© Vattenfall AB Launching of the second European Climate Change Programme (ECCP II) Lars Strömberg Vattenfall AB Stockholm/Berlin Stakeholder Conference.

© Vattenfall AB

Launching of the second European Climate Change Programme (ECCP II)

Lars StrömbergVattenfall AB

Stockholm/Berlin

Stakeholder Conference Brussels

24th October 2005

© Vattenfall AB 2

Who’s got the problem ?

© Vattenfall AB 3

ECCP I - experiences

CO2 free power plant

2000-07-16

Lars Strömberg Vattenfall AB© Vattenfall AB 4

Cost and Potential of options to reduce CO2 emissionsPrincipal example

Cost for carbon dioxide avoidance

[EUR/ton CO2]

0

50

100

Potential[Percent]

0 20 40 60 80 100

Hydro

Solar

Wind

Biofuel

Reforestation

CO2 sequestration

Coal to gas

Coal to coal

Oil to gas

Late change coal

The picture will look different when different time perspectives are adopted

Picture is from 2000

© Vattenfall AB 5

Reductions of CO2 – What ECCP 1 gave

• The ECCP 1 work identified a number of measures which could to be taken.

• Without agreement among all, it was concluded that almost 30 % reduction could be reached at a cost below 50 €/ton CO2

– Change from coal to gas

– Introduce more efficient coal power technology

– Wind power

– Biofuels, especially in the heat sector

– More CHP

© Vattenfall AB 6

Cost and Potential of options to reduce CO2 emissions until 2010 Derived from ECCP Energy Supply Preliminary report.

Cost for carbon dioxide avoidance

[EUR/ton CO2]

0

50

100

Potential[Percent]

0 20 40 60 80 100

Solar

Wind

CO2 sequestration

Methane mines

Biomass heat

Coal to gas

Biomass heat

CHPCoal to Coal

© Vattenfall AB 7

Reductions of CO2 – What we have learned (2)

• Now, after 4 years we have learned a few things:– We will remain to be dependant on fossil fuels for a long time– Change from coal to gas has not happened

• Due to high gas prices and lack of long time confidence– Building new efficient coal - yes

• Several large plants have been built and at least seven large units under way.

– Wind power has severe limitations• Cost lies about 70 – 90 €/MWh• When capacity (MWs) exceeds about 10 % in an area, the system

cannot take any more, need for extra transmission and reserve power

• 39 000 MW wind leads to that conventional power can only be reduced 2 500 MW according to one study

© Vattenfall AB 8

Reductions of CO2 – What we have learned (3)

– Biofuels are used, especially in the heat sector.

• All district heat and CHP is using biofuel in Sweden today (140 TWh fuel)

• To maintain competitiveness for bio fuels, it is necessary to keep CO2 tax in parallel with the trading system, at a level of 75 €/ton of CO2

• Biofuel usage has reached its limit in Sweden. 45 % of the fuel is imported from Russia, Baltic states and Canada !

– CHP is built wherever possible

• Few opportunities left

© Vattenfall AB 9

Reductions of CO2 – What we have learned (3)

• Carbon Capture and Storage CCS has gained much recognition and development is going fast.

– Many countries have recognized CCS as a powerful tool and have introduced it in their plans to fulfill their environmental goals

• The USA, UK, Australia, France, Germany among many others

– CCS does cost 20 – 25 €/ton CO2

• ECCP 1 assumed 50 €/ton of CO2

– Storage capacity exceeds the remaining fossil fuel reserves

– Storage in geological formations is available all over the world, all over Europe, off-shore and on-shore

– CCS will not be available in a large scale until 2015 –2020

• ECCP 1 assumed before 2010

– CCS can probably reach half of the mitigation necessary to reach our long term goals of 60 – 80 % of reduction until 2050

© Vattenfall AB 10

Emission Trading

Emission Trading sets the commercial framework for new technology in Europe

© Vattenfall AB 11

European CO2 trading system Sept. 2005

© Vattenfall AB 12

Allocations in the European trading system

-100 -50 0 50 100 150 200 250 300 350 400

Total

Public Power and Heat

Pulp and Paper

Metals

Oil and Gas

Cement, Lime, Glass

Other

Mio. t CO2

In total 12 000 units is included in the trading system. In the National allocation plans 2 100 Mton/year or 6300 Mtons for three years have been distributed. This is the roof set for emissions. The deficit is calculated to 180 Mton for 3 years. The power industry has a deficit of 360 Mton. Other sectors have an overallocation.

© Vattenfall AB 13

Marginal cost vs. Reduction of CO2 emissions in EUR/ton CO2Source: ECOFYS Economic evaluation of sectorial reduction objectives for climate change

The price in Sept 2005 is about 24 €/ton CO2 ???

© Vattenfall AB 14

Capture and storage

Capture and storage of CO2

© Vattenfall AB 15

The CO2 free Power Plant principle

• The principle of capture and storage of the CO2 under ground

The CO2 can be captured either from the flue gases, or is the carbon captured from the fuel before the combustion process.

The CO2 is cleaned and compressed. Then it is pumped as a liquid down into a porous rock formation for permanent storage.

