Pauline Butler pauses to ask for directions for the third time. My guide to Drax has worked there for 20 years and is no slouch when it comes to rattling off the facts. Yet she cheerfully admits to not knowing the latest route from one side of the site to the other.
Who could blame her? Not only is it an enormous power plant, louring over 1,800 acres of North Yorkshire, but it is a permanent construction site. To describe the conversion of half its burners to run on biomass instead of coal as a “transformation” is not mere corporate puff. A vast hopper has sprung up where one of the main roads used to be. Biomass pellets are bulkier than coal and it will take more – and bigger – trainloads to feed the furnace. That means a new railway line. Unlike coal, pellets can’t be left out in the drizzle. Hence the giant storage domes created by reinforcing grey balloons from the inside – “reverse papier-mâché”, as Butler puts it.
Back at HQ, chief executive Dorothy Thompson laughs delightedly at that description. The biomass project is her pride and joy. It is under her leadership that Drax embarked on the journey from being the UK’s biggest polluter to being its biggest renewable generator. Carbon abatement has been a core part of the strategy since 2006, a year after she took the job.
On the future of coal, which will continue to account for more than half the plant’s output for the foreseeable future, she is poker-faced. It depends on the economics. As to carbon capture and storage, she is “an enthusiastic latecomer”. She is suitably upbeat on the expansion of Drax’s less-talked-about business retail arm, Haven, which is a core plank of the group’s strategy. Amid all that, the continuing struggle to secure a place for biomass in the power generation mix remains the hot topic.
Thompson does not use the word “lobbying”. She blanches at “convincing”. “Persuading” is acceptable. Even better: “It is about a common understanding.” However you want to describe it, Drax was instrumental in getting the UK government to support large-scale biomass power generation.
An important part of the case was establishing that there was enough wood out there that could be harvested sustainably. Thompson says: “There was no established standard of sustainability, there was no history of carbon footprinting… we were part of all that.”
Thompson is “very dismayed” at a joint campaign by Greenpeace, Friends of the Earth and the RSPB against the large-scale burning of wood for power. They argue it is unsustainable to burn “whole trees” as opposed to forest residues. “We would never burn a whole mature tree, and the reason we don’t burn a tree of that age is we couldn’t afford to,” says Thompson. However, there are enough grey areas for the debate to run and run.
The argument put forward by the non-governmental organisations gained traction in no lesser publication than The Economist, a fact that elicits a purse-lipped “no comment”. Thompson concedes: “I think that we as an industry have to be much clearer about what sustainable standards we hold ourselves accountable for… You need mandatory sustainability standards and it is to the UK’s credit that we are going to be the first country to deliver them.”
Drax confidently asserts that the biomass it burned in 2012 emitted 80 per cent less greenhouse gas over its life cycle than the coal it replaced. “If you look at the data, I think you really can demonstrate we are making major carbon savings,” she says.
In practice, the campaigners are too late to shut the stable door on this particular horse, because Drax has established its entitlement to subsidies and secured finance. The challenge now lies in setting up a biomass supply chain from scratch.
The pace of the biomass conversion is dictated by how fast Drax can lay hands on the stuff. “We need vast amounts of biomass but the supply chain is in its infancy,” says Thompson. Drax is investing in two pellet plants and a port in the US, as well as port and railway expansion in the UK. One burner has switched over and was generating 400MW on my visit, according to a screen in the lobby.
“We are hopeful, if we can get the right support, we will get our second unit in 2015 and the third unit in 2016,” says Thompson. An investment decision on the rest is some way away, but she seems keen to continue on that path. “I am a firm believer that biomass is a wonderful solution for the UK,” she says.
Drax had plans to build three 300MW dedicated biomass plants but ditched the last of them in autumn 2012. Thompson presents this as an insurance policy, devised when the policy environment favoured dedicated plant over coal conversion. “We believed there was a serious risk that government policy would not support biomass in coal power stations,” she says. “As you know, the policy direction is very different now. We are pleased with that direction. We think it is a much more cost-effective solution.” Although she admits: “We would not have minded doing both.”
On the other side, there are those who argue that the UK should be keeping more coal in the energy mix: it is cheap and people are struggling to pay their bills. Thompson will not be drawn to endorse or condemn such a view. “All we can do is respond to government policy. Government policy is currently indicating that over time we would cut back on coal.” How much time, she cannot say. Drax can continue to burn coal for decades if the economics stack up.
The cost of coal generation is going up due to the government introducing a carbon floor price. Critics say it is an inefficient way to incentivise low-carbon investment and loads unnecessary costs on consumers. However, it underpins the business case for biomass and Thompson does not expect a U-turn. “I am not aware really of public reaction to the carbon floor price. Probably, if you ask the man on the street, he would be supportive. From our engagement with government, it is very clear that they believe there is strong support for the carbon floor and they don’t give any indication that they are reviewing it.”
Thompson neatly sidesteps a question on whether she envisions a backlash against more expensive forms of generation to bring coal back into favour. “I envision a time when biomass will become much cheaper,” she says, albeit decades away. As renewables go, it is already one of the cheapest, she says, and unlike wind it does not give rise to extra grid reinforcement and stability costs.
Meanwhile, she is belatedly getting excited about the prospect of carbon capture and storage (CCS) making the plant’s operation carbon neutral or even, with biomass, carbon negative. “We spent a long time wondering whether we actually believed there was a convincing CCS technology,” she says. Since oxyfuel came along, they have become “very, very enthusiastic”. Drax sits at the heart of a hub of heavy industry and is involved in the White Rose Project. It is one of two end-to-end demonstrations to get the go-ahead for detailed feasibility studies as part of the government’s £1 billion competition. Thompson says: “There is real confidence it will work”, but government funding is “pivotal”. It is not clear whether there is enough in the pot to make both schemes viable.
Drax has been quietly flourishing in the business retail sector. It has expanded Haven Power fivefold in the past five years. It is expected to make a “modest loss” up to 2015 but in the long run provides “a very efficient route to market” compared with selling power as a wholesale commodity. Thompson ultimately aims to sell half the plant’s output this way.
There are no plans to start supplying households, however. Indeed, Thompson laughs at the notion. The company has been scarred by an ill-fated scheme to insulate homes under the government’s Community Energy Saving Programme (Cesp). It is under investigation by Ofgem after meeting just 37 per cent of its obligation. Only one of four independent generators required to take part hit the target.
Thompson does little to conceal her displeasure, both at the government for imposing such a “misplaced” duty, and contractor Carillion for failing to deliver. “The first thing to say about Cesp is there is a very good reason that generators are not required to be part of Eco ,” says Thompson. “Generators have no linkage to the household and so to ask us to embark on programmes that are all about implementing energy efficiency measures is very, very challenging.”
Drax is looking to sue Carillion for breach of contract. “We appointed a company to undertake our obligation and they did not perform. We are very, very disappointed by their performance.”
It is a blot on an otherwise assured performance in uncertain conditions. Those grey domes mark the end of the beginning; there is much work yet to come.
Thompson’s rise to power
Dorothy Thompson worked in development banking for the first ten years of her career. One of the last projects she worked on was a large power station in the Philippines – her first taste of the electricity world.
In 1993 she joined Powergen to oversee the project finance of their overseas ventures. Five years later, she moved to Intergen, where she was responsible for four gas-fired power plants across the UK and the Netherlands.
When she was approached by Drax in 2005, she says “it never went through my mind to say no – it is one of those approaches one couldn’t consider refusing”.
Eight years in, she declines to speculate on what her next move could be. “I am enjoying this job, I am going to focus on this for now.”
This article first appeared in Utility Week’s print edition of 14th June 2013.
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