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Environ. Sci. Technol.,39 (17), 6535 -6541, 2005. 10.1021/es050050+ S0013-936X(05)00050-7Web Release Date: July 20, 2005

Copyright 2005 American Chemical Society

Quantifying Economic and Environmental Benefits of

Co-Located Firms

Marian R. Chertow* and D. Rachel Lombardi

School of Forestry and Environmental Studies, Yale University, 205 Prospect Street, NewHaven, Connecticut, 06511

Received for review January 10, 2005

Revised manuscript received June 17, 2005

Accepted June 17, 2005

Abstract:

Resource sharing among co-located firms-referenced in the industrial ecology literatureas "industrial symbiosis"-engages traditionally separate industries in a collectiveapproach to business and environmental management involving the physical exchangesof materials, energy, water, and byproducts. While industrial symbiosis is seenhypothetically as a win-win situation, there are few analyses of the economic andenvironmental consequences for the individual participants in multi-faceted exchanges. Inthis article, the nascent industrial symbiosis network in Guayama, Puerto Rico, isexplored from environmental, economic, and regulatory perspectives of the individualparticipants and the community. A coal-fired power plant, owned and operated by theAES Corporation, draws five million gallons per day of process water from nearby

sources thus avoiding freshwater withdrawals and, through steam sales, significantlyreduces emissions from a nearby refinery. This article quantifies economic andenvironmental costs and benefits for the symbiosis participants, concluding that there aresubstantial benefits to engaging in symbiosis, although these benefits fall unevenly onparticipating organizations. Policy intervention can be a viable means of motivating moreregular occurrences of resource exchanges among groups of firms.
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I. Introduction

A cooperative approach to business-environment issues is a key aspect of sustainabledevelopment (1). Resource sharing among firms offers the potential to increase stabilityof operations, especially in supply-constrained areas, by ensuring access to critical inputs

such as water, energy, and raw materials. Industrial symbiosis (IS), a sub-field ofindustrial ecology, is principally concerned with the cyclical flow of resources throughnetworks of businesses as a means of cooperatively approaching ecologically sustainableindustrial activity. Industrial symbiosis, then, has the potential to redefine industrialorganization by pushing companies to think beyond individual firm boundaries to abroader systems level.

Research-To-Date. Current industrial symbiosis research is evolving along severalfrontiers: from engineering and modeling of resource flows among entities in place-basedindustrial ecosystems, to analysis of the business and planning dimensions of thosesystems. Existing literature has documented various examples of industrial symbiosis (for

a literature review, see ref2). Quantification has been primarily of a technical nature: forexample, Nemerow (3) includes mass flow analyses and calculations for various materialexchanges in industrial complexes but little economic or financial analysis. Some sourceslook particularly at economics and financing at the level of the eco-industrial park(4-6).Kincaid and Overcash(7) report economic and environmental savings for a series ofpotential exchanges between industries in a six-county region in North Carolina. Severalauthors state that cost or pollution reduction is a major factor in the exchanges, but thespecific environmental and economic benefits of particular exchanges are not presented.

Lowe (5) specifically identifies the need for data on investments and required (financial)return from industrial symbiosis projects. While some parts of symbiotic exchange such

as co-generation and water cascading have been thoroughly studied and linked toindustrial ecology, these generally tackle analysis of a single resource only (8, 9). Thispaper contributes to the literature with detailed analysis of economic and environmentalcosts and benefits for a series of actual and potential exchanges in one municipality inPuerto Rico; identifies the drivers for these exchanges where possible; and suggestspolicy interventions, based on current practice, that could motivate more groups of firmsto engage in symbiotic activities.

The most frequently cited instance of industrial symbiosis is in the small city ofKalundborg, Denmark, where a well-developed model of dense firm interactions wasencountered. The primary partners in Kalundborg, including an oil refinery, powerstation, gypsum board facility, and a pharmaceutical company, share surface water,wastewater, steam, and fuel, and also exchange a variety of byproducts that becomefeedstocks in other processes. Estimated resource savings for the exchanges in

Kalundborg are listed in Table 1 . Additional estimates from Kalundborg suggest that$15M collective annual savings have been achieved, primarily on resources, from a totalinvestment of $90M (10). Total savings through 2002 are estimated at $200M, butdetailed analysis to support this conclusion has not been performed (11). The
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achievement of high levels of environmental and economic efficiency has also led toother collective benefits involving personnel, equipment, and information sharing. Thecritical lesson from the Kalundborg symbiosis concerns the evolution of exchangeswithin a network-the Kalundborg case was not centrally planned and did not unfold all atonce but evolved over the last forty years as a series of bilateral contractual arrangements

between firms (12).

