In a statement, a Drax spokesperson said it “remains committed to working with government to look at options”, as it looks to secure Contracts for Difference (CfDs) to fund a fourth unit biomass conversion.
It added the announcement from government “confirms the funding for the coal to sustainable biomass conversions of three of our six units at Drax is protected. However we are disappointed with the removal of grandfathering for future biomass conversions.
“Clearly there are budget pressures but there are also renewable energy targets to achieve by 2020. On a whole system cost basis sustainable biomass provides the most affordable way for the UK to achieve this.”
Drax consists of six units that were initially coal-burning. The first and second units have already been converted to full biomass burn under the Renewables Obligation (RO) and are not affected by Decc’s announcement, as they are already grandfathered in.
The third unit will operate under the CfD scheme (£105/MWh for biomass conversion), subject to European Commission state aid clearance, and is set to be converted to co-firing by the end of July.
Any further unit conversions would either be subject to the RO, which is time limited to 2017, or would have to apply in future CfD rounds if allowed.
Earlier this month, Drax slammed the Treasury’s shock decision to axe renewable energy exemptions to the Climate Change Levy, saying it stands to lose £90 million in earnings over the next two years.
This announcement hit the company hard, causing its share price to plummet almost 30 per cent in three hours, from an opening price of 350p/share which was steady through much of the morning before Osborne’s Budget speech sent the price tumbling down to around 250p/share just hours later.