Slides presentate in occasione del convegno "Le strategie europee di de-carbonizzazione - Quale ruolo per la Cattura e Stoccaggio della CO2?" organizzato il 16/05/2013 da WEC Italia e AIDIC in collaborazione con Energia Media

1. WEC ITALY – ROLE OF CCS IN DECARBONIZATION
Perspective on the UK Cost Reduction Task Force
16 May 2013
Nathalie Lemarcis
Director - Power Advisory & Project Finance
nathalie.lemarcis@sgcib.com

2. 217/05/2013
DISCLAIMER
The contents of this document are given for purely indicative purposes and have no contractual value.
Any views, opinions or conclusions contained in this document are indicative only, are not based on independent research and do not represent any
commitment from Société Générale. This document does not constitute an offer, a solicitation, an invitation to make an offer, advice or a recommendation
from Société Générale to purchase or sell a product or to enter into a transaction or provide investment services. The market information displayed in this
document is based on data at a given moment and may change from time to time and Société Générale will not notify the recipient of any such amendment
or change. The accuracy, completeness or relevance of the information which has been drawn from external sources is not guaranteed although it is drawn
from sources reasonably believed to be reliable. No responsibility or liability (express or implied) is accepted for any errors, omissions or misstatements by
Société Générale except in the case of fraud or any other liability which cannot lawfully be excluded.
The commercial merits or suitability or expected profitability or benefit of any investment services described in this document to the recipient's particular
situation should be independently determined by the recipient. Any such determination should involve an assessment of the legal, tax, accounting,
regulatory, financial, credit and other related aspects of any such transaction, based on such information and advice from the recipient's own advisers and
such other experts as the recipient deems relevant. Société Générale shall not be liable for any failure by the recipient to obtain such information and advice.
This document is to be treated in the strictest confidence and is not to be disclosed directly or indirectly to any third party. It is not to be reproduced in whole
or in part, nor used for any purpose except as expressly authorised by Société Générale.
This document is issued in the U.K. by the London Branch of Société Générale. Société Générale is a French credit institution (bank) authorised by the
Autorité de Contrôle Prudentiel (the French Prudential Control Authority). Société Générale is subject to limited regulation by the Financial Services Authority
in the U.K. Details of the extent of our regulation by the Financial Services Authority are available from us on request.

3. 317/05/2013
THE CCS COST REDUCTION TASK FORCE ......
UK Government initiative:
● Established in March 2012 by DECC as “an industry-led joint task force
established by Government to assist with the challenge of making CCS
commercially available for operation by the early 2020s.”
● Chaired by Geoff Chapman (CCSA), project managed by the Crown Estate
● Analytical and other support from Poyry
● Broadly representative of the stakeholders in CCS - 23 members drawn
from industry, trade associations, developers, finance and academia
“The objective of the Task Force is to publish a report to advise
Government and industry on reducing the cost of CCS so that
projects are financeable and competitive with other low carbon
technologies in the early 2020s.”

4. 417/05/2013
TASK FORCE METHODOLOGY ......
 Identification of three key areas of potential cost reduction:
● Planning & Infrastructure (Mike Saunders / Alastair Rennie)
● Commercial & Financial ( Allan Baker/Nathalie Lemarcis)
● Generation & Capture (Leigh Hackett / Tom Stringer)
 Consultation:
● Work stream work shops
● Questionnaire – cost reduction opportunities & impact
● One-to-one interviews with stake holders
 Modelling & Analysis – led by Poyry:
● Review of existing analysis in the public domain
● Challenge of assumptions
● Analysis
The report:
● is a representation of the Task Force members view of the opportunities for cost
reduction in CCS
● is not a list of government or other stakeholder actions or a detailed model /
representation of CCS project costs

5. 517/05/2013
THE IMPORTANCE OF COST REDUCTION ......
 The role of CCS in the UK generation mix is
crucial to the low carbon strategy of the UK
● Decarbonisation of generation needs CCS
● CCS facilitates Nuclear and intermittent renewable development
 CCS Commercialisation and the support
mechanisms now in place can kick start the
development of commercial CCS
● Commercialisation grant
● Feed-in Tariff /Contracts for Difference
● Emissions Performance Standard
 UK poised take a leading role (again !)
 Cost reduction is the essential step from FOAK
to Nth-of-a-kind
● CCS has to be cost competitive to deliver potential
● Desired outcome should be operational plants and a clear cost
reduction trajectory
● “No regrets strategy” – planning for success
Source: Department of Energy and Climate Change

