10 February 2009 The Case for Coal Generation Sandy Rae, Energy Management Director

2 ScottishPower - Generation Cruachan (440MW) Longannet (2,304 MW) Cockenzie (1,152 MW) Rye House (715MW) Brighton (400MW) Damhead Creek (800MW) CHP Hydro CCGT Pumping Coal TOTALCAPACITY = 6,036MW c.4000 MW in Scotland

3 Whitelee wind farm (344MW)......largest in Europe Committed to Environmental Improvements in Generation

Energy policy considerations Potential for conflict between three main UK policy drivers Preferred strategy will balance security, environment & cost issues Focus on customer prices & affordability long term Affordable Environment remains high on the political agenda medium / long term Environment Energy security has to be a priority Secure & Flexible 4

UK Portfolio Mix Hydro 4GW 2020 GB Plant Mix Total Generation ~100GW Nuclear 9GW CCGT & CHP 44GW Other 7GW Wind & Other Renewables 21GW Coal 18GW Hydro 4GW 2009 GB Plant Mix Total Generation ~80GW Nuclear 10GW CCGT & CHP 25GW Other 10GW Wind & Other Renewables 6GW Coal 28GW 5

6 Case for Coal – Coal versus Energy Policy Drivers Secure & Flexible Affordable  Need coal to fill energy gap eg nuclear closures  Avoid dependency on gas imports  Provides flexibility to back up intermittent wind  Uses existing sites, workforce & connections  Abundant coal supplies & supports UK coal mining Environment  Bridge to low carbon economy via CCS  Environmental upgrades progressing

7 Environmental Upgrades Over 90% Over 90% SO2 Emissions:  Flue Gas Desulphurisation In Progress 25% - 30% 25% - 30% NOx Emissions:  Boosted Over Fired Air c40%  Selective Catalytic Reduction 2010 to 2015 CO2 Emissions: Up to 90% Up to 90%  Carbon, Capture & Storage 2014 and beyond

8 Securing a Future for Coal Plant – Enablers to Investment Decisions Government support Country’s needs considered in planning and consenting Appropriate market design Relevant transmission charging scheme Early clarity on future environmental legislation Early clarity on policy and regulation of CCS infrastructure Early clarity on the future of the ETS and future CO2 prices

Final Commissioning FGD reducing SOx emissions Boosted Over Fired Air Turbine upgrades 2015 onwards Carbon Capture & Storage Other developments 2009 to 2015 Life extension - improving efficiency and NOx emissions Construction of 20-25MW biomass plant Evolution Of Longannet 9

Carbon Capture and Storage (CCS) We need to understand performance at commercial scale 10

Consortium can deliver viable scheme & UK roadmap by 2014 Government competition to pilot full scale CCS chain by 2014 Capture 85% of CO2 at 330MW CCS retrofitted unit at Longannet – pilot plant planned by May 2009 Transportation options include ship or utilisation of existing gas & oil infrastructure Central North Sea storage in depleted oil and gas fields with later options to extend to saline aquifer Project far advanced giving us confidence in meeting any Government deadlines ScottishPower’s UK CCS competition bid Central North Sea Over land/ Undersea Pipeline Over land/ Undersea Pipeline Ship Transportation Ship Transportation Longannet 11

Clear case for coal generation to provide secure, affordable & flexible generation Need certainty, policy support & level playing field to ensure coal stations still operational when CCS becomes commercially viable Existing coal, with continuing environmental improvements, is a bridge to a lower carbon future ScottishPower is committed to proving viability of CCS through Longannet participation in UK competition Conclusions 12