Quantifying Benefits. Much analysis has centered on environmental costs with lessattention to benefits. The environmental benefits of industrial symbiosis are quantified bymeasuring the changes in consumption of natural resources, and in emissions to air andwater, through increased cycling of materials and energy. The economic benefits of ISare quantified by determining the extent to which companies cycling byproducts cancapture revenue streams or avoid disposal costs; those businesses receiving byproductsgain advantage by avoiding transport fees or obtaining inputs at a discount. In somecases, less tangible benefits are obtained from working cooperatively with neighbors,such as improving reputation and facilitating the permitting process.

II. Context for Analysis: AES Power Plant, Guayama

An evolving network of interfirm exchanges in Guayama, Puerto Rico provides atractable illustration from which to analyze the environmental and economic case for IS.Puerto Rico is a commonwealth of the United States, thus sharing most laws and businesspractices. The municipality of Guayama, on the southeastern coast of Puerto Rico,measures 169 km2, and has a population of approximately 42,000. Before 1940, Guayamawas primarily an agricultural economy with some light manufacturing. After a period oflight industrialization in the 1940s and 1950s, the current industrial profile begandeveloping.

In 1966, Phillips Petroleum opened a petrochemical refinery, which today is owned by apartnership between Phillips and Chevron. In the 1980s a number of pharmaceuticalcompanies opened manufacturing plants in the Jobos Barrio (neighborhood): Baxter(1981), Wyeth (1985), IPR Astra Zeneca (1987), IVAX (pre-1994). There are also lightmanufacturing businesses in the industrial zone: Lata Ball (aluminum canmanufacturing); Alpha Caribe (plastic bottle manufacturing); PR International (heavymachinery repair); and Colgate Palmolive (oral care and detergents manufacturing). InNovember 2002, AES Corporation brought online a 454 MW coal-fired power plant withatmospheric circulating fluidized bed (ACFB) technology.

Guayama hosts many of the same industries as Kalundborg: a fossil fuel powergeneration plant, pharmaceutical plants, an oil refinery, and various light manufacturers.Current exchanges in Guayama include the new AES coal-fired power plant usingreclaimed water from a public wastewater treatment plant (WWTP) for cooling, andproviding steam to the oil refinery (Figure 1). Additional steam and wastewaterexchanges are under negotiation between neighboring pharmaceutical plants, the refinery,and the power plant. Beneficial reuse of the coal ash has begun as a means of stabilizingsome liquid wastes. An analysis follows of existing and potential exchanges in Guayama
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with the power plant and refinery as critical participants. Costs and benefits to eachcompany are explored as well as regulatory, political, and other relevant factors.

Figure 1 Schematic of existing and proposed exchanges in Guayama, Puerto Rico.Adapted from Martin et al. (13), updated June 2005.

From its founding in 1941 until the 1990s, the Puerto Rico Electric Power Authority(PREPA or AEE by its Spanish acronym) built and owned essentially all of the powergeneration and distribution facilities on the island. PREPA has maintained control ofelectricity distribution; however, in the face of United States energy restructuring andincreasing need for power generation, in the 1990s PREPA opened this area to proposalsfrom independent power generators. In 1978, a federal law was passed in the UnitedStates to encourage the use of renewable, nonpolluting methods of power generation. ThePublic Utilities Regulatory Policies Act (PURPA) requires a public utility (such asPREPA) to purchase electricity from small producers, and from independent producers

that maintain qualifying status, if the price of the electricity is below the utility's ownmarginal costs of production. For an independent generator to maintain "qualifyingfacility" (QF) status, the facility must use at least 5% of its energy output for productsother than electricity: steam and desalinated water are common co-generation products.When PREPA opened to proposals from independent generators, it required that allproposed facilities qualify as co-generators under PURPA. In the 1990s, two independentprojects were approved as QFs: AES Guayama, and EcoElectrica, a natural gas combinedcycle plant in the southwestern part of the island producing electricity and two milliongallons per day of desalinated water.

