Drax Group plc has abandoned plans for a dedicated biomass power plant, but pledged to invest £50 million to increase its biomass co-firing capacity.
The UK company, which operates the country’s largest coal-fired power plant in North Yorkshire, scrapped plans to build a biomass-only facility at its Selby site because it claims that Government support for biomass-fuelled power generation is not enough. Drax also said the high cost of transporting the fuel to the site made the proposed 290 MW biomass project uneconomical.
However, the company is still weighing up the possibilities for two biomass co-firing plants at different sites.
“Drax is ready to transform itself into a predominantly renewable generator, but to do so we need appropriate regulatory support, and to that end we look forward to the timely conclusion of the Government’s current review,” said Dorothy Thompson, CEO of Drax Group.
“Given the significant financial liability that we would face were we to delay our investment decision until we have certainty over the final support level for dedicated biomass, we have decided to cancel the project.”
The UK Government’s currently ongoing Renewables Obligation Consultation is expected to conclude this spring. In October 2011, the Government proposed an increase in state funding for co-firing, but also proposed that support for dedicated biomass plants would be cut by 7% from early 2012.
Drax is to invest £50 million in 2012 to enable it to produce 20% of its power from co-firing biomass at its coal-fired power plants, an increase on the current total of 12.5%.
Biomass is currently uneconomical, having caused a 21.4%, or £180 million, increase in the company’s fuel costs last year. Analysts estimate that despite the current high cost biomass as a fuel, it will increase in importance in the longer term. Drax forecasts that the introduction of the carbon price support mechanism in the UK in 2013 will strengthen both the case and the market for biomass power generation.
Drax also announced plans to spend £200 million to comply with EU emissions standards.
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