Power producer Drax to invest £3bn to double biomass production as CEO warns high energy prices may last

Power producer Drax has laid out a £3bn investment programme as it targets doubling its biomass pellet production by 2030.

Drax, which operates a large power station near Selby in North Yorkshire, is ramping up the production of energy via the renewable system of burning imported wooden pellets to produce power.

The Yorkshire Post can reveal that the increase in pellets will be met via a series of new plants across North America, augmenting the facilities it currently has in the USA and Canada.

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Drax added that its biomass and pumped storage generation assets have continued to play an “important role providing stability to the UK power system at a time when higher gas prices, European interconnector issues, and periods of low wind have placed the system under increased pressure”.

Drax operates a large power station near Selby in North Yorkshire.Drax operates a large power station near Selby in North Yorkshire.
Drax operates a large power station near Selby in North Yorkshire.

As such its strong forward sold position means that it has not been a significant beneficiary of higher power prices from these activities in 2021 but has been able to increase forward hedged prices in 2022 and 2023.

As at November 26, 2021, analyst consensus for 2021 adjusted earnings before interest, taxes, depreciation, and amortisation was £380m, with a range of £374-£391m.

Will Gardiner, CEO of Drax Group, said: “For a long time there were questions over what Drax would do after 2027. We are now in a place where there are not really any questions anymore.

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“We have prioritised three areas where we saw growth priorities, specifically around renewables, net zero and pellets.”

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Drax

He added: “We’re now setting out a strategy to take the business forward, enabling Drax to make an even greater contribution to global efforts to reach net zero.

“We believe Drax can deliver growth and become a global leader in sustainable biomass and negative emissions and a UK leader in dispatchable, renewable generation.

“We aim to double our sustainable biomass production capacity by 2030 – creating opportunities to double our sales to Asia and Europe, where demand for biomass is increasing as countries transition away from coal.”

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Mr Gardiner added that Drax has made excellent progress during 2021 in advancing its BECCS (bioenergy with carbon capture and storage) project.

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Drax

If approved by Government, the scheme has the potential to transport and securely store nearly 50 per cent of all UK industrial cluster CO2 emissions – up to 27 million tonnes of CO2 emissions a year by 2030.

“This includes the negative emissions we can deliver at Drax Power Station in the UK and through potential new-build BECCS projects in North America and Europe, supporting a new sector of the economy, which will create jobs, clean growth and exciting export opportunities,” Mr Gardiner said.

This year has seen energy prices skyrocket owing to a range of factors, including the high price of gas coming out of Russia and the system being tight.

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The crisis has caused many suppliers – including Harrogate-based CEG – to go to the wall.

The Drax boss acknowledged a very tough year for consumers concerning energy prices and said that they were likely to persist for the short term, adding that he hoped it would not impact the “wrong people at the wrong time”.

However, he added that the crisis would not impact on the operations at Drax and that it had underscored the importance of switching to renewables.

“All of our supply comes from allies of the UK so there is no risk of disruption of supply,” he said.

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“Our procedure is managed at a rate which is sufficiently stable.”

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