There is a major risk that Europe gets off-track in the 2020s The current policies will not achieve the EU ambition as CO 2 without competitiveness benefits intensity will rise EU Power Sector CO 2 emission intensity

400 350

Rising emissions in

Current Policies, Coal+RES scenario 2050 Pathway, Balanced+RES Current Policies, Coal+RES 300 250 200 150 100 50 0 2013 2020 2030 Power generation emissions intensity, EC Roadmap 2050 - DST scenario 2040 2050 1 – scenarios assumes current Member States financial commitment to RES continues at same level for each decade post 2020 and other restrictions, such as no nuclear in Germany, remain in place throughout the period Source: Pöyry analysis for European Gas Forum, 2013 GAS NATURALLY – EC GAS FORUM 9 April 2014 1

Continuing with a coal intensive system, and despite continued support for RES, it is not possible to reverse the trend by 2050 To attempt a U-turn requires maximum deployment of all low carbon technologies post 2030 but the resultant CO 2 intensity is still 17x above the 2050 target

1,800

Installed Capacity in 2030 – Current Policies, Coal+RES

1,600 1,400 1,200 1,000 800 600 400 200 0

1,172 137 92 100 59 83 54 187 100 47 215

2030

Additions/Retirals post 2030 maximising RES, nuclear & CCS

Biomass 1,200 CCGT 1,000 CCS Coal/Lig CCS Gas 800 CHP Coal Lignite 600 400 Nuclear 200 Offshore wind 0 Other -200 Other Renewables Peaker -400 Reservoir Hydro -600 Run-of-River Hydro Solar -800 -1,000 -1,200

101 81 140 145 190 365 -99

2031-2050

-156 -44 -64

2031-2050 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

Resulting Capacity in 2050 1,658 102 81 83 89 159 155 223 481

Biomass CCGT CCS Coal/Lig CCS Gas CHP Coal Lignite Nuclear Offshore wind Onshore wind Other Other Renewables Peaker Reservoir Hydro Run-of-River Hydro Solar 2050 Source: Pöyry analysis for European Gas Forum, 2013 GAS NATURALLY – EC GAS FORUM 9 April 2014 2

Strengthening the carbon price is the most efficient way to promote decarbonisation to at least 2030 Pöyry’s analysis of many future electricity market designs shows the optimal decarbonisation pathway has a EU ETS price c.

€70/tCO 2 by 2030

Relationship between carbon emission intensity and carbon price to 2030 Absolute Market scenario (AM) Dual Support scenario (DS) There is likely to be an optimal level of cost effective carbon reduction through the carbon price Significant reductions in emission intensity to levels of ~150gCO 2 /kWh (similar to 2030 ambition) can be delivered through progressive increase in carbon price to ~ €70/tCO 2 using mature technology and at least cost Source: Pöyry’ Point of View: From Ambition to Reality? Decarbonisation of the European Electricity Sector, 2013 GAS NATURALLY – EC GAS FORUM 9 April 2014 3

Intermitent wind & solar will impact all other forms of generation And large scale deployment drives marginal prices towards zero, making intermittent generation economics difficult without long-term support

Weather patterns for 25 December 2006 Generation 22-30 Dec 2030 Coal/CHP Wind Intercon.

Source: Pöyry’s Northern Europe Electricity Intermittency Study, 2011 Nuclear Hydro CCGT Nuclear Coal/CHP Nuclear Solar Wind Wind Wind GAS NATURALLY – EC GAS FORUM 9 April 2014 4