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Drax Conversion Project.

The European Commission (EC) has started an in-depth investigation to make sure that the planned UK subsidy contract for a 645-MW biomass-fired unit of Drax Group Plc will be in line with EU state aid rules.

Drax is working to convert to biomass three of the six coal-fired power generators at the Drax power station at Derby. The third such unit is planned to receive a Contract for Difference (CfD), under which it will get compensations when the average wholesale price of electricity falls below a pre-determined strike price.

The EC wants to make sure that public funds used to support the Drax project are limited to what is necessary and do not result in overcompensation. It will also assess whether the positive effects of the project in meeting EU energy and environmental objectives outweigh potential competition distortions in the biomass market.

The third unit at Drax will operate till 2027, based on UK estimates, and generate roughly 3.6 TWh of power annually. In a preliminary analysis, the EC reached the conclusion that the output estimates may be too conservative. Currently, the Commission has concerns that the actual rate of return could be higher than estimated and could lead to overcompensation.

The power plant will consume about 2.4 million tonnes of wood pellets annually, which will come mainly from the USA and South America. The EC noted that the amount is considerable so demand from the Drax conversion project could significantly distort competition in the biomass market.

The in-depth investigation is the next step in the process for obtaining State aid approval and is in line with expectations. Drax welcomes the opportunity to work with the UK Government and the EC to complete the State aid clearance process.

Previous Event

In September 2012 Drax Group announced the conversion to full firing with biomass of three of its six units. The first unit was scheduled to be online by June 2013, the second unit in 2014, and the third by 2017; initially a biomass supply had been secured for the first unit. The cost was estimated at 700 million ($1.13 billion), including modifications to fuel mills and boilers and the construction of storage structures and conveyors for the wood pellet fuel. Each unit will consume about 2.3 million tonnes of biomass yearly, requiring an estimated annual total of 7.5 million tonnes in 2017.

Project completion date : 2017-12-31 12:00:00

Major organization : DRAX GROUP PLC

Address : Drax Power Station, Selby, North Yorkshire YO8 8PH

Country :United Kingdom

Url : http://www.drax.com

Financier : European Union (EU),

Financier address : European Commission

Rue de la Loi / Wetstraat 170

B-1049 Bruxelles/Brussel

Belgique/Belgi

Belgium

Tel: +32 2 299 11 11

http://europa.eu

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Publication:Mena Report
Date:Jan 16, 2016
Words:468
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