Drax is in talks with government about a “bridging mechanism” to cover the end of the current renewable schemes in 2027 and the start of bioenergy with carbon capture and storage (BECCS) operations at Drax Power Station.
The company said that the mechanism is needed to “provide multi-year certainty allowing Drax to secure long-term biomass supplies and continue to support energy security via flexible and reliable renewable biomass operations in advance of BECCS”.
Drax plans to invest billions to develop two BECCS units at its North Yorkshire power station which could remove 8Mt of carbon from the atmosphere per year.
A trading statement released by Drax adds: “Drax believes that a bridging mechanism offers the most effective way to link between the end of the current renewable schemes in 2027 and BECCS operations.”
It continues: “In line with the group’s expectations, the UK government has confirmed that a consultation on a bridging mechanism will commence shortly.
“Consistent with its view that a bridging mechanism offers the best route for Drax Power Station, the group did not prequalify its biomass units for the next Capacity Market auction, which will take place in February 2024 for delivery of capacity between October 2027 and September 2028.”
In August, the UK government published a Biomass Strategy which set out its position on the use of biomass in the UK’s plans for delivering net zero. The Biomass Strategy outlined the potential “extraordinary” role which biomass can play across the economy in power, heating and transport, including a priority role for BECCS, which is seen as critical for meeting net zero plans due to its ability to provide large-scale carbon dioxide removals.
The National Audit Office (NAO) is currently carrying out a review of that strategy, which Drax expects to be published in the coming weeks.
Meanwhile, Drax is also awaiting the conclusion of an Ofgem investigation into Drax Power Limited’s annual biomass profiling reporting under the Renewables Obligation scheme.
The probe was launched after a BBC documentary raised questions about whether the wood that Drax had procured from Canada was sustainably sourced.
Drax has always said that the wood it uses is sustainable.
The trading statement also notes that Drax’s pumped storage and hydro solutions division is set to “significantly” outperform the 2022 adjusted EBITDA of £171 million.
It also reveals that as of 30 November Drax had over £4.4 billion of forward power sales between 2023 and 2025.