Combined Heat & Power: Recycling Energy

Issue 9 and Volume 107.

By Thomas R. Casten, Chairman, World Alliance for Decentralized Energy and Chairman & CEO, Private Power LLC

Recycling Energy would save 21.5 percent of U.S. fossil fuel consumption.

Recycling, once confined to rag pickers in poor countries, has gone mainstream. Over the past 30 years, competitive industries have learned to rag pick — go through the trash and salvage waste steel, aluminum, waste paper and plastic. Recycling presently wasted energy could cut U.S. fossil fuel purchases by $65 billion per year, postpone new electrical transmission and distribution investments, reduce emissions of various pollutants by 19-48 percent, and decrease electric system vulnerability to extreme weather and terrorist actions.

A variety of proven technologies lie in wait, but the industry assumption of the superiority of central generation blinds the world to the recycling opportunities from decentralized electric generation (DG).

How is energy recycled? Industry groups have defined recycled energy as the useful energy derived from:

  • Exhaust heat from any industrial process
  • Industrial tail gas that would otherwise be flared, incinerated or vented
  • Pressure drop in any gas, excluding any pressure drop from a condenser that subsequently vents the resulting heat.

These waste streams are abundant in all industrial processes but only a small portion of the energy content of the fuel is incorporated in any product. Most of the energy is vented into the atmosphere. However, it is often profitable to recycle this energy by generating heat and power in relatively small, decentralized plants.

Process Energy Recycling Potential

Industry vents heat from coke ovens, metal production, glass production, gas compressor drives, refineries and chemical production. Although the data is sparse, it is conservatively estimated that 13 GW of electric capacity could be supplied from the heat energy presently vented to the atmosphere.

U.S. industry flares waste gas equivalent to 2.0 Tcf of natural gas/year. Flaring reduces certain emissions but the resulting heat is generally vented. Picking these ‘rags’ could supply 19 GW of new electric-only capacity or support combined heat and power with 12-15 GW of electric capacity and 45-50 GW of thermal capacity.

Steam boilers convert about 85 percent of the fuel to steam or hot water, but heat-only production does not extract high-value electricity. Most industrial and institutional complexes feed distribution systems with medium-pressure steam, but then discard the pressure drop energy. The steam pressure is deflated at points of use with pressure reducing valves instead of using backpressure turbines to convert this pressure drop into electricity.

These steam pressure drop rags could supply 12-20 GW of fuel-free electric capacity. In addition, natural gas that is compressed for transmission and then deflated at the local distribution system supply points could also supply 8-10 GW of fuel free electric capacity.

In total, the U.S. could rag pick industrial process waste energy to supply 45-58 GW of electric capacity. This would avoid the burning of 2.4 quadrillion Btu’s (quads) of fuel per year, a seven percent savings of total U.S. fuel consumption.

Energy Recycling: Decentralizing Electric Generation

The wasted heat from U.S. central-station electricity generation is five times the industrial process recycling potential just described. In 2001, 71 percent of total U.S. power was generated with an aging fleet of fossil fired plants that delivered only 30.7 percent of the fuel energy to users as electricity. These plants made no use of nearly 70 percent of the fuel, thus wasting 25.2 quads.

After transmission and distribution (T&D) line losses (3.6 quads), and non-recoverable boiler losses (5.6 quads), 16 quads of heat could have been recycled to replace thermal boiler fuel or electric heat. Generating the power in DG plants near the end users would have eliminated at least half of the T&D losses, raising the total recycling potential to 17.8 quads.

In 2001, commercial and industrial sector boilers consumed 25.9 quads of fuel with 85 percent efficiency. If all fossil-fueled electric generation had been replaced with thermally matched CHP plants, 21 quads of fuel would have been saved.

Why Don’t Central Plants Recover Waste Heat?

Recycling heat from central electric generation stations is prohibitively expensive due to the cost of piping steam and/or hot water long distances to thermal users. Ton Van der Does, acknowledged by many as the father of CHP in the Netherlands, explained these economics with the “rule of sevens.”

He determined that it generally takes seven times more energy to move a unit of electric power a given distance than to move a unit of fuel the same distance. In addition, it takes seven times more energy to move a unit of thermal energy than to move a unit of electric energy. Thus it takes forty-nine times more energy to move a unit of thermal energy from point A to point B than to move the same energy as fuel.

To make recycling economic, generation must be decentralized, moving fuel to the thermal user, generating power in on-site CHP plants, and then moving the recycled heat short distances. The electricity will flow first to the thermal host and then to the nearest electric consumers, regardless of contracts. Decentralized generation would significantly reduce energy lost in transmission of fuel, heat and power.

Decentralized electric generation is severely limited by many legal and regulatory barriers that were originally enacted to protect early electric entrepreneurs from competition and to speed electrification of every community. The rules remain, long after universal electrification, for two reasons: assumed economy of scale and inertia.

Capital Costs of New Capacity

The commonly used measure of dollars/kW of generating capacity suggests major economies of scale for central-station generation. A 500 MW plant can be installed for $800/kW versus $2,500/kW for a small fuel cell. However, a truer measure is the dollars/kW of delivered power at peak load that includes T&D capital and peak period losses. The U.S. transmission congestion is worsening, suggesting the need for new T&D for every new kW of central generation. On average the cost is estimated to be $1,200/kW.

