Skip to content

Drax mulls mothballing coal-fired plants after posting 2015 losses

February 25, 2016

By Paul Homewood    

 

image

http://www.powerengineeringint.com/articles/2016/02/drax-mulls-mothballing-coal-fired-plants-after-posting-2015-losses.html

 

While Japan pushes ahead with a new generation of coal power stations, the UK’s industry lurches further into crisis.    

From PEI:

 

British power group Drax could be set to mothball its coal-fired power plants as low gas prices, competition from renewables, withdrawal of government support and the UK’s plan to close its coal-fired plants by 2025 all take their toll.

The company announced a strategy review this week after posting a loss of 64 per cent in its pre-tax earnings for 2015, with profits falling from £166m ($234m) to £59m. The group was forced to more than halve its dividend to shareholders, citing "severe market deterioration and difficult regulatory challenges".

CEO Dorothy Thompson was quoted as saying that while the firm “may choose to mothball” its coal plants, “what we are keen to do is to work with the government and find the right solution”.

And according to Andy Koss, CEO of Drax Power Ltd, existing coal-fired plants may still be crucial for keeping the UK’s lights on if the government fails to build enough new capacity to make up for the planned plant closures.

Drax has already converted two of the six units at its 3.9 GW coal-fired plant in North Yorkshire to burn biomass, and conversion of a third unit is planned if government aid for the process passes a European Commission investigation.

Koss has warned that unless this aid is delivered within the next two years, the coal-fired boilers may deteriorate to such an extent that conversion would no longer be possible.

Earlier this month, Drax and co-plaintiff Infinis, a renewable power firm, lost an appeal to the UK’s High Court over the government’s decision to remove their exemptions from Climate Change Levy payments. Thompson said the exemptions “have played a critical role supporting investment in a wide range of renewable technologies”.

 

 

Why anybody should be in the least bit surprised amazes me. After all, this has been the objective of government policy for years now. The combination of carbon taxes, competition from subsidised renewables and loss of market share was only ever going to have one outcome.

The only thing keeping coal afloat up to now was the cost advantage it had over gas However, falls in gas prices in the last year have changed all that. 

The final nail in the coffin was Amber Rudd’s announcement a few months ago, that the government wanted to see an end to all coal generation by 2025. Drax , along with Fiddlers Ferry, Longannet and Rugely, had originally opted into the EU’s Industrial Emissions Directive, which would allow them to operate beyond 2023. The others have subsequently all announced plans to close this year.

If Drax does go, this would leave Ratcliffe as the only plant left that has opted in to the IED. The plants which have opted out, Cottam, West Burton and Aberthaw are each allowed 17500 hours of operation between Jan 2016 and December 2023. Logically, they will seek to use these up as quickly as possible, and then shut down to minimise costs.

Below is the latest summary:

 

  Capacity MW MW to close
in 2016
Notes
Ratcliffe 2000    
Cottam 2008    
West Burton 2012    
Eggborough 1960 1960  
Rugeley 1006 1006  
Lynemouth 420   Conv to bio
Aberthaw 1586    
Longannett 2260 2260  
Drax 3870 ? 50% to bio
Fiddlers Ferry 1960 1500  
Ferrybridge 980 980  
TOTAL 20062 7706  
24 Comments leave one →
  1. David Richardson permalink
    February 25, 2016 1:09 pm

    Paul – these last two articles couldn’t show better how completely lunatic the UK energy policy is.

    All driven by the Climate Change Act (CCA) drafted by Greenpeace and brought in by Ed Miliband.

    It is always tempting to blame UN Agenda 21 and its conduit to us, the EU – but in this case the real stupidity is home-grown.

    Repeal of the CCA is our only hope – I don’t think I have enough life left to see that, unless the sun watchers are right and the climate turns cold.

  2. Don B permalink
    February 25, 2016 1:14 pm

    Even though they signed the Paris treaty, China and India intend to increase coal burning by 2030 by double and triple, respectively. At the same time, the UK intends to commit economic suicide, and Obama intends to destroy the US coal industry.

    Truly madness.

  3. Mike Higton permalink
    February 25, 2016 1:27 pm

    It would be worth adding a further column to the table showing the expected situation in 2018.
    As Paul says, the opted-out plants are likely to burn through their hours as fast as possible to maximise returns before closure. That means they will probably close down early in 2018.
    We will then be left with Ratcliffe, Lynemouth and maybe half of Drax: less than 5000 MW out of 20000 today.
    Finally we are out of time. Even if an emergency programme were started today to build replacement CCGT capacity, none would be available in this time frame.

  4. February 25, 2016 1:59 pm

    One has to bear in mind that generators play a commercial game, threatening closures in an attempt to get a better deal. Germany has the power to forbid plant closures, the UK needs something similar, ideally without interference from Brussels.

    • A C Osborn permalink
      February 25, 2016 4:10 pm

      Germany may have the ability to forbid closures, but that doesn’t mean they may not still happen to them as well.

    • February 25, 2016 7:40 pm

      Fine in theory, but who is going to invest in building the next lot of power stations if the govt can dictate what you do?

  5. February 25, 2016 2:20 pm

    “They do a good job at obfuscation (against poor innocent climate scientists)” says : Jeremy (Big Green Hedgefund) Grantham speaking at the ‘Secretary’s Climate and Clean Energy Investment Forum’ video 3 from months ago

    “Note how he says “We have” as if he owns the people he lists ..The Bank of England Governor, The Pope etc.

  6. Jack Broughton permalink
    February 25, 2016 3:09 pm

    Domestic generators will be a good investment soon; that is how the wealthier people in the third-world survive regular and frequent power cuts.

