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European Commission opens probe into Drax biomass plant subsidies

The European Commission (EC) has opened a formal investigation procedure related to the planned UK subsidy contract for a 645MW biomass-fired power unit of Drax.

Drax is working to convert to biomass three of the six coal-powered generators at the Drax Power Station in North Yorkshire.

The third unit is planned to receive a Contract for Difference (CfD), which means the UK government will compensate Drax through subsidies should the market price for electricity fall under a pre-fixed price.

According to the EC investigation document, the EC suspects that the power producer would receive more than “the minimum necessary” aid and that subsidising the project would create “undue distortions” in the upstream biomass market.

Between 60 and 80% of the about 2.4 million tonnes of wood pellets required at the plant annually will be sourced from southeast US and an approximate 16% from South America.

The EC is concerned that the potential negative effects on other wood pellet market participants will outweigh the expected environmental benefits, which the Commission admits would contribute to the EU’s renewable energy targets.

The Commission has invited UK to submit its comments on the investigation.

"Drax welcomes the opportunity to work with the UK Government and the EC to complete the State aid clearance process," Drax said in a statement.