© Vattenfall AB 16

Storage and transport

CO2 free power plant

© Vattenfall AB 17

Storage of CO2 in a Saline Aquifer under the North Sea

The Sleipner field. Oil and gas production facilities. (Source: STATOIL )

CO2-injection into the saline aquifer

Utsira.(Source:STATOIL)

© Vattenfall AB 18

Storage Capacity, saline aquifers

There exists more

storage capacity

within Eorope (and

in the world) than

the remaining fossil

fuels

Source:

Franz May,

Peter Gerling,

Paul Krull

Bundesanstalt für Geowissenschaften und Rohstoffe, Hannover

© Vattenfall AB 19

CO2 Transport and storage Schweinrich structure

Two pipeline transport routes are possible

Both routes can be designed to follow existing pipeline corridors >90%

Structure can contain 1,4 billion ton of CO2, equivalent to about emissions from 6000 MW their whole lifetime

Berlin

© Vattenfall AB 20

Reservoir simulation – 40 year model

Due to buoyancy, the CO2 strive against the top of the formation

The CO2 spreads in the whole reservoir

Conclusion: It is possible to inject 400 Mt CO2

Injection at flanks

© Vattenfall AB 21

Geological structure modelling. Schweinrich

10 years 200 years 500 years

2000 years 5000 years 10000 years

© Vattenfall AB 22

Capture

CO2 free power plant

© Vattenfall AB 23

Post-combustion capture

This technology is already commercially available in large scale (500 MW). It is at present the most expensive

© Vattenfall AB 24

Pre-combustion capture

This technology needs development. Might be competitive. The gasifier exists in demo plants.

The turbine is in the lab stage.

Produces Hydrogen as an intermediary product

© Vattenfall AB 25

O2/CO2 combustion is the preferred option at present

At present the most competitive and preferred technology for coal.

It needs development, pilot and demo plants to get design data

© Vattenfall AB 26

0

10

20

30

40

50

60

70

IEA G

HG PF 20

04 n

o ca

ptur

e

IEA G

HG PF 20

04 p

ostco

mb.

IEA G

HG PF 20

20 n

o ca

ptur

e

IEA G

HG PF 20

20 p

ostco

mb.

Mits

ui 20

04 P

F no

captur

e

Mits

ui 20

04 O

2/CO2

PF

Mits

ui 20

20 P

F no

captur

e

Mits

ui 20

20 O

2/CO2

PF

IEA G

HG IGCC 2

003 n

o ca

pture

IEA G

HG IGCC 2

003 p

re-c

omb.

IEA G

HG IGCC 2

020 n

o ca

pture

IEA G

HG IGCC 2

020 p

re-c

omb.

ENCAP PF L

ignite

Oxyfu

el W

FGD

Oxyfu

el with

out W

FGD

IEA G

HG 200

4 NGCC n

o ca

pture

IEA G

HG 200

4 NGCC p

ostc

omb.

IEA G

HG 202

0 NGCC n

o ca

pture

IEA G

HG 202

0 NGCC p

ostc

omb.

Mits

ui 20

04 N

GCC no ca

ptur

e

Mits

ui 20

04 O

2/CO2

NGCC

CO

E [

EU

R/M

Wh

e]

CO2 penalty 30EUR/T

CO2 penalty 20EUR/T

CO2 penalty 10EUR/T

COE

Hard Coal Natural gasLignite

Total generation cost of electricity with CO2 penalty

© Vattenfall AB 27

0

10

20

30

40

50

60

IEA GHGPF 2004

postcomb.

IEA GHGPF 2020

postcomb.

Mitsui 2004O2/CO2 PF

Mitsui 2020O2/CO2 PF

IEA GHGIGCC 2003pre-comb.

IEA GHGIGCC 2020pre-comb.

OxyfuelWFGD

OxyfuelwithoutWFGD

IEA GHG2004 NGCCpostcomb.

IEA GHG2020 NGCCpostcomb.

Mitsui 2004O2/CO2NGCC

CO

E [

EU

R/M

Wh

]

COE penalty

COE origninal

Hard Coal Natural gasLignite

Generation cost with and without CO2 capture

© Vattenfall AB 28

Electricity generation costs

0,0

10,0

20,0

30,0

40,0

50,0

60,0

Ele

ctr

icit

y p

rod

uc

tio

n c

os

t E

UR

/MW

h

Fuel andconsumables

Fixed O&M +additional op costsRunning O&M

Capital costsEUR/MWh

CC CO2 capt.PF oxyfuelCCPF

© Vattenfall AB 29

Generation costs incl. CO2 costs (20 €/ton)

0,0

10,0

20,0

30,0

40,0

50,0

60,0

Ele

ctr

icit

y P

rod

uc

tio

n c

os

t E

UR

/MW

h

CO2 penalty

Fuel andconsumablesFixed O&M +additional op costsRunning O&M

Capital costsEUR/MWh

PF CC PF oxyfuel CC CO2 capt.