  7. John F. Hultquist permalink
    February 25, 2016 3:23 pm

    The POTUS & EPA’s coal program is being helped along by geography and economics. (mentioned by Don B, above)
    The mountainous portions of many eastern States have had difficulty ever since coal became an industrial commodity (that is, not just for individual home heating). A very good read on this is Caudill’s “Night Comes to the Cumberlands: A Bio of a Depressed Area”– 1962.
    Serious government interference began in 1960 with the Council of Appalachian Governors, and then the Appalachian Regional Commission (ARC). Wiki has an entry for the ARC and it mentions the book.
    It is long past time to move beyond these issues in this region.

  8. CheshireRed permalink
    February 25, 2016 5:56 pm

    Drax should just tell the government they’re calling it a day with coal unless they sort out worthwhile returns. The real prospect of lights out on their watch should focus a few minds in DECC and Downing St.

  9. ralfellis permalink
    February 25, 2016 6:58 pm

    Not only is the coal side of the operation in jepody, so too is the wood pellet side. The EU launched an investigation into the subsidies, saying they were too generous and therefore illegal. So the EU doesn’t want coal, but it does not want wood either. This really is the politics, decision-making and management of the kindergarten.

    http://www.telegraph.co.uk/finance/newsbysector/energy/12082623/Blow-to-Drax-biomass-plan-as-EC-launches-state-aid-investigation.html

    Remember that Drax often represents 10% of total UK generation, so losing Drax would be a big deal. It looks like the ‘ship of fools’ did not sail to Antarctica, unfortunately they are all still bevering away in the EU.

    • February 25, 2016 7:45 pm

      The EU employs a lot of people to do investigations, so a lot of things get investigated, even cases like this where it makes no sense. The UK clearly gets the opposite of a competitive advantage by forcing its electricity consuming industries to pay more than market prices for electricity.

  10. martinbrumby permalink
    February 25, 2016 10:21 pm

    I hope Drax grows a pair and plays very hard ball indeed.

    If we are going to have blackouts with all the consequences for the poor, for industry and the economy, the sooner the better. It is the only way the weapons grade nincompoops in Whitehall and Westminster just might wake up and smell the coffee.

    I sometimes wonder if (various) government policies have been introduced specifically to piss off the British Public. Have them shiver in the dark and even the phlegmatic brits might get cross.

    Rudd has admitted that the market is so distorted it is now impossible to get new energy without subsidy. We have been importing French nuclear as much as possible for several years, at God knows what cost.

    Bring it on and bring it to a head. Before 23 June would be ideal.

    • February 25, 2016 10:53 pm

      UK might or might not escape this winter. Not next. The reserve margin of everything, including foolishly included demand side emergency curtailment, was said by National Grid to be 5.1%, about 2.9 GW over a peak 6pm winter demand about 57 GW. That is dangerously less than half the safe minimum. With the coal closures announced for the rest of 2016 (let alone DRAX) it will be significantly negative next winter, depended on who gets bribed (subsidies by a more honest name) how much not to do what they say they are going to if your DDEC wakes up and panics. No sign of that so far.

      • J Martin permalink
        February 25, 2016 10:59 pm

        A cold European winter would likely reduce or stop the supply from the cross channel interconnects. Time to start googling home generators.

  11. J Martin permalink
    February 25, 2016 10:55 pm

    Got to feel sorry for all those people who have invested in heat pumps. Hope they didn’t remove their old gas boilers or coal fireplaces.

    • ralfellis permalink
      February 26, 2016 2:20 pm

      Well that is easily solved. They can just get a small generator to run the heat pump, which will be a very efficient method of heating.

      Oh, wait a minute…….

      • February 27, 2016 1:41 pm

        run the waste heat from the generator’s exhaust directly into the house. no more heating problems.

  12. February 25, 2016 10:58 pm

    Just hope that you guys can rug up well in the winter and have the good sense to lay in a stock of candles for those long winter nights. Rest assured, its going to get colder. Its already started. See https://reality348.wordpress.com/2016/01/13/6-the-poverty-of-climatology/

    From the conclusion:
    “Why did tropical sea surface temperature decline in the decade 1967-76? Why the spectacular increase of 0.5°C over the following two decades? Why the departure from trend between January and March in the last two decades. Obviously, there are more complex factors at work than a the remorseless increase in the very tiny proportion of the well mixed greenhouse gases in the atmosphere.

    But let me hasten to add that there is one, naturally occurring greenhouse gas that is quite unequally distributed, that varies in its concentration across the year and over time. It varies under the influence of polar atmospheric processes that dictate the rate of entry of mesospheric air that contains the chief agent of erosion of ozone in the stratosphere described as NOx.

    Follow the data, that is what science should be about. If the narrative doesn’t follow the data, its propaganda.

    Lets face it, people tell fibs to suit their own purposes.”

    The message is this: Its absolutely vital to understand the sources of natural climate variation. Gordon Dobson observed back in the 1920’s that total column ozone (measured with the Dobson Spectromoter) maps surface pressure. The winds at the surface are determined by the distribution of ozone in the stratosphere. Reflect on that for a moment.

    You guys are engineers. You can understand atmospheric processes.

  13. J Martin permalink
    February 25, 2016 11:10 pm

    Perhaps other coal fired power stations are even now considering followimg Rugely and taking a fine by closing in advance of their previously agreed schedule. @ Erl Happ. Wine will help keep us warm ☺

  14. AndyG55 permalink
    February 26, 2016 8:23 am

    OT, But

    Tim Flannery makes a FUEL of himself… YET AGAIN

    http://blogs.news.com.au/dailytelegraph/timblair/index.php/dailytelegraph/comments/ship_of_fuels/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: