EU To Investigate Drax Biomass Subsidies
By Paul Homewood
An investigation has been launched by the European commission into the UK’s plans to convert part of its Drax coal power plant to biomass.
The commission wants to make sure that Drax plans are in line with EU state aid rules, after giving the go ahead to a similar conversion taking place in Lynemouth for German energy group RWE.
According to figures from the PwC, the burning of wood pellets in plants rather than coal reduces their carbon footprint by 86%.
The commission commented that it “fully supports member state efforts to increase the use of renewable energy and pursue EU energy and climate objectives. At the same time, EU state aid rules make sure that the cost of such support for consumers is limited and does not give certain operators an unfair advantage over competitors.”
Under a new UK support measure for renewable energy projects the Drax power plant, along with several others, were selected for the conversion project. The plans were sent to the EU for consideration last April.
The worries voiced by the commission are that the estimates for the converted plant’s economic performance are too conservative, and that this could lead to overcompensation. The number of wood pellets required for a plant of that size to provide enough power is also concerning, they say, because it could distort competition in the biomass market.
A Drax spokesman said: “We welcome this announcement as the next step towards the full conversion of our third generating unit from coal to sustainable biomass. A positive outcome will result in half our power station running on biomass. This will improve the security of UK electricity supply and, in saving more than 12 million tonnes of carbon per year, play a critical role in helping the UK meet its climate change targets.”
However, the uncertainty of the commission’s decision caused shares in the group to fall more than 4.5%. Insiders at Drax have said they are not worried about their maximum annual demand for biomass having a significant effect on its price as there is a huge surplus of 50m tonnes each year in the softwood forest of the south-east of the US alone.
Once again we see the EU sticking its nose into UK energy policy.
Under the Contract for Difference arrangement, Drax would be guaranteed £105 for every MWh it produces for fifteen years, at 2012 prices and index linked.
The unit involved has a capacity of 645 MW, and it is estimated that the cost of subsidies, which would be paid for by electricity bill payers, could exceed £200 million a year.
Catalyst obviously did not get the memo telling them that only dirty coal makes black smoke!