The siting decision for AES Guayama, as described in its environmental impact

statement, was based on a number of factors (listed in Table 2 ), each weighted on ascale of 1-10 with 10 being the most important. Of the 4 factors weighted as "10s," twoembody the resource-sharing concepts of industrial symbiosis: "proximity to steam user,"and "suf ficient water supply." Both of these criteria proved challenging to meet. Theavailability of industrial hosts with sizable steam and/or process heat requirements,critical for AES to achieve QF status, has been anticipated to be a limiting factor for co-generation in general (14). A steam host was identified at only two of the five sitesscreened: the Chevron Phillips refinery in Guayama, and Sun Oil de Puerto Rico inYabucoa. The lack of a suitable water supply has prevented the siting and permitting ofnew power plants in Puerto Rico, including a somewhat comparable plant in the westerncity of Mayaquez (15), and elsewhere in the United States(16). The criterion of asufficient water supply was further interpreted in AES's environmental impact statementas requiring the "elimination of the use of seawater and minimizing the use of potablewater"(17). The water supply criterion was satisfied by co-locating with a wastewatertreatment plant (WWTP) for reclaimed wastewater input. Of the five sites evaluated,sufficient wastewater was identified only at Guayama.

III. Quantifying Steam, Water, and Other Exchanges
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Steam. For AES in Puerto Rico, finding a steam host was a necessity owing to PREPA'srequirement for PURPA QF status. AES Guayama sited next to a Chevron Phillipsrefinery and built the pipeline infrastructure necessary to provide steam to ChevronPhillips. In this section, the costs and benefits of the steam host agreement are analyzedfrom an environmental perspective in terms of net air emissions, and from the economic

perspective of both AES Guayama and Chevron Phillips independent of taxconsiderations. In comparing AES cogeneration via coal combustion, and ChevronPhillips generation via no. 6 fuel oil combustion, off-site environmental impacts such asupstream extraction and transporta tion of both fuel oil and increased inputs to AESGuayama (coal, limestone, lime, water, etc.) are not inventoried (18).

Net Emissions from Steam Exchange: Calculation. In the mid-1990s when AES wasseeking a steam host, the Chevron Phillips (then just Phillips) petrochemical refinery wasproducing aromatic hydrocarbons (paraxylene, cyclohexane, and orthoxylene) andgasoline. Process steam was generated on-site with four industrial boilers burning highsulfur (2.5%) no. 6 residual fuel oil (19). Two of the four boilers were to be replaced by

steam from AES Guayama (20). In 2001, the Chevron Phillips refinery began anextensive reengineering process. Although the actual amounts of steam purchased havevaried and will continue to do so-especially with reengineering-this calculation is basedon the amount originally contracted because AES Guayama is currently committed toproviding up to that amount to Chevron Phillips at any time: 105 thousand pounds perhour (kpph) of high-pressure process steam and 80 kpph of low-pressure process steam.As of early 2004, the Chevron Phillips facility is producing a new product line withreduced process steam needs owing to changes in product lines: an average of 60 kpph ofhigh-pressure and 50 kpph of low-pressure process steam(21). Post-reengineeringwithout the steam exchange, two boilers would still have been required to provideChevron Phillips process steam; currently, all four boilers are offline. Thus, despite

reengineering, the comparison of two boilers to AES steam production is valid. Reinhardt(22) further discusses the challenges associated with choosing the relevant starting pointfor assessing relative improvements such as this.

The net emissions impact calculation must account for both the decrease fromdecommissioning two industrial boilers at Chevron Phillips, and the correspondingincrease in air emissions generated by AES Guayama to produce process steam forChevron Phillips. Emissions of five pol lutants (SO2, NOx, PM10, CO, and CO2) resultingfrom the boilers at Chevron Phillips were estimated using two sources: a report for thespecific Chevron Phillips industrial boilers within the environmental filings for AESGuayama (23); and the EPA Air Pollutant Emissions Factors for generic industrial boilersof a size suitable to produce the same amount of steam(24). Specific boiler information(such as size, costs, and steam output) was not available directly from Chevron Phillips.The weight in short tons per year (tpy) emitted of each compound was calculated fromthe emission rates by assuming that the boilers operated the same number of hours peryear as AES to produce the contracted amount of steam. Results of both calculations are

presented in Table 3 .
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The corresponding increase in air emissions generated by AES Guayama to produceprocess steam for Chevron Phillips was estimated based on heat balance informationprovided by AES Guayama. The fractional portion of emis sions resulting from steamgeneration is shown in column number 4 of Table 3. The net impact is the additional AESGuayama emissions less avoided Chevron Phillips emissions, listed in the last column for

SO2, NOx, PM10, CO, and CO2. Data indicate a substantial reduction in the emissions ofSO2, NOx, and PM10: the net reduction of 1978 tpy of SO2 emissions is almost 11 timesthe total SO2 emissions from the AES Guayama plant as a whole. Both CO and CO2emissions increased based on the inherent chemistry of switching from oil to coal. On thebasis of EPA AP-42 emission factors for coal and fuel oil, and industry estimates for fuelinput for steam production, 1000 pounds of steam generated by burning no. 6 fuel oil willgenerate 195 pounds of CO2 versus 332 pounds generated from coal (24, 25).

