Critical Issues on the Critical Path: Carbon Capture and Carbon Sequestration

1. Steve Corneli – NRG Energy, Inc. Vice President of Market and Climate Policy

2. Carbon Captureand Carbon SequestrationCritical Issues on the Critical Path Steve Corneli VP Market and Climate Policy

3. CO2 for economic growth for least advantaged ~ 10 GT A CO2 emission path to not exceed 450 ppm CO2 to maintain OECD economies Hobson’s choice? -- economic development or a stable climate Technology transformation is the only way to achieve a livable world

4. Technology transformation: focus on fossil fuel CO2 ~ 10 GT Source: US EIA International Energy Outlook 2007, NRG Global CO2 from coal and oil could easily double by 2030

5. Mostly from growth in the developing world Transformative technologies must quickly reach a “China price”

6. CCS is the biggest potential source of low CO2 power Nuclear and renewable sources also play supporting roles

7. increased efficiency additional nuclear CCS The US power sector can help lead the way Source: EPA analysis of S.280 The US shares many economic drivers for coal use with the developing world

8. And the entire global power sector must play a key role ~ 10 GT With CCS the power sector can contribute bulk of 2030 reductions

9. Rapid deployment of existing technologies to reduce cost and enhance performance Expand supply achieve economies of scale Induce OEM competition prevent monopoly supply & pricing outcomes Fully commercialize technology “Learning by doing” in field 5 – 10 early full scale commercial CCS projects Competitive, but with cost and risk support Business-friendly regulatory, commercial and technical regime Guide resource selection, development and management Find the right site, and put it there using “best practices” Monitoring and mitigation Track plume and be prepared Long term responsibilities Transfer to entity that can carry out responsibilities over century or more Facilitate permitting and risk management for GS component of first projects What does CCS need to succeed? Carbon Capture Sequestration Solve the “chicken and egg” problem by incubating enough eggs

10. Harness American capitalism to create solutions • US cap and trade system starting ASAP • Initial mix of auction and “net compliance cost” allocations • Limit windfall potential • Preserve balance sheet strength for companies that need to invest in CCS and other low carbon technologies • “Bonus allowances” and other support for competitive early CCS technologies to rapidly increase demand • Initial CO2 prices do not need to be high to drive initial deployment of CCS • Transition to full auction and full market pricing as technology becomes fully deployable • Cost containment measures fade, more aggressive reductions, and full auction • EPA rule(s) for CCS that allow safe, timely and efficient sequestration development • UIC-based for earliest projects • Seamless transition to new rule for “first wave” of policy-driven projects • Coordination with / delegation to state or regional jurisdictions • Provide for efficient long term repository and risk management Key steps must start now and proceed in parallel to provide needed reductions

11. CCS essential to solve climate change Geologic Sequestration will be safe and commercially viable New technologies can and do achieve scale economies and market penetration Leadership at the federal, state, local and corporate levels is needed to solve problem “NUMBY” “Liability” “Too expensive, will never work” “Scientists don’t agree...it costs too much...it isn’t green enough” Ideas matter -- and so do words The biggest challenge is to make realistic solutions as attractive as the problem