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FUTURE EU ENERGY MIX - WILL COAL PLAY AN IMPORTANT ROLE?

International Conference in Gliwice 29 May 2006

Matthias DürrRWE AG

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Diversity of the Energy Mix will be key

Each individual energy source has its own advantages and disadvantages

In a world of general uncertainties, no one knows how the costs and supply conditions will evolve – including economic and social costs

Therefore, a well thought-out strategy calls for a diversification of the energy mix in order to reduce dependence on the current polluting and imported sources

This also includes greater efficiency in power plants and in the deployment of plant and equipment, sparing use of valuable resources

Lignite is the only indigenous fuel available in Germany that can be extracted cost-effectively and without subsidies in the long term

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Facts on lignite

Lignite is a domestic, zero-subsidy resource that is mined at the site of its utilization

Germany is the world’s number one lignite mining nation with 182 million tons of in 2004

92% of the lignite mined are used for power production and it accounted for 26.1 % of Germany’s total power production

Commercially attractive lignite resources in the „Rheinland“ alone account for ca. 50 billion barrels of oil equivalents (boe)

This energy content exceeds the remaining oil and gas resources in the entire north sea by the factor 1.3 (estimated at 40 billion barrels of oil equivalents)

At the current rate of depletion, resources in the Rhineland are expected to last for more than 200 years

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Significant fossil energy sources in the future energy mix

Global solutions

Inclusion of threshold and developing countries

Implementation of JI and CDM

Intelligent technology solutions for CO2 reduction

Source: IEA, World Energy Outlook, 2004 Edition

Increasing world energy consumption requires more use of fossil energy sources

Coal

Natural gas

Oil

Water etc.

Fossil

World electricity generation in bn MWh

25.8

2020

6.8

9.8

1.3

3.0

6.7

3.2

1.2

2.6

3.0

2003

16.7

Nuclear energy

+ 62 %

+ 55 %

4.9

Global climate protection requires efficient technologies and policies

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Lignite is a modern energy

The near future:Increased efficiencies

Pre-dried lignite

The future:Zero-CO2 emissions plan

Zero-CO2 IGCC power plant

The CO2 emission penalization is a challenge for power generators, but modern lignite technology can turn the challenge into commercial advantage

Available today:Upgrade options

CO2-”cleaning” for modern steam technology

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Our vision: Power production with CO2 separation and storage: RWE pursues IGCC* technology

* IGCC = Integrated Gasification Combined Cycle** without CO2 separation, above 51% thermal efficiency can be achieved*** assuming full cooperation of government agencies in approving partially new technology

RWE is the only company that combines coal power plant and gasification know-how (RWE Power) with the theoretical knowledge of CO2 storage in e.g. depleted gass wells (RWE Dea) in Europe.

Key data for the envisaged pilot plant:

450 MWel

40% efficiency with CO2 separation**

2.3 million tons of CO2 storage per annum

€ 1 billion investment

In production***2014

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Swift implementation by 2014 calls for parallel development of power plants and CO storage facilities

Power plant

CO2 storage site Screening, exploration, approval

Engineering, approval

Construction, commissioning

Construction, commissioning

ApprovalDecision to build

Start of operation

Approval Start of operation

2010 2014today 8/2007

DecisionEnergy source/location

The geological conditions found in the storage site will determine what amounts of CO2 can be fed at the start and how they can be increased

Project development

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Back-up

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RWE has a strong Carbon Footprint due to Coal based Activities

Germany: Power Produced in 2005 in TWh( own plants only)Lignite 70.91)

Nuclear energy 45.1

Hard coal 16.7

Gas 12.52)

Others 3.3

Total 148.5

Hard coal 17.8

Gas 14.82)

Oil 0.3

Others 0.5

Total 33.4

CO2 emissions in 2005120 million tons

UK: Power Produced in 2005 in TWh

CO2 emissions in 200522.7 million tons

1) Including plant consumption2) Inlcuding CHP

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Lighthouse Project of RWE‘s Climate Strategy: The zero-CO2 power plant

Drying Coal gasification Gas treatmentCO2 capture

Gas and steamturbine

Power

Dry coal

Raw coal

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Power generation with CO2 capture and storage: RWE is pushing forward the IGCC technology

per pipeline toCO2 storage facility

* IGCC = Integrated Gasification Combined Cycle

RWE has the in-house know-how in power plant and gasification processes (RWE Power) and basic knowledge for CO2 storage (DEA)

can also be used as H2, or to produce SNG, methanol, fuel

IGCC*Gas and steam

turbinePower

Hydrogen

CO2

450 MWgross

Oxygen

CoalGasification

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CO2 storage at the IGCC power plant

CO2 is liquefied in the power plant using high pressure, transported per pipeline and permanently stored at great depths underground.

Power

H2O

Coal IGCC power plant

Depth: approx. 1,000 – 3,000 m

Aquifer, old oil, gas field(North German basin)

CO2

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RWE is strenghtening its development of CO2 scrubbing - for lignite and hard coalTechnology suitable for retrofitting existing power plants and those being built

Power

Power

Air

Coal

Advanced steam power plant

CO2

Zero-CO2 flue gas

per pipeline toCO2 storage site

CO2 scrubber

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Development steps towardsearly availability of the CO2 scrubber

Development of new scrubbing agents in the context of the EU CASTOR project/test facility at Esbjerg PP (DK)

Creation of partnerships with suppliers and chemical industry for development and optimization

Plant trialling in lignite-fired power plant of RWE

– until 2008: pilot project

– from 2009: demonstration plant (start of engineering)

RWE budget: approx. € 90 mill.