With respect to the economic impact of the steam exchange on both Chevron Phillips andAES, the actual steam price negotiated by AES Guayama and Chevron Phillips is notpublic information, so the various costs involved (Chevron Phillips' avoided costs from

the industrial boilers and AES's costs for producing the process steam) are estimated, asare the revenues, based on interviews and appropriate engineering literature.

For Chevron Phillips to produce 185 kpph of process steam from 2 industrial boilers (1boiler producing 80 kpph at 200 psi and the other producing 105 kpph at 700 psi) wouldrequire on the order of 11.7 million gallons per year of no. 6 residual oil according to theCouncil of Industrial Boiler Owner's (CIBO) research (25), and assuming (as with theemissions calculation) the boilers run 6775 h per year, AES Guayama's expected averagecapacity level. The cost as sociated with industrial boilers is approximately $1/gallon offuel delivered and fired (25). Thus, we may estimate Chevron Phillips' avoided costs atapproximately $11.7M, and Chevron Phillips will have a net economic gain from the

steam host relationship at any steam price less than $9.35/k lb. steam delivered.

Economic results for Chevron Phillips are summarized in Table 4 .

For AES Guayama, the costs involved in providing the contracted amount of steaminclude the fixed, one-time, up-front $5M to build the steam lines to Chevron Phillips,and the variable costs associated with the increased inputs to the AES Guayama boilers.AES Guayama's material inputs are scaled up by 7.3% to produce 210 kpph processsteam at the QF amount. Chevron Phillips contracts for 63.8% of that capacity, thus weattribute 7.3% 0.638 = 4.7% of material input costs at full process steam to the ChevronPhillips contract, estimated at $2.72M per year for variable expenses. Based on CIBOcalculations (25) and interviews, 25% is added for operations, maintenance, andoverhead; the overhead rate will vary with each plant's cost accounting calculations. Inaddition, if the $5M infrastructure cost is paid off over the 25-year life of the contract at9.5%, the rate for a recent AES Guayama debt offering, there is an additional$43,700/year charge, for a total materials, overhead, and infrastructure cost of

approximately $3.42M (see Table 5 )(26). This cost would be recouped for anysteam price exceeding $2.75/k lb., although this calculation does not incorporate theprofit AES requires. The difference between the costs of production ($2.75/k lb. for AES
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and $9.35/k lb. for Chevron Phillips) creates an estimated $8.27M economic surplus(based on 185 kpph of steam 6775 h); its distribution will depend on the pricenegotiated between AES and Chevron Phillips, and on the actual costs to each of thecompanies for the production of steam.

Summary, Steam Exchange. Prior to entering a steam-host agreement with AES, ChevronPhillips generated its own process steam with four industrial boilers burning high-sulfurno. 6 fuel oil. Receipt of steam from AES Guayama obviated two industrial boilers atChevron Phillips, and AES Guayama gained QF status to generate electricity in additionto the process steam. As described above, this is a win-win-win situation: ChevronPhillips wins because the steam from AES Guayama is cheaper than what it wasgenerating onsite; AES Guayama wins because it gains QF status as well as some (weassume) profit from selling steam to Chevron Phillips, based on the differential ofChevron Phillip's cost to produce steam of $9.35/k lb. and AES's cost of $2.75/k lb.; andthe community and local environment win because the symbiotic relationshipsubstantially reduces net air emissions of SO2, NOx, and PM10. One drawback is the

substantial increase in CO2 associated with global climate change.

Reclaimed Water Exchanges. There are two dimensions along which power generatorscan reduce their freshwater use: reduce the total volume needed by recirculating coolingwater instead of passing once through; and replace freshwater with reclaimed water.Environmental concessions, such as using reclaimed water for cooling and recirculatingcooling water, are becoming more common for new power plants. Increasingly stringentregulations of the U.S. Clean Water Act discourage once-through cooling for powerplants to protect the aquatic species affected by the heated water discharge(27). Twodifferent motivators for water exchanges in Guayama are discussed: the resourcelimitation that gave rise to the siting of the AES power station near a wastewater

treatment plant; and the economically driven opportunity for potential savings for nearbyindustrial facilities.