© Vattenfall AB 30

Avoidance costs of CO2

0,0

10,0

20,0

30,0

40,0

50,0

60,0

Avoidance cost €/ton CO2

CO2 penalty

Fuel and consumables

Fixed O&M + additional op costs

Running O&M

Capital costs EUR/MWh

PF with CO2 capture Gas CC with CO2 capt

Avoidance costs

2000-07-16

Lars Strömberg Vattenfall AB© Vattenfall AB 31

Cost and Potential of options to reduce CO2 emissionsPrincipal example

Cost for carbon dioxide avoidance

[EUR/ton CO2]

0

50

100

Potential[Percent]

0 20 40 60 80 100

Hydro

Solar

Wind

Biofuel El

CO2 Capture and Storage

Coal to gas

Oil to gas

New efficient coal

New Picture 2005 including recent knowledge

Savings

Biofuel Heat

© Vattenfall AB 32

• Carbon capture and storage from Coal fired Power plants can be done at a cost close to 20 €/ton CO2

– Capture at about 15 €/ton of CO2– Storage at lower than 2 €/ton CO2– Transport depending on distance and volume, but 5 €/ton of CO2 for

large plants on shore

• More than enough storage capacity on shore and off shore is at hand in saline aquifers

• Technology choice is not yet made. Oxyfuel is preferred technology in Vattenfall at present

• The commercial choice stands between Gasfired CC without CCS, taking the penalty of CO2 emission, and Coal fired plants with CCS

Conclusions from analysis - Reduction of CO2

Lars Strömberg 2003 07 05

Vattenfall AB

Corporate Strategies

© Vattenfall AB 33

Taking responsibilty

• Lord Oxburgh, former chairman of Shell Transport and Trading:

"CCS is absolutely essential if the world is serious about limiting greenhouse gas emissions“

• The new report from the Intergovernmental Panel on Climate Change (IPCC) concludes:

“CCS could achieve more than half of the emissions reductions necessary to mitigate climate change up to 2100”

Vattenfall agrees with this. We also believe CCS is needed to fulfill our climate goals

© Vattenfall AB 34

Back up

CO2 free power plant

© Vattenfall AB 35

The Climate Change

• The Climate Change problem is for real

• EU ministers have agreed on, that we have to reduce the emissions to maintain a reasonable CO2 concentration in atmosphere

– 15 – 30 % until 2030

– 60 – 80 % until 2050

• A radical solution is necessary. We cannot wait

© Vattenfall AB 36

CO2 storage cost

Fictive cost calculations using tool developed in EU-funded GESTCO project:

Storage at Schweinrich of 10 Mton CO2 per year over 40 years:

© Vattenfall AB 37

CO2 transport cost:

Transport to Schweinrich from Schwarze Pumpe power plant:

Distance 320 km

10 Mton CO2 per year over 40 years:

© Vattenfall AB 38

Pilot Plant

CO2 free power plant

© Vattenfall AB 39

Construction area

© Vattenfall AB 40

Boxberg IV

Why Oxy-fuel technology ?

We work with all three (four) technologies, but:

• Oxyfuel technology is the technology giving lowest costs at present

• It is suitable for coal and have relatively little development work left

• We can build on our good experience with present PF technology

© Vattenfall AB 41

Analysis of some technology options

CO2 free power plant

© Vattenfall AB 42

CO2 Free Power Plant: Technology ChoiceThe ultimate technology choice is not clear yet. Several technologies will probably be applied to different commercial situations.

• Post combustion capture. – At present the most expensive option but commercially available in large size. – Can be applied to existing plants.– Needs no demo. Optimization of existing options needed.

• Pre combustion capture.– The most complicated technology. IGCC demos have not been successful– Produces hydrogen as integrated intermediate fuel for the power process, from coal or

gas.– Development need for the gas turbine run on hydrogen – Lab tests + pilot + demo

• CO2/O2 (oxy-fuel) capture– The most preferred option at present– Technology straight forward and builds on the modern supercritical coal fired boilers– Tests in technical scale positive. Needs pilot plant and demo plant

• Chemical Looping technology is the most interesting long term option.– Lab experiments very encouraging.

© Vattenfall AB 43

• Specific data for the plants

Options for reduction of CO2

Lars Strömberg 2003 07 05

Vattenfall AB

Corporate Strategies

PF CC PF oxyfuel

CC with capture

Specific Investment costs €/kWe

1000 550 1425 938

Additional investment mio €

140 100

Power output MW 900 500 720 405

Energy penalty MW 180 95

Efficiency % 45 60 36,5 49

© Vattenfall AB 44

• Common data used for the four plants:

Options for reduction of CO2

Coal Price 50 $/ton ~ 5,7 €/MWh

Gas price 13 €/MWh

Depreciation time 25 years

Interest rate 10%

© Vattenfall AB 45

The Problem

• Fossil fuels are needed– Analysis show that fossil fuels will remain as major energy source

in 2030 ( 85 %)

• The top priority is to introduce renewable energy sources in the energy system

– All analysis show that renewable energy sources will play a large role, but not large enough and soon enough

• In several countries nuclear power is decommissioned

• No renewable energy source not known today can play a significant role in 25 years from now, i.e. 2030

• Emissions from fossil fuels must be reduced

© Vattenfall AB 46

Schwarze Pumpe power plant