The challenge in UK power generationSteve Riley, Executive Director, Europe

London, 3 December 2010

3 December 2010 page International Power2

What constitutes a viable electricity system in the period to 2030?

What attributes are needed?

What market structure can deliver the attributes needed?

What are the fundamental drivers?

Need for a holistic approach

3 December 2010 page International Power3

Looking ahead to a different generation mix in 2030

Source - Gas: At The Centre of a Low Carbon Economy Future, A review for Oil & Gas UK, Poyry, September 2010

January 2030

Total generation potential of wind capacity in 2030

Flexibility required from other sources of generation

0

10

20

30

40

50

60

70

01 04 07 10 13 16 19 22 25 28 31

Gen

era

tion

(G

W)

Nuclear Biomass CCSCoal Coal CHPCCGT Other renewables Demand Peaking plants Imports

80

0

10

20

30

40

50

Gen

era

tion

(G

W) Intermittent generation

3 December 2010 page International Power4

A changing generation mix

Supply/TWhCarbon intensitygmCO2 per kWh

Note: Imports, currently at around 7 TWh per annum, not included Sources: DUKES for historical data; IPR projections for 2030

Renewables

Nuclear

Gas

Coal

Carbon intensity

Committee on Climate Change aspiration on carbon intensity

3 December 2010 page International Power5

Reserve Margin

Sources: IPR analysis, March 2010 Notes: Profile reflects LCPD but not IED

16GW (coal/oil and nuclear) to be retired

Unreliability of aging plant

Intermittent wind generation

Uncertain timetable for potential new nuclear

Peak Demand

Week Ahead Availability Unconstrained Availability

40

45

50

55

60

65

70

80

GW

75

85

Headline Availability

2008 2009 20100

5

10

15

20

25

30

40

35

45

2009 2011 2013 2015 2017 2019

%

Firm new build reserve margin

Target reserve margin

3 December 2010 page International Power6

IPR position on market reform in the UK

On the carbon price floor – the priority must be a mechanism that delivers CO2 reduction at the least extra cost to the sector and the consumer

On renewables deployment - overall, it is timely to replace the Renewables Obligation with a Feed-in-Tariff mechanism

On low carbon obligation and capacity payments:

need to consider the whole market, not just the low carbon producers

capacity payments offer a credible mechanism for delivering the attributes needed for a viable electricity system

On Emission Performance Standards – in light of existing and new emission reduction regulation, Emission Performance Standards are an unnecessary regulation

3 December 2010 page International Power7

International Power investing for the future

In early stage development

Consented

Fossil generation remains an important technology for International Power

Plant improvement projects at UK’s main pump-storage facility at Dinorwig:

increased storage capacity and investment to improve unit efficiency

Renewable projects – IPR has around 1.3 GW of wind power globally and is starting to invest in the UK:

pipeline of onshore wind projects across the UK

developing energy from waste and biomass projects

tidal projects in Scotland in early stage development

8MW

6MW

6MW

12MW

8MW

3MW

32MW

3 December 2010 page International Power8

The industry is faced with a number of major challenges in the coming decade

Market reform needs to consider the whole market, in recognising that a number of attributes are needed for a viable and effective system

Developments in the UK cannot be in isolation from what is happening in the rest of Europe.

IPR is very well placed to contribute to the electricity mix of the future

Concluding remarks