Resource Driven Water Exchange: PRASA WWTP, AES Guayama. Water resources havebeen identified as a top environmental concern in Puerto Rico by the director of theEPA's Caribbean Division, Region II (28). Along the south coast, where Guayama islocated, water resources have been a concern since the mid-20th century, and currentsupplies show signs of deterioration. The surface water system suffers from inefficientinfrastructure and poor water quality (28); and the groundwater has been contaminated byindustrial discharges and overdrawn by agriculture and industry, resulting in saltwaterencroachment into the coastal aquifer(29).

As a result of the water resource limitations, the siting criteria for AES (see Table 2)included proximity to a reclaimed water source. The Guayama wastewater treatmentplant (WWTP) performs secondary treatment on approximately 5 million gallons per day(MGD) of municipal sewage; prior to the AES Guayama exchange, the effluent wasdischarged to the Caribbean Sea. AES uses water for two distinct purposes:approximately 1 MGD for boiler makeup and about 4 MGD for cooling water. Waterused for boiler makeup must meet higher quality standards than that used for cooling
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water. The only water emitted by AES is in the form of vapor from the cooling towers.With the exchange in place, the WWTP reroutes its discharge to AES Guayama for use ascooling water, and approximately 4 MGD of extraction and discharge are avoided.

Economics-Driven Potential Water Exchanges. Wyeth Pharmaceuticals, a finishing and

tableting plant just north of AES Guayama, is a third party in discussion with AESGuayama regarding a potential wastewater exchange. Wyeth currently dischargesapproximately 0.27 MGD of treated wastewater to the Guayama WWTP. Wyeth'swastewater treatment and disposal has an approximate cost of $0.001/G for treatment and$0.002/G for disposal(30). By sending its treated wastewater directly to AES Guayama,Wyeth would avoid the $0.002/G discharge fee charged by PRASA. The facility alsobecomes eligible for "zero discharge" status, which may qualify the facility for additionalflexibility in its relationships with regulators, as other byproduct exchanges have in theUnited States (31). Treatment is still required to the same level of quality for any waterleaving Wyeth's premises; tests are being conducted to determine whether any changes intreatment will be necessary for the exchange, although none are anticipated. Minimal

additional infrastructure would be required since pipes already run from Wyeth and AESto a central point at their shared boundary for discharge to PRASA.

The economic impact on AES Guayama of this exchange will not be known until the usefor this wastewater is determined. If the wastewater is suitable for boiler makeup, it willreplace freshwater AES Guayama currently purchases from PREPA at a cost of $1/kG;otherwise, it will replace a portion of the lower-value cooling water currently purchasedfrom the Guayama WWTP at a cost of $0.20/kG. The net economic benefits of the

ongoing exchange are listed in Table 6 . Wyeth and AES Guayama each wouldbenefit economically through avoided costs without significant additional expense;Wyeth's savings would be substantially larger. AES Guayama is currently negotiatingwith two other industrial neighbors regarding potential reuse of their wastewater; flowscould add up to 0.86 MGD or 17% of AES's input needs, for a potential range of savingsof $63,000-$314,000 per year, depending on AES's use of wastewater.

Environmental Impact of Wyeth-AES Guayama Water Exchange. Wyeth's dischargedwater ends up at AES Guayama, regardless of whether it comes directly from Wyeth, orvia the Guayama WWTP; there is no change in final disposal. The net impact of thisindustrial wastewater exchange on freshwater extraction is not known until the use of theWyeth water is determined: if the Wyeth discharge is clean enough to be used for boilermakeup, then it replaces fresh surface water AES currently purchases from PREPA. If itis suitable instead only for cooling water, then it circumvents the PRASA WWTP(reducing the amount purchased from PRASA) and does not affect extraction directly.Wyeth's criteria for water exchange with AES Guayama are the same as the AESGuayama criteria for a steam host: "The potential users should possess economic stabilityand long-term permanence"(17).

Potential Resource Exchange: Ash. Generic power generation via conventional coalcombustion creates byproducts referred to as coal combustion products, or CCPs. Coal
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combustion products include: fly ash, bottom ash, flue gas desulfurization (FGD)byproducts, and boiler slag. Roughly one-third of all U.S. utility fly and bottom ash,which constitutes the majority of byproducts, is reused, or about 24.4 million short tonsper year(32). Disposal for a utility's coal combustion products may be as high as 1-3% ofits annual budget (33). The economic incentive for the generator to identify a marketable

reuse for ash is clear: for those coal combustion products finding markets, revenuesaverage $2/ton (34) as opposed to $10-15/ton disposal costs.

