Drax co-fires 85pc at Selby unit 1

OREANDA-NEWS. July 30, 2015. UK utility Drax is co-firing biomass with coal at 85pc at its Selby unit 1 power plant — its third coal-to-biomass conversion — as it awaits an EU decision on state-aid for its contract-for-differences (CFD) subsidy awarded last year.

The subsidy has been in a state of flux since February, when the European Commission started an investigation into whether an inflation-linked 105/MWh (\\$164/MWh) CFD subsidy awarded to German utility RWE for its 400MW UK Lynemouth coal-to-biomass conversion violated EU rules.

Drax expects a phase-two investigation following the conclusion of phase one, mirroring Lynemouth's process. "There will be no conclusion on phase one until after the summer," Drax chief executive Dorothy Thompson said.

The third unit is now burning 85pc biomass under the UK's renewable obligation (RO) scheme, until it receives CFD approval to move to 100pc. The unit can continue to burn biomass under the RO as an exemption to the removal of the guaranteed support rate known as "grandfathering", through the unit's early attainment of a final investment decision that allows for renewables.

Drax poured scorn on the government's decision to scrap the climate change levy exemption from August. But, as the decision did not propose changes to CFD or RO levels — to reflect the loss of the 5.50/MWh exemption — it conceded that it "should make the case easier" with the EU going forward.

Drax continues to "carefully assess" its strategy for a possible fourth biomass conversion unit. And confirmed the Department of Energy and Climate Change (Decc) has given "strong signals that any future conversions should be supported by CFDs", Thompson said. But guidance on whether there will be further CFD rounds will not arrive until the autumn, she said.

UK energy minister Amber Rudd indicated earlier this month that a second allocation round for CFD subsidies for renewable energy development is unlikely to be held this year, and refused to say if one would be held at all.

Biomass generation accounted for 37pc of generation in January-June, equivalent to 5.2TWh, up from 23pc during the first half of last year.

Drax's first-half earnings before interest, taxation, depreciation and amortisation of 120mn were up by 18pc on the same period a year earlier.