Drax powers ahead with plans to ditch coal

Andy Koss, chief executive of Drax Power
Andy Koss, chief executive of Drax Power
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Power station Drax said that 65​ per cent​ of ​its​ electricity was generated from sustainable compressed wood pellets​ last year as it forges ahead with plans to ditch coal in favour of biomass.

This was up from 43 per cent in 2015, bringing it closer to its long term goal of being 100 per cent biomass.

​​Th​e North Yorkshire firm, once one of the biggest polluters in Europe, saw it is new producing enough renewable electricity to power Sheffield, Leeds,​ ​Liverpool and Manchester.

Drax described 2016 as a pivotal year for the company despite very challenging ​power and commodity markets​.​​

​The group reported earnings of £140m in the year to December 31, in line with​ ​guidance, but still below ​the ​£169​m reported in 2015.

Drax CEO Dorothy Thompson said: “​2016 began with some of the most challenging ​​power and commodity markets I have seen in my career and in a similar way to 2015 this created a headwind to profitability.”

Andy Koss, chief executive of Drax Power, said the firm now has three units, out of six, fully running on biomass.

“We stand ready to convert more and we’re in discussions with the Government. If we got the green light we could convert fully to biomass within two years,” he said.

“The Government remain supportive of biomass. They recognise the achievements we’ve made.”

The group said that the strong operational performance across its business helped it to respond to the financial challenge posed by the difficult commodity markets and the​ ​removal of Climate Change Levy exemptions.​

​It said its biomass units delivered a record level of renewable electricity.

​Drax​ produced 16​ per cent​ of the UK’s renewable electricity from sustainable wood pellets in 2016. Coal contributed just 9​ per cent​ of Britain’s electricity during 2016​,​ ­down from 42​ per cent​ in​ ​2012.

Carbon emissions from the generation of electricity at Drax power station fell by 53 per cent in 2016.

The firm said that despite a background of significant political change in the UK, it has seen no fall out from the EU referendum.

Ms Thompson said: “In general, the Brexit vote did not affect us because our electricity is used in UK homes and businesses.

“We purchase large quantities of fuel in foreign currency. However, we are well hedged against currency fluctuations for the next five years including the devaluation of sterling in 2016.”

Drax said that the Government’s decision to apply the Climate Change Levy to renewables had a significant effect on its results, reducing earnings by an estimated £34m in 2016. On a more positive note, the European Commission approved its Contract for Difference (CfD).

Drax said wood pellet prices have fallen following three warm winters in Europe where there is a large market for wood pellets for heating.

Mr Koss said: “This is good for us as we can pick up distress cargoes. Some pellet plants in the US are having financial difficulties.”

Drax is developing plans to build four state-of the-art rapid response open cycle gas turbine (OCGT) power stations, which could, at the flick of a switch, be running at capacity within 10 minutes.

These more flexible plants will provide system support to the Grid and plug gaps created by intermittent renewables like solar and wind. The projects will also help the Government achieve carbon saving targets.