Private equity drives major low emission heat recovery project

21st February 2013

According to studies carried out for the US Environmental Protection Agency and Department of Energy, recycling energy that is currently wasted could generate nearly 200000MW of clean power, equivalent to about 20percent of the entire country’s electricity generating capacity. Recycling this wasted energy takes two forms, industrial waste energy recovery and combined heat and power (CHP).

Industrial waste energy streams are a natural by-product of manufacturing processes such as metals, glass, chemicals, charcoal, pulp and paper, refineries, food processing and ethanol production, as well as natural gas transmission systems. Recycling this waste energy requires no new fossil fuels and produces no greenhouse gas emissions, so it is as clean as power from wind, solar, and biomass generation.

Even more gains could be realised by local power generation near manufacturers using by-product heat to displace boiler fuel in lieu of electricity from distant, central generation. Conventional power plants typically waste two-thirds of their energy in the production process, but on-site generation – often referred to as cogeneration or CHP – is typically more than twice as efficient and less expensive than conventional generation because it recycles the by-product heat from power generation and avoids long-distance transmission costs and line losses.

These facts are one of the main drivers behind Recycled Energy Development (RED), a company that owns and operates industrial power projects that harness waste energy to dramatically reduce greenhouse gas emissions and cut power costs for host companies.

“RED sees climate change mitigation as an enormous economic opportunity for US industry,” said RED chairman Thomas Casten. “By recycling waste energy, RED will improve industrial competitiveness, create large quantities of clean energy, significantly reduce greenhouse gas emissions, reduce the demand for fossil fuel, and stimulate economic growth.”

“Our mission is to profitably reduce greenhouse gas emissions, and we believe recycling waste energy is one of the largest, most economically beneficial routes to a low carbon future,” added ceo Sean Casten.

An important part of this mission is carried out by Turbosteam, a wholly owned subsidiary of RED. Since 1986, the company has installed over 180 systems that have saved users over US$200million in energy bills and reduced global carbon dioxide emissions by over four million tonnes (Fig.1).

Turbosteam believes successful power projects have a single point of coordination, someone responsible for everything from conceptual design to system commissioning. Therefore the company combines the expertise of a consulting engineer, banker, manufacturer, and general contractor to ensure that projects deliver the optimal value.

Depending upon a customer’s needs, Turbosteam can provide design optimisation services, detailed site engineering (electrical, piping, structural), capital equipment, and/or turnkey installations. Contractually, Turbosteam can structure projects either as an up-front capital sale or as an off-balance sheet, shared-savings contract to meet the needs of more financially sophisticated customers. However, RED’s latest success is an innovative agreement signed with Silicon producer West Virginia Alloys (WVA). As part of this, RED will invest US$45–55m to recycle hot exhaust into a net 40–44MW of electricity generation, offsetting roughly one third of WVA’s electric consumption.

The project in Alloy, West Virginia, is expected to go into operation in 2010 and annually produce over 300000MW hours of clean energy and eliminate 290000tonnes of greenhouse gas emissions. The energy recycling project burns no fossil fuel and emits no pollutants, including carbon dioxide, a greenhouse gas, yet sells power for less than the cost of new coal-fired generation.

“This substantial investment is a step forward for West Virginia's economy and our environment,” said Governor Joe Manchin, who joined RED Chairman Thomas Casten and West Virginia Alloys President Arden Sims in announcing the project. “This project shows that our state is leading the way in showing that economic growth and environmental stewardship can and must go hand in hand.”

West Virginia Alloys uses electric arc furnaces to produce nearly pure silicon. This project allows WVA to capture energy from the silicon furnaces and gain an advantage over competitors that typically vent this energy.

RED will install waste heat recovery boilers that convert exhaust heat into steam, which in turn will drive a power generator. The resulting energy will offset nearly one third of the purchased electricity used in the furnaces, eliminating costs and associated emissions of purchased power. RED will supply all capital and energy expertise, receive a modest return on the capital and then split all remaining financial benefits with West Virginia Alloys, thereby helping to maintain the competitiveness of the silicon facility.

This project marks RED’s first deal under the recently announced partnership with private equity firm Denham Capital Management to invest US$1.5billion in energy recycling projects. Announced late last year, the partnership will serve as an investment platform to fund projects developed and managed by RED that will profitably reduce energy costs and greenhouse gas pollution.

Denham Capital Management is a leading global private equity firm that manages over US$2.3billion. Denham employs over 50 professionals spread among offices in Boston, Houston, New Jersey and London.

The company makes direct investments in the energy and commodities sectors, including in businesses and assets involving natural resources, power and utilities and energy-related infrastructure and services.


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