The UK’s largest coal-fired power station could be turned into one of its biggest sources of renewable energy – if subsidies are increased.
Drax generated about 6% of the UK’s total renewable power in the first half of this year, through burning straw and other biomass at its Yorkshire power station. This was achieved despite burning a much lower proportion of biomass than the plant could sustain if run under optimal conditions.
Dorothy Thompson, chief executive of Drax, said the power station could be transformed to produce more renewable energy than fossil fuel power, using biomass from straw, waste wood and other sources instead of coal.
Biomass is a relatively green fuel because the materials from which it is made have absorbed carbon dioxide from the air as they grow.
With higher levels of biomass burning, Drax and other coal-fired power stations could have a lower carbon footprint than gas-fired power stations, according to the company. The government is promoting gas as the “greener” alternative to coal as ministers struggle with the need to address the potential for power shortages at the same time as cutting carbon dioxide emissions.
But Thompson said her vision would only come about if the government increased the subsidies to biomass, which are paid for through consumers’ power bills, to a level more comparable with other sources of renewable energy generation.
Under current conditions, Thompson said, it was uneconomic to burn biomass, and at present biomass generation at Drax runs at about 8%, compared with more than 50% which the company believes to be possible.
“The level of financial support is inadequate to burn biomass in very large quantities at current market rates,” she said.
She said moving to majority biomass generation could be a relatively quick process, if the company was given the green light by ministers. “We would see ourselves starting along this path immediately, with delivery within three to four years,” she said. “By 2020, we could be delivering renewable energy to more than 2m homes.”
Currently, biomass generation is awarded half of a “renewable energy obligation certificate” (ROC) per unit of electricity, compared with two ROCs for each unit of offshore wind. The government is scheduled to decide on this issue soon, with a view to bringing in draft legislation by the end of this year, but may miss the deadline.
Drax has already put on hold planned investments in new biomass-only power plants, because the company believes they would be uneconomic under current rules.
But Thompson said that the carbon floor price the government is planning to introduce would erode the competitiveness of coal-fired generation in the future. Whether or not this would result in a reduction of coal use in the UK, however, would depend on the future price of gas.
Chris Huhne, secretary of state for energy and climate change, said: “Biomass is one of the cheapest ways of meeting our renewable energy targets, but the key issue is setting the level of support – enough to deliver what is needed, but not too much or that becomes an unnecessary price for the end user to pay.”
He said the current review of subsidy levels and government consultation would be completed later in the year.
Drax, which presented its half-year results on Tuesday, was boosted by a one-off tax credit of £198m during the period, following the resolution of a complex tax dispute. The company said the money could provide “a very important part” of the hundreds of millions of pounds in investment needed to convert its current coal-fired boilers to predominantly biomass generation.
Tests at the plant have shown that burning more than 50% biomass in its boilers is technically feasible, if certain adjustments are made. Thompson also argues that biomass can be complementary to intermittent sources of renewable energy such as wind power, acting as back-up generation if the wind fails to blow.
Drax, which reported a pre-tax profit of £169m, also said it had refinanced its debt facilities to April 2014. The company returned an interim dividend of 16p a share.