Drax biomass support arrangements called in by European Commission

The planned conversion of a generating unit at Drax power station in Yorkshire, to burn biomass, is now pending the outcome of an ‘in-depth’ investigation by the European Commission.  This investigation will look into the proposed support package to see whether it is in line with state aid rules.

Potential unfair advantage

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 ensure that the cost of such support for consumers does not give certain operators an unfair advantage over competitors.”

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."

Economic performance concerns

The carbon footprint is reduced by 86% by burning wood pellets rather than coal, according to figures audited by PwC.  However the Commission’s concerns are primarily around the plant's potential economic performance.  This might have been underestimated, which could lead to excess compensation through the support arrangements.  Another concern centres on whether the amount of wood pellets required by the project might itself effect competition in the biomass market.

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

For more information, help or advice please contact Andrew Davison on 0191 211 7950 or email [email protected].