BURNING ISSUE
Power station sets biomass target as group aims for a zero-carbon future
THE YORKSHIRE-BASED power station Drax plans to supply more of its own biomass, to help the UK reach its targets for reducing carbon emissions.
In a trading update, Drax said it was targeting biomass self-supply capacity of five million tonnes by 2027. The company said it was evaluating options for a further three million tonnes over the next seven years.
Drax said it is also targeting returns significantly in excess of the group’s cost of capital. Drax also revealed that it was trading in line with expectations and its acquired assets were performing strongly.
Will Gardiner, Drax Group’s CEO, said: “Drax’s purpose is to enable a zero-carbon lower cost energy future.
“We believe sustainable biomass has a long-term critical role to play. That’s why we plan to supply 80 per cent of our biomass from our own sources – a significant increase on the 20 per cent we currently self-supply. Supplying more of our own biomass will cut costs and reduce supply chain risks, ensuring our biomass power generation remains viable in the long term.
“When combined with carbon capture it will also enable negative emissions, helping the UK on its path to net zero by 2050.”
Drax hosted a Capital Markets Day for investors and analysts. Mr Gardiner and his management team provided an update on how the group is delivering its goals. The event outlined the “significant opportunities” Drax sees in growing its biomass supply and renewable generation businesses.
The statement added: “As a
part of the group’s key strategic objective of building a long-term future for sustainable biomass, Drax remains focused on opportunities to reduce its cost of biomass to a level which is economic without subsidy in 2027.
“These savings will be delivered through further optimisation of existing biomass operations and greater utilisation of low-cost wood residues; an expansion of the fuel envelope to incorporate other renewable fuels and a significant expansion of self-supply capacity.”
Drax is targeting five million tonnes of self-supply capacity by 2027. It is 1.5 million today, with 0.35 million tonnes in development.
Drax said it will continue to work with its current suppliers to develop its portfolio.
The statement added: “At the 2019 half-year results, Drax announced an investment in lowcost capacity at its existing three sites in the US Gulf, adding 350,000 tonnes of new capacity by 2021. The capital cost is in the region of £50m, enabling targeted fuel cost savings in excess of £15/ MWh on the additional capacity once commissioned.”
Drax is evaluating options to deliver an additional three million tonnes of capacity. These options are expected to deliver returns significantly in excess of the group’s cost of capital, with strong cash flow generation and a fast payback, Drax said.
These activities would enable Drax to develop an unsubsidised biomass generation business by 2027, with the option to service wood pellet demand in other markets – Europe, North America and Asia, the company said.
The statement added: “Biomass sustainability is at the heart of the group’s activities and Drax has implemented industry leading processes which support this expansion, encourage forest growth and make a positive contribution to climate change.”
We believe sustainable biomass has a critical role to play. Will Gardiner, Drax Group’s CEO