1. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt Financing the CCS business STRICTLY PRIVATE & CONFIDENTIAL Tony White British-Norwegian Workshop on CCS 23 rd April, 2008

2. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt 2 Getting Started The Zero Emissions Platform

3. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt 3 CCS costs summary For one commercial-scale 800MW plant 1 Total cost 2 Capex only 3 Annual cost 4 Annual cost per CO2 tonne 5 €m €m p.a.€/tCO2 p.a. IGCC with pre- combustion CCS 861 (566 – 1125) 566 (464 – 668) 124 (91 – 153) 24.90 (18.30 – 30.50) PC with post- combustion CCS 1114 (881 – 1418) 784 (616 – 952) 153 (124 – 183) 30.70 (24.70 – 36.70) PC with oxyfuel CCS1364 (945 – 1851) 891 (538 – 1243) 186 (131 – 237) 37.20 (26.30 – 47.40) CCGT with post- combustion CCS 1016 (977 – 1150) 685 (616 – 823) 334 (324 – 373) 66.90 (64.70 – 74.70) Average ‘central case’ estimates from industry studies (low – high range shown in brackets)

4. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt 4 When CCGT sets the marginal power price, carbon price for CCS to compete is very high Power price necessary to earn a 10% return at the given CO 2 price CO 2 price necessary for CCS with each technology to compete with CCGT unabated When CCGT sets marginal power price, the carbon price must rise to over €100 before CCS technology on coal-fired plant can compete

5. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt 5 Principles and design of CCS support mechanism This scale of funding will not be forthcoming from MS budgets No evidence of any budget support this large (eg UK retreat) Therefore EU-level funding mechanism is needed EU ETS is the only source large enough Current cost data uncertainty means too early to pick winner All technologies are in similar cost ranges within the error margins Therefore all technology types should be supported in first phase Funding support should be segmented across technologies The most efficient way to offer the support is to pay on performance Moral hazard risk is created if funds paid before CO 2 is stored Therefore payment mechanism should pay for CO 2 tonnes stored EU ETS is an existing mechanism based on CO 2 tonnes At commercial scale, the support needed is big (~€1bn per plant) CCS will not occur without funding support EU ETS should be used to provide the funding support Payment for CO 2 tonnes stored can be made with EUAs, through a reserve set aside within the Phase 3 cap, of ≤ 180m EUAs p.a. to pay for ≤ 60Mt CO2 stored p.a. segmented equally across 3 CCS technologies and China/India

6. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt 6 ….and then? How to decarbonise

7. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt 7 Policy analysis: impact of long-term framework The cost of supporting the CCS demonstration plants is greater if no future policy signal Total cost of CCS power plant Cost of unabated coal power plant Cost of support mechanism Cost of low emissions power plant (eg reduced emissions intensity) Cost to shareholders and consumers 2015 2008 Delivery of CCS demonstration plants Possible requirement for Capture- Ready Preparation of legislation and mechanism s 20?? Compulsory CCS for new build ? Compulsory retrofit ? Future behaviour of supply chain parties? First tranche deployment Future of CCS Visible policy continuum is needed for real supply chain mobilisation

8. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt 8 Conclusions  Difficult to choose between technologies  Each demonstration requires ~€1bn  No single member state will deliver  EUETS is the only revenue source in town  Multiple allowances?  Long term intentions may reduce costs

9. G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt 9 Contact Climate Change Capital CCC Head Office Climate Change Capital 3 More London Riverside London SE1 2AQ United Kingdom Tel: +44 (0)20 7939 5000 Fax:+44 (0)20 7939 5030 www.climatechangecapital.com