recycling techniques. The article also covers the efforts of members of the Alliance for Industrial Efficiency—including RED, GE, Dow Chemical, Sierra Club, and others—to ensure this clean energy solution gets the recognition it deserves in Washington.

During the last U.S. Congressional session, the Alliance advocated for industrial energy efficiency tax incentives that would increase manufacturing competitiveness, create jobs, and reduce pollution. The incentives bills, S. 1639 (sponsored by Sens. Jeff Bingaman, D-NM and Olympia Snowe, R-ME), and H.R. 4751 (sponsored by Rep. Paul Tonko, D-NY and Dean Heller, R-NV), received strong bipartisan support but didn’t make it into the final tax package.

RED’s Tom Casten, quoted in the piece, gets right to the point: “[Waste heat recovery] is a tremendous opportunity to cut costs, the amount of fuel we are burning, and to cut CO2.”

Exactly. So it’s time to enact legislation that puts energy recycling on the same footing with other clean energy sources like wind and solar.  The article explains why:

• “As much as 20 percent to 50 percent of the energy that manufacturing processes consume is released as waste heat, according to a 2008 Energy Department report. That power can be used by the factory where it’s captured, sold to the local power grid, or both.”
• “Heat vented from facilities such as steel mills, cement kilns, glass manufacturers and natural-gas compressor stations could generate enough clean energy to power more than 7 million homes, based on a study by ICF International … That is the equivalent of $4.3 billion in annual electricity costs.”
• “Together, waste heat and cogeneration can provide as much as 20 percent of the nation’s electricity by 2030, equal to the amount now generated by the nuclear-power industry, [according to] the Oak Ridge National Laboratory.”

Tax incentives for energy recycling would also help industry meet planned EPA carbon dioxide emissions standards. The EPA’s recently issued guidance for greenhouse gas emissions permits (PSD and Title V Permitting Guidance for Greenhouse Gases) makes energy efficiency the centerpiece of its compliance options. It recognizes energy recycling techniques including waste heat recovery and combined heat and power (CHP) as cost-effective ways to cut greenhouse gas emissions in the industrial sector.

Sen. Bingaman plans to work with Sen. Snowe to advance the tax breaks this year, according to a statement issued by his staff on Dec. 17.

So there you have it. Let’s hope this is the first of many big stories in 2011 on benefits of waste heat — and that this is the year Congress gives it its due.

Word is getting out that energy recycling is key to revitalizing American manufacturing. Just look at this new op-ed in Crain’s Cleveland Business by prominent Ohio businessman Lonnie Coleman.

Coleman explains that energy efficiency is critical to lowering manufacturing costs and strengthening our industrial sector.  He writes, “Among the most economically beneficial opportunities for savings, energy- efficiency initiatives can help improve business competitiveness and profits for years. One particularly ripe area… is called energy recycling.”

Coleman explains how all that heat you see coming out of the smokestacks at industrial facilities is really wasted energy that can be recycled into useful electricity. And that means less burning of fossil fuels, which is good for the bottom line and the environment. In a nutshell, he writes, “Recycled energy techniques allow manufacturers to capture that waste and turn it into 100% clean power, thus lowering energy costs and raising productivity.”

A firm believer in the massive potential of energy recycling to aid our ailing economy, Coleman points out that in his state alone, nearly 60 industrial facilities are prime candidates for energy recycling projects.

So, why don’t we see more energy recycling projects underway?  It’s the million dollar question, and Coleman has the answer: “Despite its significant savings, energy recycling requires a great deal of capital investment. With a still- sputtering economy, this is a tough sell for many business owners who lack access to that level of capital.”

This is where the bipartisan legislation currently before Congress comes in. “Fortunately, Congress is considering investment tax credits for industrial energy efficiency, including combined heat and power and other energy recycling projects. The proposed bipartisan legislation… will maximize the economic and environmental benefits of energy recycling, giving business the means to make their energy work twice. With that help, more… businesses can thrive, putting more [people] back to work.”

As I said before in a recent post, it’s a small change to the tax code that can make a very big difference for our economy and the planet. Let’s hope our elected leaders are listening.

Toronto Star columnist Tyler Hamilton does a great job of explaining energy recycling. He writes about how he teaches schoolchildren about energy by putting a steaming cup of coffee under a windmill-like device. The steam from the coffee moves the device — a form of a Stirling engine — and it gains speed and momentum, powered only by the heat rising from the cup. The demonstration shows how heat can be harnessed and put to work.

He goes on to write that while we can’t power the world with coffee, “clearly we don’t give enough consideration to the problem of waste heat.”

As readers of this blog know, and as Hamilton points out, most power plants running on fossil fuel waste an enormous amount of energy in the form of heat. Furthermore, many industries, including cement plants, steel mills, pulp and paper mills, oil refineries, chemical plants — all are energy-intensive enterprises that generate tons of waste heat.

Just ask the man Hamilton calls “the continent’s chief energy recycling evangelist,” RED’s Tom Casten. Tom’s policy paper, Profitably Reducing Greenhouse Gases, is quoted in the article:

“Energy waste is pervasive. Policymakers don’t seem to see it, but ask virtually any school kid to draw a picture of a power plant and you’ll see something resembling Homer Simpson’s, where massive columns of waste heat are vented into the air.”

Then Hamilton makes the case for the soundness and practicality of energy recycling as a cost-effective, clean energy solution:

“Making products, processes and facilities more efficient to begin with is one way to reduce waste heat, but the other is to capture that heat and recycle it into, say, electricity or steam for an industrial process or hot water for heating a new residential community. It’s no different, really, than how we recycle plastic bottles, glass jars and soup cans in into park benches, juice bottles and pop cans. Yet one is encouraged, even mandated, while the other is largely ignored. Why is that?”

Great question.

…policy wonks, news junkies, energy experts, students, and, well, everybody.

RED has launched a completely redesigned newsroom that we hope will serve as a hub for all the news that’s fit to print on energy recycling.

With everything from brainy policy papers to short videos to news features from prominent media outlets, it’s the place to go for anyone interested in recycled energy and cogeneration. Whether you’re an energy recycling expert who wants to see the latest news, a manufacturer looking for the best way to save money and cut pollution, or you just want to learn why recycled energy is the most cost-effective clean energy solution around, you’ll find what you need here.

We hope you’ll be hearing a lot more about energy recycling now that several companies in the field have teamed up to launch a new initiative called Heat is Power. The goal is to educate lawmakers and the public about the enormous potential of the type of energy recycling known as waste heat recovery—or as they put it, “WH2E” (waste heat to electricity)—to help solve our energy woes and put America back to work. According to Heat is Power, WH2E is the “missing link to America’s clean energy future” and has the potential to “boost U.S. competitiveness and keep American industry in America by providing a new source of profit or cheap onsite clean electricity for our industrial manufacturers.”

The group also points out that, “no country is yet a leader in exports of this technology… American companies today can manufacture this technology with greater than 90% American content. Capturing the export market of this technology will catapult the United States in the global clean energy race and result in the creation of sustained American manufacturing jobs.”