Drax biomass conversion must comply with EU state aid rules

Power plant conversion project in North Yorkshire is one of several state-backed renewable energy projects in the UK
Drax power station in North Yorkshire

Drax power station in North Yorkshire, which is being part-converted from coal to biomass power. Photograph: Bloomberg/Getty

The European commission has launched an investigation into the UK’s plans to support the conversion of part of its Drax coal power plant to biomass.

The commission, which late last year gave approval for the German energy group RWE to undertake a similar conversion at its Lynemouth plant, wants to ensure the Drax plans are in line with EU state aid rules.

The carbon footprint is reduced by 86% by burning wood pellets rather than coal, according to figures audited by PwC.

The commission said it “fully supports member state efforts to increase the use of renewable energy and pursue EU energy and climate objectives. At the same time, EU state aid rules make sure that the cost of such support for consumers is limited and does not give certain operators an unfair advantage over competitors.”

The Drax conversion project in North Yorkshire is one of several selected under a UK support measure for renewable energy projects. The plans went to the EU last April for consideration.

The commission says it is concerned that the estimates of a fully converted plant’s economic performance might be too conservative and that this could lead to overcompensation. It is also worried about the number of wood pellets required and whether the sheer quantity could distort competition in the biomass market.

A Drax spokesman said: “We welcome this announcement as the next step towards the full conversion of our third generating unit from coal to sustainable biomass. A positive outcome will result in half our power station running on biomass.

“This will improve the security of UK electricity supply and, in saving more than 12 million tonnes of carbon per year, play a critical role in helping the UK meet its climate change targets.

Shares in the group fell more than 4.5% to 221p as investors feared the uncertainty the EC decision would bring, though Angelos Anastasiou of Whitman Howard said a decision in Drax’s favour might come sooner than expected.

Drax insiders are confident their maximum annual demand for biomass (2.4m tonnes) will not have a significant effect on its price when there is an approximate annual surplus of 50m tonnes in the softwood forests in the south-east of the US alone.


Originally Published at http://www.theguardian.com/business/2016/jan/05/drax-biomass-conversion-must-comply-with-eu-state-aid-rules?CMP=share_btn_link#comments

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