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Drax pulls out of £1bln carbon capture project, cites government policy as reason

Drax has stopped funding a project to store carbon emissions from a coal plant under the North Sea
Drax has stopped funding a project to store carbon emissions from a coal plant under the North Sea

The UK renewable energy company Drax has pulled out of a £1 billion (appr. €1.4 billion) project to introduce carbon capture technology to cut emissions.

The company says it remains committed to fulfilling its current work on a carbon capture and storage (CCS) feasibility and technology development project (FEED), but once completed, would not be investing further and will withdraw as a partner of Capture Power, the developer of the White Rose CCS project.

The withdrawal comes in the aftermath of the UK government’s decision earlier this summer to cut subsidies handed out to green energy companies, which Drax says resulted in a critical lack of profits.

Drax CEO Dorothy Thompson says she is ‘very sad’ to make the decision and the company the White Rose project had lots of potential.

‘The most recent effect has been the government has removed a tax exemption for renewable power that is sold to industrial companies and we're the largest generator of renewable power in the UK and this has suddenly removed a stream of income,’ she told BBC.

Drax’ shares plummeted over 30% immediately after the government announced the removal of green energy subsidies in late July.

The White Rose CCS project – led by the Capture Power partnership made up of Drax, Alstom, and BOC – had the potential to trap up to 90% of carbon emissions from a new coal fired power station next to Drax’ existing power plant in Yorkshire and store them beneath the North Sea, Drax says.

The company was fully committed to the completion of the feasibility study which is due to conclude in the next 6-12 months.

‘We remain fully committed to completing what we’ve signed up to – the completion of a study into the feasibility and development of world leading technology that could result in dramatic reductions in carbon emissions produced by power stations and heavy industry,’ says Drax group operations director and Capture Power board director Pete Emery.

‘We are confident the technology we have developed has real potential, but have reluctantly taken a decision not to invest any further in the development of this project. The decision is based purely on a drastically different financial and regulatory environment and we must put the interests of the business and our shareholders first,’ he continues.

In statement, the Department of Energy & Climate Change (DECC) says the CCS is set to play a vital role in decarbonising the electricity sector and heavy industry.

‘The government remains committed to assisting the development of CCS in the UK and to the CCS competition, continuing to negotiate with the two preferred bidders,’ DECC says.

But the chair of the Energy and Climate Change Committee, Angus MacNeil, says the government must take responsibility for Drax' decision.

‘They certainly didn't consider what they were doing and they've left Drax in a very invidious position at the moment. Drax itself would have been actually carbon negative, in that they were burning biomass and then were going to be storing that capture, so they would have been taking carbon out of the atmosphere,’ MacNeil says.

However, he adds, Drax’ decision is not surprising considering the UK government’s ‘wrecking ball’ approach to clean energy.

Drax has stopped funding a project to store carbon emissions from a coal plant under the North Sea