Friday, 19 February 2010

Drax power plant suspends plan to replace coal with greener fuel

Ben Webster, Environment Editor

Britain’s biggest power station has suspended its plan to replace coal with greener fuel, leaving the Government little chance of meeting its target for renewable energy.
Drax, in North Yorkshire, which produces enough electricity for six million homes, is withdrawing a pledge to cut CO2 emissions by 3.5 million tonnes a year, or 17.5 per cent.
The power station, which is the country’s largest single source of CO2, has invested £80 million in a processing unit for wood, straw and other plant-based fuels, known as biomass. The unit is designed to produce more renewable electricity than 600 wind turbines, but will operate at only a fraction of its capacity because Drax says it is cheaper to continue to burn coal.
Drax is also one of dozens of companies delaying investments in new biomass power stations because of uncertainty over the Government’s policy on long-term subsidies. Hundreds of farmers growing biomass crops may now struggle to sell their produce.

Drax’s 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. Renewable energy is a key component of Britain’s legally binding targets to cut overall emissions by 34 per cent by 2020 and 80 per cent by 2050.
In an interview with The Times, Dorothy Thompson, Drax’s chief executive, blamed the Government for failing to give sufficient subsidy to biomass to make it competitive with coal.
Drax has bought two million tonnes of biomass, but Ms Thompson said that it was considering selling it overseas because it no longer made economic sense to burn it in its six boilers.
Ms Thompson said: “We are not confident that the [subsidy] regime for what is one of the cheapest forms of renewable energy will support operat- ing the biomass unit at full load. The UK is missing out massively on the potential for renewable energy from biomass. We want to run in a lowcarbon way but policy is against us.”
She accused the Department of Energy and Climate Change of lacking the skills to develop a successful biomass policy and focusing too heavily on expensive and unreliable wind turbines. “I think they simply have not put enough expertise into biomass. Wind is not a silver bullet; its benefits have been overstated.”
Ms Thompson said that the Government was holding back biomass by offering it only a quarter of the subsidy given to offshore wind farms and capping the amount of crops that can be burnt in coal-fired power stations.
She said that it was cheaper for Drax to pay for emissions permits to burn coal, the most polluting fossil fuel, than to switch to biomass.
Each megawatt hour of electricity costs Drax £31 to produce from coal and £40 from biomass.
Ms Thompson said that Drax would also be unable to proceed with its £2 billion plan for three new biomass power plants unless the Government offered longer-term support. “We do not believe we can create a credible investment case for our shareholders if there is complete regulatory uncertainty. This is a very serious issue because renewable energy through biomass is a key component for delivering the 2020 target.”
The Renewable Energy Association said that plans for more than 50 biomass projects, totalling £13 billion of investment, had been suspended because of uncertainty over policy. Lord Hunt of Kings Heath, the Energy Minister, said this month that the subsidy regime for biomass needed to be reviewed. Wind farm developers are guaranteed fixed subsidies for 20 years, but biomass investors could have the subsidy cut after four years.