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$: G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt Financing the CCS business STRICTLY PRIVATE & CONFIDENTIAL Tony White British-Norwegian$
G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt

Financing the CCS business

STRICTLY PRIVATE & CONFIDENTIAL

Tony White

British-Norwegian Workshop on CCS

23rd April, 2008

2G:\Market Development\Conference Presentations\2008\Norway-UK April.ppt

Getting Started

The Zero Emissions Platform


CCS costs summary

For one commercial-scale 800MW plant1

Total cost2 Capex only3 Annual cost4 Annual cost per CO2 tonne5

€m €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 CCS 1364(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)


€ 90/tonne€ 155/tonne€ 103/tonne € 129/tonne

€ 86.7/MWh € 95.4/MWh € 73.7/MWh€ 77.9/MWh

IGCC PC post coobustion PC oxyfuel CCGT

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


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 CO2 is stored

Therefore payment mechanism should pay for CO2 tonnes storedEU ETS is an existing mechanism

based on CO2 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 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


….and then?

How to decarbonise


Policy analysis: impact of long-term framework

The cost of supporting the CCS demonstration plants is greater if no future policy signal

To

tal c

ost

of

CC

S p

ow

er

pla

nt

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

20152008

Delivery of CCS demonstration plants

Possible requirement for Capture-Ready

Preparation of legislation and mechanisms

20?? 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


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


Contact Climate Change Capital

CCC Head Office

Climate Change Capital3 More London RiversideLondonSE1 2AQUnited Kingdom

Tel: +44 (0)20 7939 5000Fax: +44 (0)20 7939 5030

www.climatechangecapital.com

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