Giant coal-fired power station puts greener fuel plan on ice

Drax, whose coal-fired power station in Selby, North Yorkshire supplies about seven per cent of the country's electricity, blamed the Government for failing to sufficiently subsidise biomass fuel, which includes wood, straw and other plant-based fuels, to make it competitive with coal.

The decision will make it almost impossible for the Government to meet its commitment to increase the proportion of electricity from renewable sources from 5.5 per cent to 30 per cent by 2020. Drax, which is the single largest source of carbon emissions in Britain, has invested 80m in a new co-firing plant to burn biomass with coal, which could help cut its emissions by 17.5 per cent.

It is expected to come on stream in mid-2010 but chief executive Dorothy Thompson said it will not be used to its full capacity because it remains significantly cheaper to burn coal on its own. She said existing Government subsidies for biomass were too low to make the fuel source financially viable.

"By this summer we will be able to burn 1.5 million tonnes of biomass a year at the existing Drax Power Station. We are really concerned that we will not use this capability to the full because UK Government policy is not fully supportive of substituting biomass for coal. This will lead to higher CO2 emissions."

Drax has already bought two million tonnes of biomass crops for the new processing unit, which is believed to be one of the biggest co-firing plants in the world but Ms Thompson said the company is considering selling it overseas.

She reassured Yorkshire farmers who produced the crops the firm would not default on its contracts. "We remain committed to our local farmers and will continue to purchase biomass from local sources."

Company figures says it costs it 31 per megawatt to produce energy from coal compared with 40 per megawatt for biomass.

Ms Thompson said it remained cheaper for Drax to burn coal and buy extra emission allowances under the European emission trading scheme than it was to switch to biofuel.

"We call on the Government to revisit its current policy for replacing coal with biomass to enable existing coal-fired generators to significantly reduce their carbon footprint with a relatively cheap renewable power."

The Government must offer long-term support, Ms Thompson said, if the company is to proceed with its 2bn plan for three new biomass power plants to create a credible investment case for shareholders.

She warned that the firm believes the Government's renewable energy strategy has become fixated on supporting wind energy and is neglecting other areas such as biomass.

According to the Renewable Energy Association, plans for more than 50 biomass projects, totalling 13bn of investment, have now been suspended as a result of uncertainty over the level of support they will receive.

The news came a day after Denmark's largest power company, Dong, revealed plans to build a new biomass power station in Hull, which could be in operation by 2016.

A Department of Energy and Climate Change spokesman said: "We're confident we can meet our ambitious renewables targets. Making low carbon sources of energy more competitive is central to our energy strategy, and biomass has an important contribution to make.

"We're reviewing whether current arrangements already available provide enough certainty for investors. In doing this we must be particularly mindful of the sustainability of biomass and the impacts on energy consumers' bills."