Xmas Comes Early For Drax
By Paul Homewood
Management at Drax received an early Christmas present yesterday when the European Commission announced that it had approved the company’s bid to convert a third coal-fired power plant unit to biomass.
The UK’s largest coal-fired power producer had been anxiously awaiting the Commission’s state aid decision, as it attempts to re-position itself ahead of the country’s ultimate coal power phase out.
The Commission has opened an investigation into government support for the project in January and concluded that it was in line with the European Union’s environmental and energy targets.
The company announced a shift away from coal earlier this month with the acquisition of business energy supplier Opus Energy and four gas stations. The deal had been contingent on the Commission’s state aid approval.
The British government has guaranteed a minimum electricity price for Drax’s biomass project of 100 pounds per megawatt-hour (MWh) until 2027, which Drax said had not changed following the Commission’s approval.
"With the right conditions, we can do even more, converting further units at Drax to use sustainable biomass in place of coal," Drax Chief Executive Dorothy Thompson said in a statement.
The company said it could convert its remaining three coal-burning units to biomass in the next two to three years if the government sets the right conditions.
Drax said the unit would be able to run 100 percent on biomass instead of co-firing coal in the coming days.
It might be a Christmas present for Drax, but not for bill payers, or for that matter American forests.
The stated strike price of £100/MWh, which seems to have been widely reported, actually understates the real cost, which is £105/MWh at 2012 prices, or about £115/MWh at current prices. This is nearly three times the going rate.
Last year, Drax received more than £450 million in subsidies for biomass power. Little wonder Dorothy Thompson wants to convert the other units!