Drax set for three year extension for controversial subsidies

The project will see two of Drax’s four biomass units be fitted with carbon capture technology, while the remaining two will be left on a “merchant” basis, meaning that energy can be produced when production from renewables such as wind and solar is less than expected.

The company says that it expects the project to be up and running by 2030.

Later in the week ministers are scheduled to announce a consultation into a bridging mechanism between 2027, when Drax’s generous biomass subsidies end, and the completion date of the project.

It is understood that the Government’s preferred option is for a three-year extension of the current subsidies for the company.

It is expected that Drax expects some level of Government support after 2030, tied to its two BECCS units in North Yorkshire, while the two remaining biomass units will not be included as they are not fitted with carbon capture technology.

However, the company is open to the future possibility of fitting the remaining two biomass units with carbon capture technology in the future.

Previous estimates suggest that Drax has already received over £6 billion in public subsidies, and is expected to rake in a further £4 billion by 2027.

An extension to 2030 at current levels could see the company continue to receive billions of taxpayers money.

This is despite the ongoing Ofgem investigation into the validity of the company’s reporting on the sustainability of its wood pellets.

It came after a Panorama investigation which claimed that the company uses wood from rare North American forests, rather than the offcuts of sustainable wood it claims.

Ministers were set to approve the project in late 2022 when sources told The Yorkshire Post that “BECCS is the only sustainable way to continue biomass” in the UK.

However, a high turnover of Secretaries of State covering energy, along with a formal investigation by Ofgem, the energy regulator, has seen the project delayed.

A lack of progress led to Drax pausing its investment in the project in March last year before ministers a week later left the company off its list of designated projects to receive funding.

Despite the presumed Conservative support for the project later this week, the company is preparing for dealing with a Labour government in subsequent years.

Ed Miliband, Labour’s shadow energy secretary, said last year that his party would review Drax’s subsidy scheme.

The party’s current energy policy, one of its 5 missions, is to make sure that all electricity generation by 2030 will be clean, but this makes no mention of biomass.

However, it is understood that if Drax’s BECCS project is up and running by 2030 as planned, then there is a path for the company to continue as a green energy project, but not without the carbon capture element.

Capture projects are expected to be one of those which are set to get public investment from Labour’s £28bn pledge alongside newer technologies such as hydrogen, while established energy sectors such as wind and solar will see far more private sector investment as the party will focus on unblocking funds companies want to spend but currently cannot due to red tape.

However, Drax’s subsidy agreement, as well as any delays to BECCS in North Yorkshire could provide a potential headache for Labour when in government, with longstanding concerns by many of its MPs and activists over the company’s green credentials.