allocation method in Proposed ETS review - view of European

Power Producer -

Zuzana KrejčiříkováEuropean Affairs Director

EP conference, 2 December 2008, Brussels

2

NEW EU MEMBERS ARE FACING LACK OF ELECTRICITY GENERATION CAPACITY

Source: Eurostat, Eurelectric

* 10 EU members without Cyprus and Malta ** Decommissioning of thermal plants older than 45 years

Growing demand and the decommissioning of 28 GW aged capacity will lead to 56 GW capacity deficit

Needed investments over 60 billion euros to build the missing capacity

0

20

40

60

80

100

120

2007 2020

Decommissioning of old plants**

Demand Growth 2%

56 GW gap

New EU members* electricity balance development

Ne

t c

ap

ac

ity

(G

W)

<10

10-20

20-30

30-40

Plant age

>40

3

THE COST OF CO2 ALLOWANCES IN THE 2013-2020 PERIOD IS 57% HIGHER THAN THE VOLUME OF INVESTMENTS NEEDED

62

97

0102030405060708090

Needed investments* Cost of buying CO2allowances 2013-2020**

EUR bn

Source: Pointcarbon

* Average Capex 1100 EUR/kW

** Allowance price per 30 EUR/t considered

4

11,4

39,9

0

5

10

15

20

25

30

35

40

45

Average GDP per capita 2007

3,9

6,6

0

1

2

3

4

5

6

7

Electricity consumption percapita 2007

USD ‘000 MWh/year

+250 %

+69 %

Source: World Bank, Eurostat

ON THE WAY TO ECONOMIC CONVERGENCE, NEW EU MEMBERS WILL PROBABLY EXPERIENCE SIGNIFICANT GROWTH OF ELECTRICITY CONSUMPTION

New EU countries* EU 15* Excl. Cyprus, Malta

5

NEW EUROPEAN UNION STATES HAVE VERY DIFFERENT GENERATION MIXES TO PARTS OF EU

Denmark and the United Kingdom also rely heavily on carbon intensive power generation

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Lignite Hard Coal Gas/Oil

Nuclear Hydro Other

Power generation net capacity structure (2007)

Source: Eurostat, Eurelectric

6

NEW EU COUNTRIES HAVE ALREADY DECREASED THEIR CO2 EMISSIONS BY 24% COMPARED TO 1990 LEVELS

505

665

0

100

200

300

400

500

600

700

1990 2007

Total CO2 emissions of new EU countries*Mt CO2/year

-24 %

Source: Pointcarbon, Eurostat

* Excl. Cyprus, Malta

7

Auction as a primary allocation method is a logical development of the scheme

Sudden implementation of the auction for power sector (0% → 100%) is a dangerous shock with the risk of a quick phase-out of carbon intensive power plants and lack of capacities in Europe and will draw out necessary funds for modernisation away from industry

EU ETS revision – allocation method of emission allowances

Gradual auctioning of emission allowances for power sector from 20% in 2013 to 100% in 2020