In a letter to North Lincolnshire Council seen by Utility Week, Drax Power said it was withdrawing its plans for the £600 million plant at Immingham Port.
The company blamed a “highly challenging” investment case and “lack of regulatory support for dedicated biomass”.
The news emerged as Drax raised £190 million in a share placing to invest in converting three of six generating units at its coal plant in Selby, North Yorkshire, to burn biomass.
In February, the company abandoned plans for two other 300MW biomass plants, in favour of converting its 3,900MW coal power station in north Yorkshire to burn predominately biomass.
The Renewable Energy Association (REA) said the cancellation of this project was “alarming”.
Recent government proposals to cut the renewables obligation certificates available for biomass were “extremely destabilising”, said REA head of policy Paul Thompson. Other plans for dedicated biomass plants could also disappear due to a lack of secured funding, he added.
This news from Drax follows an announcement from Centrica earlier this week that it is pulling proposals for two dedicated biomass plants.