The most obvious environmental benefit of ash reuse is that its own disposal is avoided.It also displaces the use of other materials such as sand when it is reused-thus reducingextraction and, in some cases, transportation for the replaced material. As a concreteadditive (its largest use), ash displaces cement thereby reducing the CO2 emissionsassociated with the cement manufacture. As a raw material for cement manufacture, ashdisplaces the extraction of materials such as limestone and sand, and may displace somefuels as well (35).

At a coal combustion plant, bottom ash is created within the combustion chamber, and flyash is collected after the combustion chamber. In traditional coal combustion plants, fluegas desulfurization (FGD) byproducts are created downstream from the combustionchamber by the reaction of SO2 in the waste gases with lime injected into the scrubber.The scrubber's output is primarily calcium sulfate, a precursor to artificial gypsum. InKalundborg, this flue gas desulfurization byproduct is sold to a wallboard manufactureras a substitute for mined gypsum. In the United States, the majority of flue gasdesulfurization sludge is managed onsite in waste piles (32, p 48). The circulatingfluidized bed (CFB) coal combustion technology in use in Guayama produces ash with acomposition unlike that of traditional coal combustion plants. These plants do notproduce separate high-sulfur byproducts: this circulating fluidized bed coal combustion

burns limestone together with the fuel in the combustion chamber, where the majority ofthe SO2 is captured. As a result, the circulating fluidized bed fly and bottom ash aresubstantially higher in sulfates and lime (unreacted CaO) than traditional ash. Feedlotstabilization, agricultural soil amendment, and coal mine reclamation have beenidentified as suitable applications for CFB ash (36-38).

AES Guayama's annual ash production is about 220,000 tpy. AES Guayama faces anannual cost of ash disposal of about $3M, consistent with trade literature citing $10-15/ton disposal fees. This is their single largest operating expense, thus AES has a strongfinancial incentive to address disposal. In addition, AES Guayama is committed to off-island disposal of its ash; the ash can only stay in Puerto Rico for beneficial reuses. Initialplans for reuse investigated cement, soil stabilization, and ash rock for highway fill (17).AES Guayama has pursued the application of the ash slurry as fill material for high-voltage underground transmission lines (21) and late in 2004 began using some ash tostabilize liquid waste prior to landfilling (39).

The components of the CFB ash closely resemble the contents of Portland cement and itsraw materials including CaO, SiO2, Al2O3, Fe2O3, and MgO(40), thus the ash may besuitable for use as a raw material for cement. The high lime content of the ash matches
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the primary input to cement: limestone. The carbon content provides an additional fuelsource. The high sulfur content is the primary drawback for use in the kiln. However,common additives to cement finishing mills (post-kiln) include the sulfur-containingcompound gypsum (40). Two cement kilns in Puerto Rico within 50 miles of Guayamaproduce an estimated 1500 tpy cement (41). If the AES ash were suitable as an additive at

a rate of 6% of inputs (common for high-carbon ash(35) and for gypsum (40)) thenapproximately two-thirds of the ash could find beneficial reuse, at an avoided disposalcost for AES of $1.85M/year and potential revenue of $296,000/year.

IV. Discussion of Results

The economic and environmental impacts of existing and proposed materials, water, andenergy exchanges among firms in Guayama, Puerto Rico have been presented. There isclear evidence of substantial public environmental benefit: for example, a 99.5%reduction in SO2 emissions due to steam generation for Chevron Phillips is achieved, andAES avoids extracting 4 million gallons per day of scarce freshwater through the use of

treated effluent from the wastewater treatment plant.

Economically, the analysis presented here suggests that the biggest financial winner isChevron Phillips. By not having to operate its old boilers to produce steam, the companygains significantly through reduced operating costs, and, based on those savings,negotiated an acceptable contract with AES for steam purchase. For AES, treatedwastewater is not only available, but also is considerably less expensive than the cost ofpurchasing freshwater by some $1.2 million per year. In both instances, private benefitsare achieved simultaneously with public ones.

