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Drax presses ahead with biomass plans

Aerial view of Drax's plant in North Yorkshire, UK
Aerial view of Drax's plant in North Yorkshire, UK

UK power giant Drax has announced that it is pressing ahead with its biomass plans as new figures show the company produced about 17% of the UK’s renewable electricity in the first half of 2017.

The company, which runs a coal and biomass plant in North Yorkshire, UK, published its half-year results for the six months ended 30 June, 2017, yesterday (19 July,2017).

Three of the company’s six generating units are currently powered by compressed wood pellets and receive support from Renewable Obligation Certificates (for two units) and a Contract for Difference (CfD) (for one unit).

Dorothy Thompson, chief executive of Drax Power, said plans were progressing to boost this figure by converting an existing coal unit to biomass.

She said: “In line with our strategy we continue to explore future options for our ‘Generation’ business. This includes continued engagement with government to make the case for further biomass upgrades of coal units.

“During H1 2017 we have been running a trial on one of our coal units to examine the feasibility of a low-cost solution for fuelling it with 100% compressed wood pellets using existing co-firing infrastructure.

“The unit has performed well but there is further work to do to ensure that it delivers high output reliably and safety on a sustained basis, which we believe is achievable. In view of this, we will continue our trail through the summer, but have decided to return the unit to coal fuelling this winter to ensure high availability through the colder months.”

The plans for conversion to gas come after years of unsuccessful lobbying for the government to offer more renewable energy subsidy contracts to support the conversion of further units to burn biomass.

Finance

In the first half of the year, Drax boosted its earnings to £121 million (€136m), compared to £70 million in the same period last year, due to its acquisition of the business energy supplier Opus Energy.

However, the power group made a pre-tax loss of £83 million for the period ended 30 June, 2017, compared to a £184 million profit the same period last year.

Strategy

Elsewhere, the company reiterated its strategy and ambitions for long-term growth. At Drax’s Capital Markets Day, which was held in June, Thompson said the company made plans to achieve a “2025 EBITDA target of over £425 million”.

She added: “We expect to deliver this across a range of earnings streams, more than a third of which will come from the growth of our Retail and Biomass Supply businesses, complemented by increasingly stable and less commodity exposed generation earnings.”

Separately, the company also mentioned its North America-based wood pellet supply business – Drax Biomass. Drax said that its North American arm “increased its production of good quality, sustainable, cost-effective wood pellets for sale to Drax Power”.

In April, in line with its strategy to increase self-supply, Drax acquired a 450,000 tonne wood pellet plant in Louisiana. This increases the company’s production capacity by 50%, Drax maintained.

The company, which has come under fire from green groups sceptical of the environmental case for biomass, said that it had appointed David Nussbaum, a former head of the World Wide Fund for Nature in the UK, as a non-executive director.

This story was written by Liz Gyekye, editor of Bioenergy Insight. 

Aerial view of Drax's plant in North Yorkshire, UK