Drax, the UK’s biggest power station, has said that government reforms of subsidies for renewable energy have put the company’s planned biomass expansion in jeopardy.
According to a report in the Financial Times, the UK government’s new subsidy rules have made it hard for the company to make the case to shareholders for its planned £2 billion biomass investment.
Drax had planned to build three new 290MW power stations that would burn biomass such as straw and wood, and to convert one of the boilers in its coal-fired plant to do the same. If the latter project was successful, the company would have considered applying the technology to other coal-fired facilities.
One new plant was planned for a site at the south-west edge of the Port of Immingham and another on land adjacent to the existing Drax Power Station.
Since key aspects of the government’s subsidy reforms will be reviewed in 2013, Drax now finds itself unable to put forward a strong investment case to its shareholders—as building biomass boilers takes more than three years.
The company will only go ahead if the government agrees to grant renewable subsidies to converted coal plants. Currently only purpose-built biomass plants receive extra payouts to cover their higher costs.
Construction was originally expected to start by the end of 2010, but Drax said in its half year results to June 30 that this is no longer the case.
Drax has been burning biomass for seven years, but so far has been using it to ‘co-fire’ alongside coal in its burners. The company has said it is able to source plentiful supplies of straw, wood and energy crops for burning.
The company has re-iterated that it remains committed to biomass. Commenting, chairman Charles Berry said: “During the first half of 2010 we have developed our options to expand our capability to generate electricity from biomass. Delivery is dependent on the right policy framework being in place, and to that end we are working with the new government and the industry regulator, Ofgem, to make our plans a reality.”