6. 617/05/2013
KEY CONCLUSIONS FROM THE INITIAL REPORT ......
Need for a supportive regulatory landscape:
Commercialisation program provides an
opportunity to resolve many of these
issues and create a template for future
industry development
Within this environment tangible cost savings can come from:
● Planning & infrastructure developments
● Generation & capture technology development
● Evolution of commercial and financing arrangements
Deliverability is not the responsibility of government alone
Development of CCS requires constructive full engagement of all stakeholders

7. 717/05/2013
PLANNING AND INFRASTRUCTURE DEVELOPMENT ......
 Achieving optimal scale in CO2 storage
● Storage reservoir development represents a significant part of CO2 storage cost
● Expensive process so benefit from focussing on “high volume” opportunities
● Substantial risk (cost) reduction from storage clusters
Essentially a volume business – higher volume = lower per unit cost
 Optimisation of transport infrastructure
● Cost of increasing a pipe size is not proportional to the volume transported – lower per unit
transport cost
● Trunk lines and local feeder hubs provide volume benefits over early point to point projects
● Distance matters – shorter less complex routes have obvious cost benefits
Planning and investing for future projects in the first projects could lead to
significant reductions in per unit of CO2 stored in follow on-projects

8. 817/05/2013
GENERATION AND CAPTURE TECHNOLOGY DEVELOPMENT ......
 Early plants unlikely to be optimal – optimising would improve per unit:
● Capital equipment costs
● Capture operating costs, including energy penalties (parasitic load)
 Benefit of experience
● Reduced redundancy in design and execution
● Process optimisation
● Better integration
● Piggy-backing on commercial, regulatory, planning and other existing knowledge

9. 917/05/2013
ACHIEVING AFFORDABLE FINANCING ......
 Appropriate risk allocation across the full chain – never easy in a new industry !
● Complex mix of disciplines and “cross border” risks and liabilities
● Appropriate allocation on FOAK is unlikely to be the optimal allocation for the Nth-of-a-kind :
improvement with experience
 Role of Government, developers, insurance industry and finance being defined
● Real time risk allocation discussion under way – Commercialisation Competition
● We don’t know what we don’t know – pragmatic approach from all stakeholders
 Continued engagement with finance and insurance industry crucial
● Genuine interest now – momentum needs to be retained
High cost of capital in early projects offers scope for material cost reductions if a
replicable template emerges from the Commercialisation competition

10. 1017/05/2013
POTENTIAL DELIVERABLE COST REDUCTIONS ......
Cost reductions only achievable if a number of projects are built

11. 1117/05/2013
POTENTIAL DELIVERABLE COST REDUCTIONS ......

12. 1217/05/2013
CONCLUSIONS .......
 An LCOE with CCS at or below £100/MWh is achievable by the 2020s
 This is confirmation that CCS is comparable with traditional renewables – even
more so when it’s ability to back up intermittency is taken into account
 Clear that the industry needs to capitalise on the Commercialisation
competition but to realise the full potential a credible long term commitment is
required by all stakeholders
 Cost savings will only come from multiple operating full chain projects with a
well conceived transport and storage solution
Challenge is to look beyond the Commercialisation phase
and plan for success

13. 1317/05/2013
ADDITIONAL INFORMATION .......
 Information relating to the CCS Cost Reduction Task Force is available on the
DECC web site
 The Final Report of the Task Force will be delivered to the Minister in Spring 2013
 A number of “Candidate Actions” have been identified by the Task Force and these
will be taken forward

14. 1417/05/2013
SOCIETE GENERALE AND CCS .......
 Leading Financial institution in the CCS sector:
Financial Advisor to one of the short-listed commercialisation projects
Financial Advisor to Abu Dhabi “full chain” CCS (Masdar) project
Financial Advisor to Powerfuel IGCC, UK
Financing Feasibility study for Hydrogen Energy California
EEPR guarantee facility for the 2Co Don Valley CCS project
Member of the UK Government CCS Forum
CCS Cost Reduction Task Force Member