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Financing the CCS business

STRICTLY PRIVATE & CONFIDENTIAL. Financing the CCS business . Tony White British-Norwegian Workshop on CCS 23 rd April, 2008 . Getting Started. The Zero Emissions Platform. CCS costs summary. Average ‘central case’ estimates from industry studies (low – high range shown in brackets).

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Financing the CCS business

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  1. STRICTLY PRIVATE & CONFIDENTIAL Financing the CCS business Tony White British-Norwegian Workshop on CCS 23rd April, 2008

  2. Getting Started The Zero Emissions Platform

  3. CCS costs summary Average ‘central case’ estimates from industry studies (low – high range shown in brackets)

  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 CO2 price CO2 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. Principles and design of CCS support mechanism CCS will not occur without funding support At commercial scale, the support needed is big (~€1bn per plant) Current cost data uncertainty means too early to pick winner This scale of funding will not be forthcoming from MS budgets The most efficient way to offer the support is to pay on performance All technologies are in similar cost ranges within the error margins No evidence of any budget support this large (eg UK retreat) Moral hazard risk is created if funds paid before CO2 is stored Therefore all technology types should be supported in first phase Therefore EU-level funding mechanism is needed Therefore payment mechanism should pay for CO2 tonnes stored Funding support should be segmented across technologies EU ETS is the only source large enough EU ETS is an existing mechanism based on CO2tonnes EU ETS should be used to provide the funding support Payment for CO2 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. ….and then? How to decarbonise

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

  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. 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

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