Regulatory conditions, however, influenced both water and steam opportunities. With

respect to steam, AES became a steam supplier to meet the qualifying facilityrequirement under PURPA. With respect to water, recognizing southeast Puerto Rico as adry area, the use of treated wastewater at AES was included as a condition in the sitingagreement. This leads to another key finding concerning industrial symbiosis. AlthoughAES does not appear to be the largest financial gainer (beneficiary) from the byproductexchanges, in part because it incurs setup costs to receive wastewater and sell steam, AESgains in another critical way. It is reasonable to assume, having examined the history ofthis and other projects in Puerto Rico, that AES would not have achieved society's"license to operate" without its willingness to engage in symbiotic activities. This can betaken literally as the necessary permits and figuratively as permission in a democraticsociety to carry out vital functions such as provision of energy and water in a broadlyacceptable way.

From the two required exchanges of water and steam, it is evident that integration ofindustrial symbiosis criteria into the siting process is one way to protect natural resourcessuch as water and air. A reasonable future policy direction, already begun in some areas,would be to require water reuse for new power plants and some type of combined heatand power generation. The electricity industry accounts for 39% of all freshwaterwithdrawals in the United States, second only to agriculture (16). To conserve this
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resource, power plants are facing increasingly stringent requirements on water use; somestates and municipalities have denied siting and permits due to lack of availablefreshwater; and the EPA has proposed regulations that could limit the amount of waterused by power plants (16). Examples from the current literature of the pursuit of waterreuse opportunities motivated by limited water resources come from such diverse

geographic areas as Australia (42), China(43), and Israel(44).

Additional voluntary exchanges are under consideration to achieve private benefit orreduce private costs with respect to water and coal plant ash. Various industrial neighborsto AES are negotiating to send wastewater directly to the power plant. These wastewaterexchanges do not displace extraction (assuming they are used for cooling water makeup,the most likely scenario) and the same wastewater would have arrived at AES via theWWTP in either case. Rather, additional wastewater exchanges are economically drivenfor the partners to avoid the cost of discharge to PRASA. Ash disposal is AES Guayama'slargest operating expense; thus the company is highly motivated to find alternativebeneficial uses of the ash, but such an on-island opportunity must not violate the tangible

and intangible aspects of its license to operate.

The industrial symbiosis literature can be interpreted to show that a single exchange isoften the first step and that, as in Kalundborg, Denmark or in the case of Chaparral Steelin Texas, "trades beget trades." (45). This pattern looks to be repeated in Guayama basedon several requests, particularly for exchange of chemicals, now being evaluated bynearby firms. In essence, successful initiation of trading within co-located firms appearsto bring a shift in thinking-a change in the dominant trajectory of firm individualism-creating a willingness to consider further trading. Given the nature of environmental andeconomic benefits identified in the case of Guayama with respect to air, water, andbyproducts, it is reasonable to infer that these benefits, none of which are very

unconventional, can be found in many other comparable situations.

The organizational hurdles may be lack of information across firms, perception of hightransactions costs across firms, insufficient trust or communication across firms, or lackof a regulatory push. Key, then, is catalyzing the early exchanges so that firms will beopen to the potential benefits of additional ones when economically and environmentallydesirable. The role of the private sector is critical in furthering industrial symbiosis (2).Yet, as in the case of Guayama, regional government action to foster wastewater reuse ornational government action to encourage co-generation as in PURPA, can also bepowerful catalysts. Through selected policy interventions such as those described toreward wastewater reuse or additional use of waste heat, government action couldadvance symbiosis which, in turn, could bring additional public and private benefits in itswake.

* Corresponding author phone: 1-203-432-6197; fax: 1-203-432-5556; e-mail:[email protected].

1. World Commission on Environment and Development. Our Common Future; OxfordUniversity Press: New York, 1987.
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18. Lentzen, M.; Treloar, G. Differential Convergence of Life-Cycle Inventories towardUpstream Production Layers: Implications for Life-Cycle Assessment.J. Ind. Ecol.2002,

6(3-4), 137-160. [CrossRef]

19. Berrios, A. Former Director, Air Quality Program, Puerto Rico EnvironmentalQuality Board; Interview March 22, 2003.

20. Smith, J. Chevron Phillips Puerto Rico; Interview March 20, 2003.

21. Reyes, C. Engineering Vice President, AES Guayama; Personal communicationNovember 2003 and March 2004.

22. Reinhardt, F. L.Down to Earth: Applying Business Principles to EnvironmentalManagement; Harvard Business School Press: Boston, MA, 2000.

23. TRC Environmental Corporation. Tableas de las Fuentes de las Emisiones de lasIndustrias cercanas al predio propuesto (Table of Emissions Sources from Industries nearthe Proposed Site); March 13, 1995.

