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Creating Value from Steam Pressure RECYCLING ENERGY: USING STEAM TURBINES TO CONVERT BOILER WASTE INTO FREE ELECTRICITY Presentation for 2004 Western Kiln Dry Association Portland, OR May 3, 2004 Sean Casten Chief Executive Officer 161 Industrial Blvd. Turners Falls, MA 01376 www.turbosteam.com

Too many lumber drying mills “leave $20 bills on the ground”. : 

Too many lumber drying mills “leave $20 bills on the ground”. Economic theory says $20 bills are never on the ground – experience says otherwise Conventional dry kiln/sawmill design leaves $ on the table by failing to convert energy waste into high-value electricity. Potential to generate zero-marginal cost electricity in most lumber mills. Reduce mill operating costs / boost mill profitability Can be used to enhance reliability of mill electric supply Can be used to enhance power factor of mill electricity (avoid $/kVAR charges, get more useful kWh/kWh purchase) Can create cost-effective means of mill waste disposal Reduces environmental impact of mill operations (eligible for $-support from CO2 offsets in some cases).

Understanding 75% of US power generation in 30 seconds or less… : 

Understanding 75% of US power generation in 30 seconds or less… The Rankine Power Plant Fuel (Coal, oil, nuclear, gas, etc.) High Pressure Steam Heat to atmosphere Low Pressure Steam Low Pressure Water Pump Boiler Cooling Tower High Pressure Water Electricity to Grid Steam Turbine Generator

Understanding lumber mill energy plants in 30 seconds or less… : 

Understanding lumber mill energy plants in 30 seconds or less… Lumber Mill Energy Plant Pressure Reduction Valve Mill waste High Pressure Steam Heat to lumber Low Pressure Steam Low Pressure Water Boiler Pump Boiler Dry Kiln High Pressure Water

The opportunity : 

The opportunity Mill waste Heat to lumber Boiler Pump Boiler Dry Kiln Electricity to Plant Bus Isolation Valve Isolation Valve Steam Turbine Generator

Several non-intuitive benefits of this approach.: 

Several non-intuitive benefits of this approach. The presence of the lumber kiln makes this generation ~ 3X as efficient as the central power it displaces. Average Rankine plant converts only 33% of fuel into useful energy – 2/3rds goes to cooling tower. Use of heat in dry kiln eliminates this efficiency penalty Ensures that marginal generation cost is always less than utility kWh. Since 75% of the power plant is already built, the capital costs per kW installed are much less than central stations, despite the relative diseconomies of scale. 1,000 MW Rankine plant typical capital costs ~ $1 billion ($1,000/kW) 1 MW steam turbine generator integrated into existing lumber mill typical capital costs ~ $500,000 ($500/kW) Similar logic applies to non-fuel operating costs Rankine power plant typical O&M costs ~ 1 c/kWh Long term Turbosteam service contract on 1 MW unit ~ 0.1 c/kWh

Other design possibilities: 

Other design possibilities Value can be enhanced by boosting boiler pressure and/or reducing kiln pressure to increase kW production per lb of steam. (Often possible without modifying existing equipment simply by easing back on operating pressure margins built into existing designs) Generator can be designed to provide ancillary benefits in addition to kWh savings (e.g., enhance reliability, power factor)

Turbosteam has installed 102 systems in the U.S., and 167 worldwide since 1986.: 

>10,000 kW 5001 – 10000 kW 1001 – 5000 kW 501 – 1000 kW 1 – 500 kW Turbosteam has installed 102 systems in the U.S., and 167 worldwide since 1986. Non-U.S. 17 countries 66 installations 36,488 kW

18 of these installations are in the lumber and wood products industries. : 

