Managing carbon price risk

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Presented by Sarwjit Sambhi, director, power business unit, Centrica - at the CBI Climate change Summit, Tuesday 2 December 2008

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  • Managing carbon price risk

    1. 1. Managing carbon price risk Sarwjit Sambhi, Centrica 2 December, 2008
    2. 2. Centrica’s carbon exposure Fuel Carbon O&M Gas Carbon Spark Spread <ul><li>9 CCGTs in UK (including Langage and Spalding) </li></ul><ul><li>6 million UK retail electricity customers </li></ul>GENERATION COSTS MARKET PURCHASES 12 million tonnes p.a. requirement
    3. 3. EU ETS <ul><li>Phase I overallocation leads to price collapse, though length not understood until Apr-06 reporting </li></ul><ul><li>Phase II NAPs tighter - prices driven by other commodities & trading sentiment </li></ul><ul><li>Phase III still to be finalised but looking tighter again giving more robust pricing signals out to 2020 </li></ul><ul><li>Trading volumes continue to increase </li></ul>
    4. 4. Impact of ETS on Investment ABATEMENT COST CURVE LEVELISED COST OF GENERATION (£/MWh) CCGT Coal w/o CC Nuclear Offshore with ROC ROC Capital Costs O&M Fuel Carbon Range of abatement required Nuclear extensions Additional CERs Fuel Switching below €45/t Fuel Switching above €45/t CCS Industrial demand destruction

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