New T&D raises the installed cost/kW from new central plants to $2,000/kW. Only 80 percent of this new central capacity will reach users during peak periods when line losses reach 20 percent. Thus, the total capital cost of a new central generation peak kW is $2,500, the same as the fuel cell, which needs no new T&D and has no peak load line losses.

Several mature CHP technologies cost less than half as much per kW as a fuel cell, offsetting their lower fuel-to-electricity conversion. A 5-20 MW combined-cycle gas turbine converts 40-45 percent of the fuel to electricity and can achieve 85-95 percent overall efficiency by recycling most of the waste heat. Piston engine DG has comparable efficiencies. The cost of both technologies, $800-$1,200/kW, is less than half the current cost of fuel cells, and thus the lower installed costs compensates for their lower electric efficiency.

Using a variety of fuels, proven CHP technologies offer economic DG across a wide range, from a few kW to several hundred MW. Combustion and reciprocating engines convert oil, natural gas and most off gases to heat and power. Likewise, boilers with backpressure turbines can burn virtually all types of fuels including waste, biomass, and coal. With a combination of capital and efficiency advantages, today’s CHP technologies offer superior value to central plants on a delivered kW basis.


Why continue to operate and build expensive central plants when DG has such comprehensive advantages? In a word, inertia. Attitudes, habits of mind, obsolete regulations and the power of incumbent firms that profit from the status quo are all slow to change.

In competitive markets, insurgent firms push disruptive technology into niche markets, gradually overcoming the natural inertia and leading to the technology growing to dominate the overall market. But electricity is not a competitive market and many barriers to DG remain even in states with some easing of monopoly protection. Barriers will remain until all energy policy makers understand the advantages of DG and CHP.

Savings Potential from Recycling Energy

Figure 1 shows the potential fossil fuel savings to the U.S. economy from industrial recycling and replacing fossil fired central electric generation with thermally matched CHP. These two actions, fully deployed, would save 20.8 quads or 21.5 percent of U.S. fossil fuel consumption.

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The calculations assume current CHP technologies with a 32 percent fuel-to-electricity efficiency and 88 percent overall fuel efficiency. These numbers are consistent with the author’s experience with more than 150 thermally matched CHP plants ranging in size from 40 kW to 200 MW.

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The weighted average cost of fuel in 2001 was $3.22/MMBtu to the commercial and industrial sectors and $1.88/MMBtu for central electric generation. Figure 2 shows that the dollar and percentage fuel savings potential from recycling of $65.2 billion, which is 17.2 percent of the total U.S. fuel expenditures for 2001.

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Recycling reduces emissions in two ways, by burning less fossil fuel and by replacing old and relatively dirty generation with modern, clean production. The percentage reduction varies for NOx, SO2 and CO2 due to fuel mix changes and technology substitution. Figure 3 shows the percentage reduction for each of the three pollutants at various levels of recycled energy deployment.

Energy rag picking can flourish by:

  • Rewarding utilities that increase efficiency
  • Penalizing those that are inefficient.
  • Reducing standby charges and moving wholesale power markets to locational pricing.
  • Banning state laws prohibiting private wires or third party sales of electricity.
  • Basing air quality regulation on useful energy output; allow emissions per MWh of useful output and eliminate new source rules.
  • Giving recycled energy and renewable energy a preferred position since both are fuel-free and pollution-free.
  • Giving all consumers real time electric pricing of options.

Despite abundant advantages, DG supplied only 6.5 percent of U.S. electricity in 2001. However, the state use of DG ranged from zero percent in three states to 26 percent in California and 33 percent in Hawaii. Internationally, we see wider differences. DG provided a low of 2-3 percent of electricity consumed in France to more than 40 percent in Finland, Denmark and the Netherlands.

Since each state and country has access to the same technologies and similar capital and fuel costs, the explanation for differences must lie in local regulations and barriers. Where policy makers have encouraged utilities to support DG and have removed barriers to efficiency, energy recycling has flourished.

Thomas Casten is the founding chairman and CEO of Private Power LLC, a firm specializing in recycling energy. He is also the founder of Trigen Energy Corporation. Currently he serves on the board of the American Council for an Energy Efficient Economy, the Center for Inquiry, the Fuel Cell Energy Board and is chairman of the World Alliance for Decentralized Energy (WADE). Casten has a B.A. in economics from University of Colorado and an MBA from Columbia University.

Industrial Recycled Energy: Primary Energy

In 1994, NiSource formed a subsidiary, Primary Energy, to help economically challenged integrated steel companies recycle their waste heat and blast furnace gas. The new company invested $300 million in six waste energy facilities. Combined, these plants supply 440 MW of electric capacity and 460 MW of steam capacity.

The four steel mills owned by Ispat Inland, ISG and US Steel consume the recycled heat and power on-site. By recycling energy, they have improved their competitive position by over $100 million per year and reduced yearly emissions of SO2 by 24,000 tons, NOx by 12,000 tons and CO2 by 3.4 million tons. The CO2 reduction is equivalent to the CO2 uptake of one million acres of new trees. Such rag picking is profitable. Recently the projects were sold for $335 million to Private Power.