18 of these installations are in the lumber and wood products industries. 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 1989 1988 Bertch Cabinet Mfg IA cabinet mfr 279 kW BP+C design 15,525 lbs/hr Induction generator Bruce Hardwoods (2) TN flooring mfr 525 kW + 3250 kW 40,000 lbs/hr + 50,000 lbs/hr Synch. generators Marcel Lauzon Quebec sawmill 335 kW BP+C design 17,000 lbs/hr Synch. generator Young Mfg Company KY millworks facility 120 kW 13,000 lbs/hr Synch. generator Bell-Gates Lumber VT sawmill 75 kW 4,600 lbs/hr Induction generator Brattleboro Kiln Dry VT lumber mill 380 kW 18,000 lbs/hr Induction generator Young Mfg Company KY millworks facility 200 kW 8,000 lbs/hr Synch. generator Aristokraft TN furniture mfr 825 kW BP+C design 34,000 lbs/hr Induction generator Pompanoosuc Mills VT furniture mfr 50 kW 3,900 lbs/hr Induction generator Webster Industries WI lumber mill 550 kW, dual BP 27,600 lbs/hr Induction generator Fitzpatrick & Weller NY furniture mfr 450 kW 24,150 lbs/hr Synch. generator Buehler Lumber PA lumber mill 462 kW 20,700 lbs/hr Induction generator Cox Lumber KY hardwood products mill 1,000 kW 45,000 lbs/hr Synchronous generator Wightman Lumber NY lumber mill 96 kW 5,000 lbs/hr Induction generator

Cox Interior, Inc. is a Campellsville, KY manufacturer of poplar, oak and cherry interior wood products. : 

Cox Interior, Inc. is a Campellsville, KY manufacturer of poplar, oak and cherry interior wood products. Founded in 1983 Manufactures variety of wood products (stairs, doors, mantels, etc.) in 500,000 sq. ft. facility in Campbellsville, KY 750 Employees Wood-wastes combusted in boilers to raise steam for process thermal loads www.coxinterior.com

Description of CHP project : 

Description of CHP project 4 MW condensing turbine installed in 1990. Boiler operates on wood waste generated in plant to produce ~11.3 million kWh/year. 1 MW backpressure system installed in 2002 reduces 45,000 lbs/hr of steam from 235 psig/490oF at boiler down to 30 psig to dry lumber (peak capacity = 1.4 million board-feet). Pressure to kilns is reduced to 15 psig in summer to boost turbine-generator power output per lb of steam. Economics (backpressure only) Total installed cost = $500,000 Electricity generation in 2003 = 2,077,414 kWh Energy savings in 2003 = $120,490 23% 15-year return on assets (projected) In total: On-site generation produces 61% of on-site power needs, saves $775,000 in expenses per year. Environmental Bonus: Displacement of dirtier generation from the grid reduces CO2 emissions by 15,000 tons/year www.coxinterior.com

A final observation on system design: the key to a successful project is to customize equipment for specific site objectives.: 

A final observation on system design: the key to a successful project is to customize equipment for specific site objectives. Example: Midwest Steel Mill (Now in design stage) PRV reduces 900 psig steam down to 150 psig for plant-wide distribution

Our approach is to identify and design to customer-specific financial objectives.: 

Our approach is to identify and design to customer-specific financial objectives. Identify Design with Most Rapid Capital Recovery Below this flow, incremental gains in turndown efficiency are offset by sacrificed peak power and higher $/kW costs 180,000 lbs/hr design flow 6.5 MW rated power output $1.44 million/year annual savings 2.2 year simple payback (46% ROA) 2. Identify Design with Highest Annual Energy Cost Savings Above this flow, incremental gains in peak power production are offset by sacrificed low-end efficiency 275,000 lbs/hr design flow 10 MW rated power output $1.59 million/year annual savings 2.5 year simple payback (40% ROA)

These points bound the financial opportunity, but do not identify the optimum financial design. : 

These points bound the financial opportunity, but do not identify the optimum financial design. 6.5 MW $1.44 million/year savings 10 MW $1.59 million/year savings

The final design selected is customized for to balance technical, financial and operational constraints. : 

The final design selected is customized for to balance technical, financial and operational constraints. Final Design 7.8 MW 216,000 lbs/hr design flow 900 psig / 825 inlet  150 psig exhaust Financial Performance 45.6 million kWh/year generation $1.5 million/year annual energy savings 45% gross ROA 21% marginal ROA Key points Good CHP plants are necessarily custom-designed Optimum design must factor in variable thermal loads, energy rates, financial objectives, turndown curves and subcomponent-vendors product limitations / “sweet spots” Designing strictly for a payback or cash generation runs the risk of leaving money on the table OR making poor use of final capital dollars. Similar logic applies to “power-first” CHP plants. Find a partner who has the ability to help you work through these design constraints.

So is there an opportunity in your facility? : 

So is there an opportunity in your facility? Typical Values Extreme Values Target Financial Return <2 years simple payback from energy savings Above-market returns and/or Non-financial drivers

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