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                                  Sean Casten
                            Turbo Steam Corporation
                          Turners Falls, Massachusetts

 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 dollars 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 of CO2
       offsets in some cases).

Understanding 75% of U.S. Power Generation in 30 Seconds or Less

                          The Rankine Power Plant

Western Dry Kiln Association              40                               May 2004
Understanding Lumber Mill Energy Plants in 30 Seconds or Less..

                               Lumber. Mil Energy Rant


The Opportunity

                                             Steam Turbine
                                                                  Bectriay to
                                                                  Rant Bar

Western Dry Kiln Association            41                                 May 2004
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 percent of fuel into useful energy - 2/3rds
        goes to cooling power.
        Use of heat in dry kiln eliminate 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 ,0 00 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/k Wh

Other Design Possibilities

If waste wood supply is able to produce more steam than is needed in kilns, can make
economic sense to reduce pressure of some or all steam further in a condensing turbine-
generator to make more lbs/kW

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

Condensing IC) Conficaration        BackwessweICondensinq 03FLICi Catgut-4ton

                                                                    LIP   Ste am to

Generator can be designed to provide ancillary benefits in addition to kWh savings (,
enhance reliability, power factor).

Western Dry Kiln Association               42                                     May 2004
Turbosteam has installed 102 Systems in the U.S., and 167 worldwide since 1986

.Eighteen of These Installations are in the Lumber and Wood Products Industries

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Western Dry Kiln Association                                                       43                                                                    May 2004
Cos Interior, Inc., is a Campellsville, KY manufacturer of poplar, oak and cherry interior
wood products. It was founded in 1983 and has 750 employees. They manufacture a
variety of wood products (stairs, doors, mantels, etc.) in 500,000 square feet.facility in
Campbellsville, Kentucky. Wood-waste is corn busted in boilers to raise steam for process
thermal loads.

Description of CHP Project

        Four MW condensing turbine installed in 1990. Boiler operates on wood waste
        generated in plant to produce –11.3 million kWh/year.

        One MW backpressure system installed in 2002 reduces 45,000 lbs/hr of steam
        from 235 psig/490 degrees F 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
              Twenty-three percent 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
        CO 2 emissions by 15,000 tons/year.

A Final Observation on System Design: The Key to a Successful Project is to
Customize Equipment for Specific Site Objective.

Example: Midwest Steel Mill (now in design stage)
PRV reduces 900 psig steam down to 150 psig for plant-wide distribution

Western Dry Kiln Association              44                                   May 2004
                                                                                Co sign tor Penis low?
                                                                                • 11 9 U91 D L dpoao r
                                                                                • ♦33rDlIIbI KUUlifOr
                                                                                • 51 4m1IIb1 3 lib     ga
                                                                                • 3year arnple payback

                                                                                De sign tor ba 101020
                                                                                • 2 4 MN rated pines
                                                                                • 21 Dm HIM MI Ihroi
                                                                                • $672 k 31 11131sauligs
                                                                                • 2.7 vearshipk paytalt

Our Approach is to Identify and Design to Customer-Specific Financial Objectives

1. 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.
1.      Above this flow, incremental gains in peak power production are offset by
        sacrificed low-end efficiency
2.      275,000 lbs/hr design flow
3.       10 MW rated power output
4.       1.59 million/year annual savings
5.      2.5 year simple payback (40% ROA)

These Points Bound the Financial Opportunity, but Do Not Identify the Optimum
Financial Design

             40% 31. 4g mill iONyear Savings
                    I                                    --     II

        cc 35%                                                              Optimal system is
        cC 30%
                                          $1.53 milli creyear savings       designed hereto
                                                                            balance desires for
         !II 25%                                                            rapid capital
         • 20%        1.41111111M

                                                                            recovery, high
        V- 15%
          1                                h
                                                                            annual cash

             10%   I --twi . am.-             '411■1.11
                                                                            generation AND
              5%  I — Marginal     ROA    111.1111..
                                                                            effective use of free
              0%                                                            cash.
                 150             200                  250             300
                           Design Steam Flow(mbsihr)

Western Dry Kiln Association                       45                                             May 2004
 The Final Design Selected is Customized to Balance Technical, Financial and
 Operational Constraints

                                                     • 7 8 IVIVV
  - , p'ipp! , posjg                                 • 216,000 lbsihr design fle...v
                                                     • 900 peg 1 825 inlet     150 psig exhaust

                             .       :0 ;            • 45.6 million kWh/year generation
                         '                      40   • $1.5 millionNear annual energy savings
    P                                                • 45% gross ROA
                                                     • 21% marginal ROA

                                                     • 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"paryver-first" CHP plants
                                                     • Find a partner who has the ahitity to help you work through
                                                       these design constraints.

So, Is There an Opportunity in Your Facility?

                                                                   I y pie a I Values         Extreme Values

                                                                                           Abe v e•rnarket returns
                                                            <2 years simple payback
                                                             from energy savings
                                                                                           N on-frnancia I drivers

        ' r , t.-.   r                      '                         >150 psig                      15 psig

              .                  ,                                      100pzig                      15 psig

                                                                   510,000 IlcisThr                2,500 lbsihr

    . .
                                                                   56 month g f • ear             3 monthsfyear

                                                                      54 cilONh                    =1.7 cikWh

Western Dry Kiln Association                                                   46                                    May 2004

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