CCS Economics and Financing - Philip Sharman, Evenlode Associates, at the UKCCSRC ECR Winter School 2015

1. Philip Sharman, Scientific Collaboration
17th February 2015
CCS Economics & Financing
CDT/UKCCSRC Winter School

2. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 2
What are you prepared to risk….?

3. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 3
How about this…!
What $1 billion looks like – nearly 12 pallets of $100 notes!

4. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 4
My Agenda
• CCS Economics
- Economic methodology
- Key economic indicators for CCS
- Economics of CCS – current thinking
• Financing CCS
• Some closing thoughts
- Risk management and ‘Project Finance’
- The challenges with CCS…
- Possible solutions

5. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 5
CCS Economics

6. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 6
My Agenda
• CCS Economics
- Economic methodology
- Key economic indicators for CCS
- Economics of CCS – current thinking
• Financing CCS
• Some closing thoughts
- Risk management and ‘Project Finance’
- The challenges with CCS…
- Possible solutions

7. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 7
Economic methodology – a refresher…
• Cash Flow
−Net CF = ‘cash in’ (revenue) minus ‘cash out’ (project
costs) over a defined time period
−Incremental NCF
−Why is CF useful?
• Show changing costs over time
• Show other factors (e.g. tax) over any part of lifetime
• Show full lifetime economics
• Value
−Future Value (FV), Present Value (PV)
−Net Present Value (NPV)
−Why is NPV useful?
• Show project costs as a single number
• Assess project viability (NPV > 0)

8. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 8
‘Cash in’ – Revenue opportunities for CCS
• Potential sales from Enhanced Oil Recovery (CO2-EOR)
• Potential sales from Enhanced Coal Bed Methane
(ECBM) production
• Potential sales for Enhanced Gas Recovery (CO2-EGR)
• Potential sales for other applications (minerals,
chemicals)
• Carbon credits (eg under ETS)

9. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 9
‘Cash out’ – Project costs for CCS
• Capital expenditure (‘CAPEX’)
• Operating expenditure (‘OPEX’)
• End-of-life (abandonment) expenditure (‘ABANDEX’ !)
• Taxes

10. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 10
CAPEX (one-off costs)
• Equipment
−CO2 capture plant
−CO2 purification plant
−Storage tanks
−By-product treatment
−Compressors
−Pipelines
−Platforms
−Well drilling
−Monitoring equipment
• Installation & construction
labour
• Escalation
• Owners’ costs - including:
−Contingency
−Permits & licensing
−Site exploration &
characterisation
−Land acquisition/right of way
−Project development
−Environmental impact
−Project financing
−Currency risk
−Taxes
−Import duties
−Warranties
−Insurances
−Start-up & commissioning

11. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 11
OPEX (on-going costs)
• Operating labour
• Maintenance labour
• Consumables
- Water
- Chemicals
- Spare parts
• Fuel/energy requirements
• Externally supplied utilities
• Waste disposal
• Inspection services
• Insurances
• Special taxes (e.g. CO2
emissions)
• Transport tariffs
• Major overhaul costs
• Monitoring

12. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 12
‘ABANDEX’ (end-of-life costs)
• Closing wells
• Dismantling and removing platforms
• Decommissioning, dismantling and removing process
equipment
• Salvaging equipment (where possible)
• Site remediation and restoration
• On-going monitoring

13. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 13
CCS project lifetimes
• ‘Build’ phase – 2-3 years
• ‘Operate’ phase – 20-40 years
• ‘Abandon’ phase – 1+ years
• Long-term liability/stewardship – 10-30 years after
injection ceases?

14. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 14
My Agenda
• CCS Economics
- Economic methodology
- Key economic indicators for CCS
- Economics of CCS – current thinking
• Financing CCS
• Some closing thoughts
- Risk management and ‘Project Finance’
- The challenges with CCS…
- Possible solutions

15. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 15
Key economic indicators for CCS
BEWARE – TREAD CAREFULLY!
Three key indicators:
• Levelised cost of production (ie $/MWh, $/tonne, $/bbl, $/GJ)
• Cost of CO2 avoided ($/tonne CO2)
• Cost of CO2 captured ($/tonne CO2)

16. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 16
Levelised cost of production (LCOP)
• Standard metric for assessing project economics
• LCOP represents the revenue per unit of product that must be met to
breakeven over the lifetime of the plant (ie zero profit)
• For CCS, this includes all costs incurred from capture, compression,
transportation and long-term storage
• Best indicator for representing impact on consumers and society
• For power generation project – Levelised Cost of Electricity (LCOE)
• Economic assessment of a CCS project: Incremental increase in
LCOP resulting from implementing CCS, eg:
ΔLCOE = LCOEwith_CCS – LCOERef

17. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 17
LCOE
LCOE = FCRFPCCapital + FF_OMCF_OM + FV_OMCV_OM + FFuelCFuelHRate
FCapEAnnual
For detailed methodology see:
‘Strategic Analysis of the Global Status of Carbon Capture
and Storage, Report 2 (Economic Assessment of CCS
Technologies)’, Appendix A
Global CCS Institute, 2009

18. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 18
Cost of CO2 avoided
• ‘CO2 avoided’ is not the same as ‘CO2 captured’ due to
the energy penalty of CCS:
100tCO2 generated by plant
100tCO2 emitted
Before
CCS
After
CCS
13tCO2
emitted
30tCO2 gen.
by CCS
87tCO2 avoided
117tCO2 captured and stored (90% of total CO2 generated)
100tCO2 generated by original plant

19. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 19
My Agenda
• CCS Economics
- Economic methodology
- Key economic indicators for CCS
- Economics of CCS – current thinking
• Financing CCS
• Some closing thoughts
- Risk management and ‘Project Finance’
- The challenges with CCS…
- Possible solutions

20. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 20
Technology maturity: Demo, FOAK & NOAK
Demonstration plant
Technology component/subsystem
Pilot plant
First-of-a-kind (FOAK) commercial-scale plant
nth-of-a-kind
(NOAK)
- fully mature
2nd-of-a-kind commercial plant
Capital
Cost
Number of Plant in Operation
RD&D Commercial Deployment
‘Capital Cost
Learning Curve’
Demonstration plant

21. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 21
Economics of CCS – current thinking
• Many and varied sources on CCS economics, BUT:
• Much is outdated…
• Much does not properly address risk or challenges…
• Much does not address the whole CCS-chain…
• Much does not have a transparent methodology…
• Much does not provide for sensitivity analysis…
• Try to use unbiased analysis from major, broad-based
initiatives (e.g. IEA, CSLF, ZEP, IPCC, MIT CSI, GCCSI)
• Most recently conducted analysis for GCCSI
(WorleyParsons, Schlumberger, Baker & McKenzie,
EPRI) – 2011 update

22. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 22
Ref. 1: Boundary Dam Unit 3, Saskatchewan (2014)
• Unit 3 retrofit: 139110MWe
• Post-combustion capture
• 90% capture rate
• 1MtCO2 per year to EOR (and geological storage)
• CAPEX: C$1.4 billion (£0.75 billion)

23. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 23
Ref. 2: Kemper County IGCC, Mississippi (2015)
• 582MWe new build
• Pre-combustion capture
• 65% capture rate
• 3.5MtCO2 per year to EOR
• CAPEX: US$5.6 billion (£3.64 billion)

24. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 24
Ref. 3: Gorgon, Western Australia (2016)
• 3 x 5Mtpa LNG trains
• Pre-combustion capture
• 40% capture rate
• 3.4-4.0MtCO2 per year to geological storage
• CAPEX: AUS$52 billion (£26.2 billion)

25. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 25
Significant factors
General Factors
• Location in world
• Technology factors:
−‘Brownfield’ vs ‘greenfield’
−Technology maturity
• Labour factors:
−Rates
−Unionised
• Commercial factors
−Risks
−Contingencies
−Warranties and insurances
−Price of CO2
Specific Factors
• Capture specific:
−Technology choices
−Chemicals
−Fuel costs
• Transport specific:
−Routes, booster pumps etc
−Flow through pipelines
• Storage specific:
−‘Finding costs’
−Capacity
−Injectivity
−Containment

26. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 26
Economics of CCS – current thinking
‘Strategic Analysis of the Global
Status of Carbon Capture and
Storage, Report 2 (Economic
Assessment of CCS
Technologies)’
Global CCS Institute, 2009
Updated 2011

27. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 27
Economics of CCS – current thinking (2010$)
Power Generation Industrial Applications
PC
(SC &
USC1)
Oxy-comb
(Std &
ITM1)
IGCC NGCC Blast
furnace
steel
prod.
Cement
prod.
Natural
gas
processing
Fertilizer
prod.
Levelised
Cost of
Production
US$/MWh US$/MWh US$/MWh US$/MWh US$/tonne
steel
US$/tonne
cement
US$/GJ
natural gas
US$/tonne
ammonia
Without
CCS2
73-76 73-763 91 88 570-800 66-88 4.97 375
With CCS
(FOAK) 3
120-131 114-123 125 123 82 34 0.056 11
With CCS
(NOAK) 4
117-129 112-121 123 121 74 31 0.056 11
% increase
over w/o
CCS5
61-76% 53-65% 37% 40% 10-14% 39-52% 1% 3%
Cost of CO2
Avoided6
($/tonne CO2)
FOAK 62-81 47-59 67 107 54 54 19 20
NOAK 57-78 44-57 63 103 49 49 19 20
Cost of CO2
Captured
($/tonne CO2)
FOAK 53-55 42-47 39 90 54 54 19 20
NOAK 52 41-45 38 87 49 49 19 20
Source – GCCSI (2011)

28. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 28
Economics of CCS – current thinking (industrial capture)
Cost of CO2 captured (US$2013) –
averaged costs of CCS technologies
applied across various industries

29. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 29
Cost reduction potential – a UK view (£2012)

30. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 30
Ref. 1: Boundary Dam Unit #3, Saskatchewan (2014)
• Unit #3: 139110MWe
• Post-combustion capture
• 90% capture rate
• 1MtCO2 per year to EOR (and geological storage)
• CAPEX: C$1.4 billion (£0.75 billion)

31. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 31
Ref. 1: Boundary Dam Unit #3, Saskatchewan (2014)
• Unit #3: 139110MWe
• Post-combustion capture
• 90% capture rate
• 1MtCO2 per year to EOR (and geological storage)
• CAPEX: C$1.4 billion (£0.75 billion)

32. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 32
So, where does all that leave us?
“Looking where we are now in
terms of CCS, I am not very
hopeful that we will see a
substantial amount of CCS
before the next 20 years,
unless governments and the
industry make extraordinary
efforts or we have
international legally binding
agreements which end up
with a carbon price to give a
proper incentive for CCS.”
Fatih Birol
Chief Economist
International Energy Agency
Oslo, 7 June 2011

33. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 33
Financing CCS
“I call my invention ‘the Wheel’, but so far
I’ve been unable to attract any finance…”

34. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 34
My Agenda
• CCS Economics
- Economic methodology
- Key economic indicators for CCS
- Economics of CCS – current thinking
• Financing CCS
• Some closing thoughts
- Risk management and ‘Project Finance’
- The challenges with CCS…
- Possible solutions

35. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 35
If CCS was a ‘mature’, ‘commercial’ technology, then…
• Funds:
− Debt
− Equity (shares)
− Subordinated debt
− Bonds
− (Grants)
• Insurances and loan guarantees
• ‘Bills of Exchange’ and ‘Letters of Credit’
• Ownership model (eg BOO, BOT, BOOT, BOLT)
• ‘On balance sheet’ or ‘off balance sheet’? Customer
type?
• ‘Project Finance’
• Risk management

36. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 36
If CCS was a ‘mature’, ‘commercial’ technology, then…
Various ‘capital providers’ would be involved:
Structured
Finance
Corporate
Lending
Corporate
Debt
Corporate
Equity
Infrastructure
Funds
Private
Equity
eg project
financiers
eg banks eg company eg pension
funds,
insurance
companies
eg private
sector
financiers
eg venture
capital
investors
DEBT EQUITY
Specialist Debt Specialist Equity
Source: The Climate Group,
Ecofin Research Foundation,
GCCSI (February 2011)

37. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 37
If CCS was a ‘mature’, ‘commercial’ technology, then…
Risk management in ‘project finance’/’off-balance-
sheet’ – e.g. power plant:
• Construction risk
• Sponsor risk
• Economic risk
• Fuel supply risk
• Sales/off-take risk
• Operating risk
• Technology risk
• Environmental risk
• Country risk
• Political & legal risk
• Foreign exchange risk
• Inflation risk
• ‘Force majeure’ risk
• … etc.

38. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 38
If CCS was a ‘mature’, ‘commercial’ technology, then…
Company/consortium
or ‘project company’
Shareholders Commercial banks
Equity
(20-30%)
Debt (loans)
(70-80%)
Sub-loan
C A P I T A L
Export credit
agenciesInsurance
Export credit
guarantees
Construction
consortium
Electricity
distributors
Power purchase
agreement
Turnkey construction
contract
Fuel
supplier Operators
Fuel supply
agreement
O&M
contracts

39. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 39
…but (with some exceptions) ‘1st Generation’ CCS is in
the RD&D phase…
Demonstration plant
Technology component/subsystem
Pilot plant
First-of-a-kind (FOAK) commercial-scale plant
nth-of-a-kind
(NOAK)
- fully mature
2nd-of-a-kind commercial plant
Capital
Cost
Number of Plant in Operation
RD&D Commercial Deployment
‘Capital Cost
Learning Curve’
Demonstration plant

40. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 40
My Agenda
• CCS Economics
- Economic methodology
- Key economic indicators for CCS
- Economics of CCS – current thinking
• Financing CCS
• Some closing thoughts
- Risk management and ‘Project Finance’
- The challenges with CCS…
- Possible solutions

41. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 41
CCS financing challenges
• Technology and technology risk
− Scale-up to demonstration
− Scale-up to FOAK
− Integration for whole CCS-chain
• Economics and commercial risk
− Generally, project costs > project revenues
− Worst on demos and FOAK
− Economic ‘gap’ narrows as technology matures
− 2nd/3rd Generation – significant cost reduction
• Need for additional funding to address gap
• Complexity: Many ‘players’ involved in integrated CCS systems
• Long-term liability issues

42. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 42
Scale-up: eg Oxy-fuel combustion
(30MWth pilot at Vattenfall’s Schwarze Pumpe PS)

43. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 43
Scale-up would be x160 if applied to the 1.6GWe
Schwarze Pumpe PS – too big a step!

44. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 44
Proposed 448MWe White Rose demo at Drax PS –
x45 max scale-up acceptable

45. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 45
How to bridge the economic ‘gap’?
For EU demo programme (10-12 projects), €7-
12Bn additional funding required to close
economic gap Source: IEA (2009)

46. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 46
Further funding/financing needed in short-/medium-term (including for current demonstration projects)
Alstom perspective of economic ‘gap’ (2011)
CCS can be
commercially viable
by ~ 2025
Significant economic
gap exists before
then
Alstom perspective of economic ‘gap’ (2011)

47. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 47
Long-term liability/stewardship?
• Issue: Long-term stewardship of stored CO2 (including
liability for leakage) for 10-30 years after injection
ceases
• Not a risk the private sector can either price or absorb
(i.e. unlimited, indefinite risk) – barrier to financing
• Issue needs to be addressed prior to financing projects,
not after construction
• IEA/CSLF roundtables on financing (2010-2014) –
consensus view that this is responsibility of governments

48. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 48
What do private sector capital providers think about
this?
Structured
Finance
Corporate
Lending
Corporate
Debt
Corporate
Equity
Infrastructure
Funds
Private
Equity
Source: The Climate Group,
Ecofin Research Foundation,
GCCSI (February 2011)
“Less PR appeal
than wind, or
even nuclear!”
“Better to be a
‘fast follower’
than a ‘leader’.”
“Technology risk
is the ‘elephant
in the room’!”
“Can’t price
with technical
risk.”
“Need a
‘bullet-proof’
downside.”
“A massive
VC deal.”

49. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 49
My Agenda
• CCS Economics
- Economic methodology
- Key economic indicators for CCS
- Economics of CCS – current thinking
• Financing CCS
• Some closing thoughts
- Risk management and ‘Project Finance’
- The challenges with CCS…
- Possible solutions

50. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 50
Possible solutions
• Challenge: Technology and technology risk
− Scale-up to demonstration
− Scale-up to FOAK
− Integration for whole CCS-chain
• Solution: Move ahead with large-scale, integrated
demonstrations URGENTLY to technically prove!
Urgently move from pilots to demos

51. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 51
Possible solutions
• Challenge : Economics and commercial risk
− Generally, project costs > project revenues
− Worst for demos and FOAK
− Economic ‘gap’ narrows as technology matures
− 2nd/3rd Generation – significant cost reduction
• Challenge : Need for additional funding to address gap
• Solution: Public financial support for large-scale integrated
demonstrations and early mover projects while continuing
R&D on 2nd/3rd Generation technologies
Need public funding to bridge the gap
and more R&D to reduce CCS costs

52. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 52
Public policy options – lots of choice!
Regulations Economic incentives
Emissions Performance
Standard (EPS)
CCS Mandate
Feed-in Tariff
Capital Grant
Carbon Price GuaranteeCCS Quota Obligation
Source: Jim Watson, UKERC (2013)

53. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 53
Public policy options – and they can be
combined…
Regulatory options Price-based options
Emissions Performance
Standard (EPS)
CCS Mandate
Feed-in Tariff
Capital Grant
Carbon Price GuaranteeCCS Quota Obligation
All interventions will have differing impacts on investment (& risk) and the market

54. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 54
Funding the gap
• G8 commitments (2010) – acting as ‘driver’
• International organisations, governments and sovereign
wealth funds committing funds for demos include:
− Australia (Commonwealth and States)
− Canada (Federal and Provincial)
− China
− EC
− Japan
− Netherlands
− Norway
− Republic of Korea
− UK
− USA (Federal and States)
• Commitments: US$20.7 billion (GCCSI, 2012)
• Large-scale integrated projects ‘likely’ by 2020 – 22 in
‘operate’/’execute’ stages (GCCSI, 2014) vs. 30+ ‘needed’ (IEA, 2013)

55. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 55
Possible solutions
• Challenge : Complexity: Many ‘players’ involved in
integrated CCS
• Solution: Look at and learn from other sectors (eg IT
sector) and business models
• Challenge : Long-term liability issues
• Solution: Down to Governments to address this (as per
IEA/CSLF Roundtable recommendations)

56. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 56
My Agenda
• CCS Economics
- Economic methodology
- Key economic indicators for CCS
- Economics of CCS – current thinking
• Financing CCS
• Some closing thoughts
- Risk management and ‘Project Finance’
- The challenges with CCS…
- Possible solutions

57. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 57
Closing Thoughts… CCS Economics (1)
• ‘CCS community’ needs broad understanding of CCS economics .
• Key CCS economic indicators give different perspectives:
− LCOP (product cost increase, impact on consumers or society)
− CCO2 avoided (value of CO2, cost of CCS to operator/system)
− CCO2 Captured (costs to the process).
• CCS in power gen and many industrial processes increases CAPEX,
OPEX and ABANDEX – economic hurdle. Generally costs exceed
potential revenue streams.
• CCS project lifetimes long – uncertainty on long-term liability issue.
• Good economic data available but choose sources carefully.
Differences generally due to assumptions (performance, input costs,
‘levelisation’ methodology).
• CCS generally still RD&D. Demo and FOAK costs high compared to
NOAK. Big reductions anticipated for 2nd/3rd generation.

58. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 58
Closing Thoughts… CCS Economics (2)
• Project costs vary considerably – depend on location, technology,
labour, commercial, capture/transport/storage specifics.
• Largest uncertainty in costs is CAPEX. CCS adds between ~30%
(pre-comb) and 80-100% (post/oxy-comb).
• Difficult to pick single capture technology with clear cost advantage:
Oxy-comb looking good (LCOP,CCO2 avoided) but least mature.
• Storage costs very dependent on geology (but generally contribute
<5% of total in ideal sites or up to ~10% in poorer sites).
• More design studies  better understanding of costs. So far, many
more completed on IGCC+pre-comb (and costs have drifted up…).
• Recent studies show cost estimates consistently higher than 3-5 years
ago. Costs now ~15-30% higher than earlier estimates (GCCSI).

59. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 59
Closing Thoughts… Financing CCS (1)
• For commercial implementation, need economic drivers to provide
incentives for plant owners.
• Standard ‘Project Finance’ approaches and risk management
mechanisms not yet suitable as CCS not mature/commercial.
• Technical risk remains high: Scale-up challenges, integration across
CCS-chain.
• Economic ‘gap’ real – needs additional funding to address.
• Full-chain CCS complex and many ‘players’ – complicates financing.
• Long-term liability/stewardship issues (storage) major barrier to private
sector financing – need addressing prior to financing.
• Private sector capital providers have important role in financing CCS
roll-out but currently have concerns (risk, scale, lead vs. follow).

60. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 60
Closing Thoughts… Financing CCS (2)
• Demo of large-scale integrated projects for range of technologies and
applications URGENT – to address technology risk.
• Public funding vital to bridge ‘economic gap’ for demos and ‘early
adopters’ – to address commercial risk.
• Need continued public financing support for R&D to reduce costs.
• Various mechanisms for public financing support for demos and early
projects – differing impacts on investment/markets.
• G8 commitments acting as driver for many governments etc. to
commit to funding demos – encouraging! Early adopters?
• Lessons from other sectors and business models relevant to
perceived complexity of CCS projects (i.e. number of ‘players’).
• Long-term liability/stewardship issues need resolving by governments
– no other organisations can assume such unlimited/indefinite risks.

61. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on
that it is complete or correct or will apply to any particularproject. This will depend on the technical and commercial circumstances. It is provided without
liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited.
Presentation title - 16/02/2015 – P 61
A gentle reminder…!

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