EC opens in-depth investigation into UK support for Drax power plant

The European Commission (EC) has opened an investigation into whether a plan by Drax to convert a plant from coal to biomass breaches state aid rules.

The Commission said it would look into whether the move was unfair to competitors. Drax shares fell 3.3%.

The UK aims to close all coal-fired generators by 2025, and recently won EU clearance to support a biomass plant being converted by RWE.

Drax said the inquiry was expected as part of the approval process. The Commission statement said it supported member states' efforts to increase the use of renewable energy, but not at the expense of giving an unfair advantage over competitors and consumers.

The Commission, the European Union's executive arm, said 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."

The investigation will examine whether public funds "are limited to what is necessary" and do not distort the market for biomass fuels, the statement added.

Last month, the Commission approved UK plans to subsidise the conversion of RWE's Lynemouth coal-fired power plant in northern England to burning biomass, a move seen as positive for Drax.

The investigation is likely to prolong the uncertainty surrounding the future of the plant, which generates up to 8% of UK electricity.

Dorothy Thompson, Drax's chief executive, told the Times that it would "work hard to complete this state aid clearance process as quickly as possible and make the case for converting the remainder of our power station".