Search Share Prices
Drax to convert fourth biomass unit by second half of this year
Drax said on Wednesday that it plans to complete work on the conversion of a fourth unit to biomass in the second half of this year, returning it to service in late 2018.
In a statement in which it welcomed the government response to the consultation on cost control for further biomass conversions under the Renewable Obligation scheme, Drax said the capital cost is significantly below the level of previous conversions, re-purposing the existing co-firing facility on site to deliver biomass to the unit.
"Drax will now continue its work to deliver the low cost conversion of a fourth biomass unit, accelerating the removal of coal-fired generation from the UK electricity system, whilst supporting security of supply," it said.
The response proposes that, rather than imposing a cap on renewable obligation certificate support for any future biomass unit conversions, a cap would be applied at the power station level across all ROC units. This would protect existing converted units and limit the amount of incremental ROCs attributable to additional unit conversions to 125,000 per annum.
Drax said this will enable the group optimise its power generation from biomass across its three ROC units under the cap, while supporting the government's objective of controlling costs under the Renewable Obligation scheme.
Chief executive Will Gardiner said: "We welcome the government's support for further sustainable biomass generation at Drax, which will allow us to accelerate the removal of coal from the electricity system, replacing it with flexible low carbon renewable electricity.
"We look forward to implementing a cost-effective solution for our fourth biomass unit at Drax."
RBC Capital Markets noted that originally, the planned proposal from the government was that each additional biomass unit would be dealt with on a discreet basis, unit by unit.
"The announcement that the allowance cap will be applied at the power station level means that Drax can manage biomass generation across all three units. The proposal each year is that a station cap will be set by Ofgem and Drax can optimise biomass generation across the three units, which allows Drax to benefit from load shifting, which is the key reason that the conversion becomes economically viable."
"Via the use of load shifting Drax will therefore move generation out of the summer months (at the two existing ROC units) and into the winter (across three ROC units) where the power price is higher."
At 1210 GMT, Drax shares were up 4% to 289p.