Drax to cease coal generation from March 2021

Drax has stated its intention to cease generation from its last two coal units from March 2021, although they will remain available until September 2022 in line with its existing Capacity Market agreements.

The announcement follows its failure to secure contracts for either unit in the recent T-3 capacity auction and was made as part of its full-year results for 2019.

Drax power station in North Yorkshire began generating electricity from coal in the 1970s and become the largest power station in the UK when the second half was built during the 1980s. Four of its six units have already been converted to run on biomass.

Drax Group chief executive Will Gardiner described the decision to finally bring an end to coal generation at the site as a “landmark” for the company: “Drax’s journey away from coal began some years ago and I’m proud to say we’re going to finish the job well ahead of the government’s 2025 deadline.”

The closure will result in the loss of between 200 and 230 jobs, which will start going from April 2021.

“Stopping using coal is the right decision for our business, our communities and the environment, but it will have an impact on some of our employees, which will be difficult for them and their families,” added Gardiner.

“In making the decision for the UK to stop using coal and to decarbonise the economy, it’s vital that the impact on people across the North is recognised and steps are taken to ensure that they have the skills needed for the new jobs of the future.”

Commenting on the announcement, Energy and Climate Intelligence Unit head of analysis Jonathan Marshall said: “The accelerated closure of the UK’s coal power fleet shows how rapidly the renewable revolution has changed our power system. Undercut by ever-cheaper clean power, coal units have been struggling for years and closing early is a sign of the times.”

He continued: “A low carbon grid will underpin the UK’s transition to a climate neutral nation, powering our cars and keeping us warm at home. Getting the UK back on track to meet these goals is the next step for the government, which will surely be beginning to plan a similar retreat from high carbon natural gas.”

With the government unwilling to offer further subsidies for biomass conversion, Drax plans to replace the coal units with combined-cycle gas turbines (CCGTs) and battery storage.

However, the company has faced opposition from environmental campaigners who say that building new CCGTs conflicts with the UK’s climate change commitments. Although more fuel efficient that other types of gas generation, CCGTs must run for more hours each year to justify the extra capital costs.

Environmental law firm ClientEarth recently launched a legal challenge against the government’s decision to grant planning permission for the repowering project.

Drax began capturing carbon emissions from one of its biomass units last February and eventually hopes for the power station to become the anchor for a carbon capture and storage network that would enable the creation a zero-carbon industrial hub in the Humber region.

Gardiner said: “Having pioneered ground-breaking biomass technology, we’re now planning to go further by using bioenergy with carbon capture and storage to achieve our ambition of being carbon negative by 2030, making an even greater contribution to global efforts to tackle the climate crisis.”

The group reported a 64 per cent rise in EBITDA (earnings before interest, tax, appreciation and amortisation) to £410 million in its financial results for 2019, primarily due to additional earnings from the gas and hydro assets it acquired from Scottish Power at the beginning of the year.

The new purchases accounted for the majority (£114 million) of the 76 per cent increase in EBITDA from its power generation division to £408 million, which was also aided by the reinstatement of the Capacity Market and payment of deferred charges.

Adjusted earnings from Drax’s biomass pellet supply division rose 52 per cent to £32 million, whilst those from its retail arm fell 39 per cent to £17 million. The group’s operating profit grew by £2 million to £62 million.

“Drax has delivered a strong set of full-year results following the successful integration of new hydro and gas generation assets and made good progress with its strategic initiatives to build a long-term future for sustainable biomass and be the leading provider of power system stability,” said Gardiner.