North America spends far too much for power that is far too dirty. The enormity of the waste is difficult to fathom. This waste exacerbates global warming— one of our most vexing environmental problems. But it also offers an opportunity for RED to both cut pollution and generate profits.

Defining recycled energy and cogeneration

RED will develop industrial energy projects that either recycle waste energy from a host's industrial processes to produce electricity and thermal energy, or it will build new on-site electrical generation that converts fuel to electricity and then recycles the associated waste heat to displace the host's boiler fuel (a process known as cogeneration or combined heat and power). Recycled energy is useful energy derived from:

• Exhaust heat from any industrial process or from electric power generation;
• Industrial tail gas that would otherwise by flared, incinerated or vented; or
• Pressure drop in any gas.

Understanding the potential to recycle energy or cognerate requires three pieces of information:

• First, manufacturing processes and electric power generation convert only a portion of their available energy input into useful work. Both discard the remaining potential energy. The U.S. electric power generation system, on average, discards two thirds of its input energy as waste. Many industrial processes also discount significant quantities of potential energy. This energy carries a significant cost of procurement and conversion. Investments in energy recycling, therefore, create substantial economic savings.
• Second, much of the waste energy discarded by manufacturing and power generation can be profitably recycled into useful heat and power—but only if the energy recycling facility is located at or near users. Thermal energy, which is the form of much of present waste, does not travel far without losing its value.
• Third, the U.S. electric power industry has largely ignored energy recycling, focusing instead on remote central generation plants that cannot capture waste heat. This bias results from cost-plus utility regulation, which for several decades provided a guaranteed return on a monopolist’s every investment.

Put simply, state regulators protected monopolists, discouraging innovation and efficiency. Although some utility monopolies continue to discourage entrepreneurs with onerous interconnection standards and buyback rates, enormous opportunities—as evidenced by the previous successes of Casten-managed companies—abound for those private-sector participants with the financial structure and regulatory/financial expertise to capture this wasted energy. Those opportunities are increasing as industrialists seek alternatives to rising utility rates, as consumers demand more power, and as politicians seek more pollution reductions.

Recycled energy’s potential

The United States has 10,000 megawatts of installed industrial recycled energy capacity in operation, the equivalent of ten large nuclear plants. This installed capacity represents roughly 10 percent of the identified potential to recycle industrial waste energy. A recent study for the U.S. Environmental Protection Agency documented another 95,000 megawatts of potential recycled industrial energy generation capacity.

Recycling this waste energy would produce 19 percent of U.S. electricity use in 2005 without burning any fossil fuel or emitting any greenhouse gases. To provide some perspective, capturing this industrial waste heat alone would allow the United States to meet greenhouse-gas-reduction targets from the Kyoto agreement.

RED principals have developed numerous energy recycling projects, equivalent to 7 percent of U.S. energy recycling capacity, and these projects all have generated high returns on capital, as well as savings for the hosts. Economic theory says such opportunities should not exist, but RED’s managers have demonstrated that opportunities abound. In fact, the energy cost difference between ‘best practices’ energy islands that optimize the cost of energy services and actual practices is profound and has grown with the recent increases in fossil fuel and electricity prices. REDFUND’s business plan benefits from this growing dichotomy.

Links to recent publications by RED principals

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