Blackfriar: Drax an island of stability in a sea of energy uncertainty

DRAX’S timing could hardly have been sweeter.

As regulator Ofgem was busy blasting holes in Britain’s energy strategy, the North Yorkshire plant confirmed more progress on plans to replace half its coal with biomass.

“There’s a risk that the UK could struggle with its generation capacity around 2015/16 or later in the decade,” said Drax chief executive Dorothy Thompson.

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“The key to Drax is that we are a strategic asset that provides really stable generation. We are there when we’re needed.”

While little new was contained in Drax’s update – its plans to burn more plant-based material were given the green light July – its shares rose more than six per cent on Tuesday to close at 641.5p.

In fact, the numbers showed underlying profits for 2012 falling to £193m from £202m. Finance director Tony Quinlan even warned earnings will be subdued for another two years as rising capital spending meets pricier carbon emissions penalties.

So why the stock market exuberance?

Perhaps because Drax appears to offer a rare slice of stability in an increasingly uncertain sector.

New nuclear is in disarray, after Centrica pulled out of a partnership with EDF to build new reactors in the UK. The most advanced of these, at Hinkley Point in Somerset, is unlikely to open by its 2017 deadline as EDF argues with Government about the price it will earn for the power.

Domestic shale gas production remains but a distant hope, fraught with obstacles.

Carbon capture and storage – the only way a new coal plant will get the go-ahead on these shores – is still in pilot mode.

Renewables last made up just nine per cent of UK energy production, and the growth of offshore wind is proving a slow and expensive story.

Meanwhile, ageing coal and oil-fired plants are being forced to close. Tightening rules on carbon emissions, plus the Government’s pledge to generate 15 per cent of its power from renewables by 2020, mean Britain will lose about 11.6 gigawatts (GW) of coal and oil-fired power by 2015 or earlier.

To counter all of this, Britain is making a dash for gas – just as world prices are set to increase.

Later in the decade, gas will account for about 60 per cent of Britain’s power station needs instead of 30 per cent today, he added.

Britain will be “very tight on power station capacity in three to five years’ time”, he warned.

Drax, which supplies seven per cent of the UK’s power, offers a valuable slice of energy security amidst all this uncertainty.

But even with subsidies from Government confirmed, biomass still has its risks. While civilisations have long burned wood for domestic fuel, Drax is attempting to create a brand new supply chain for power station fuel.

It must ship 95 per cent of the fuel from abroad, and is building pelleting plants in America to supply some of this. It needs to source about eight million tonnes of the fuel a year to feed half the 4,000 mega watt plant.

Competition for that fuel will surely increase as other coal plants jump on board the conversion bandwagon – consultancy Deloitte reckons biomass could be used to generate 21 per cent of Britain’s energy by 2020.

Assuming Drax and others are successful in building an efficient biomass supply chain, the fuel can give relative energy security in an uncertain world. But Britain must be careful it is not caught in a trap of subsidising a huge proportion of its electricity generation.

The ‘clicks vs bricks’ debate has been raging in retail circles for some time.

There are those who believe the high street will disappear over the next few decades as people opt to shop via the internet from the comfort of their own homes.

With this in mind you might expect the new £350m Trinity Leeds scheme, which opens its door exactly one month from today, to shy away from improving the digital experience for its customers. In fact it is doing the exact opposite. It will embrace the digital era and its owners Land Securities has given the Yorkshire Post an exclusive insight into what shoppers can expect when it opens its doors.

It’s all about the experience. Gone are the days when shopping was a chore.

Shopping now has to compete with leisure for people’s time.

Forget multichannel, which refers to using every available way of selling, the new buzzword is omnichannel – successfully joining up PC, tablet, mobile and physical shopping.

Trinity Leeds is hooking up with Google to launch an app that allows shoppers to navigate themselves around the centre by providing real-time information about products and promotions.

The landmark shopping centre is making itself fit for purpose in this new digital age.

Retailers should take note if they want to avoid the same fate as HMV, Blockbuster and Jessops.

Bricks and mortar can survive but they must go hand in hand with online.