24.EPA Air Pollutant Emission Factors: AP-42, 5th ed.; Volume 1: Stationary Point andArea Sources, 1998. http://www.epa.gov/ttn/chief/ap42/index.html.

25. Zeitz, R. A., Ed.Energy Efficiency Handbook; Council of Industrial Boiler Owners:Burke, VA, 1997.

26. Heiser, S. AES Signs $215 Million Financing Associated With AES Puerto Rico.Live Power News, May 31, 2002.

27. Swanekamp, R. Cooling Options Change for a Hot, Thirsty Industry. Power2002,146(6), 55-59.

28. Juarbe, V. EPA's Regional Director Highlights Puerto Rico's Woes. CaribbeanBusiness, Thursday April 24, 2003, p 34.
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34. Schwartz, K. D. Business and Technology Journalist; Personal communication, 2003.

35. Bhatty, J. I.; Gadja, J.; Miller, F. M. Commercialization of High-Carbon Fly Ash inCement Manufacture; Report No. 00-1/3 1A-1; Illinois Clean Coal Institute: Canterville,IL, November, 2001.

36. U.S. DOE, National Energy Technology Laboratory.Fluidized Bed Combustion AshLandfill Design; Project 018; NETL: Washington, DC, June, 2000.

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39. Stone, D. AES Manager, Personal communication, March, 2005.

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Table 1. Estimated Resource Savings at Kalundborga

groundwater savings 2.1 million m3/y

surface water savings 1.2 million m3/y

oil savings 20,000 tons/y

natural gypsum 200,000 tpy

a Source: ref10.

Table 2. Site Screening Criteria Used by AES, with Assigned Weighting Factors (on aScale of 1-10, with 10 Being Most Important)a

proximity to steam user 10

water supply 10

proximity to port 10

conditions that minimize environmental impact 10

heavy industrial zoning 9

far from residential areas and communities 7

land outside of Zone 1 floodplain 7

access to transmission grid 6

highway access 5

a Source: ref19.

Table 3. Comparison of Estimated Emissionsfrom Steam Production by Chevron Phillips

and AES Guayama

Chevron Phillips Industrial BoilersEmissions

AESGuayama
http://pubs.acs.org.ezproxy.rit.edu/cgi-bin/crossref/10.1002/sd.149http://pubs.acs.org.ezproxy.rit.edu/cgi-bin/crossref/10.1016/S0959-6526(02)00131-2http://pubs.acs.org.ezproxy.rit.edu/cgi-bin/crossref/10.1002/sd.149http://pubs.acs.org.ezproxy.rit.edu/cgi-bin/crossref/10.1016/S0959-6526(02)00131-2


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Emissions

emissions

species

1. EISemissions

ratescalculation(tpy)

2. EPAemissions

factorscalculation(tpy)

3.average

of 2methods(tpy)

4. emissionsfrom steamcontracted

by ChevronPhillips(tpy)

5. net

emissions

from steamproduction by

AESGuayama(tpy) (column4 - column 3)

6. net percent

increase

(decrease) in

emissions fromsteamproduction byAES Guayama

SO2 1592 2381 1987 9 (1978) (99.5)

NOx 224 275 250 39 (211) (84.4)

PM10 105 153 129 6 (123) (95.3)

CO 20 29 25 40 15 60.0

CO2 159,000 143,000 151,000 202,000 51,000 33.8

Table 4. Chevron Phillips Estimated Cost to Produce Process Steam and Estimated SteamCost

approximate cost for fuel oil, delivered and fired ($/yr) 11,700,000

estimated steam cost ($/k lb.) 9.35

Table 5. AES Guayama Estimated Cost to Provide Process Steam to Chevron Phillips

cost for infrastructure ($/yr) 43,700

variable costs, estimate ($/yr) 2,720,000

estimated overhead, O&M ($/yr) 750,000

total cost to provide process steam ($/yr)a 3,440,000

estimated steam cost ($/k lb.) 2.75

a Numbers do not add due to rounding to 3 significant digits.

Table 6. Economic Impact of Proposed Wyeth-AES Guayama Water Exchangea

Wyeth savings

amount of water exchanged 7.7 MG/mo 12 mo/y = 92.4 MG/y

avoided cost, PRASA discharge fee 92.4 MG/y $0.002/G = $184,800/y

AES Guayama savings

avoided cost, cooling water use 92.4 MG/y $0.0.0002/G = $18,480/y

avoided cost, boiler makeup use 92.4 MG/y $0.001/G = $92,400/y

a Source: ref30.

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