Interview: Will Gardiner, chief executive, Drax Group

“Our purpose is changing the way energy is generated, supplied and used for a better future”

When I come to meet Will Gardiner, the new chief executive of Drax Group, the UK is in midst of a heatwave. Shops have been emptied of fans and all Brits can talk about is the weather (some things never change). The air-conditioned office in central London provides some welcome relief from the sweltering sun, as does a glass of water offered by press officer Julian.

Like Gardiner, the office is new. Everything looks and smells pristine. As he leads me into a meeting room, Julian struggles to confirm our presence on a tablet-like digital calendar fixed to the outside wall. He is still learning how it works, he explains.

Gardiner enters a few minutes later with hand outstretched. He is laid back and affable, and speaks with a soft, soothing baritone voice that defies the usual British stereotype of Americans as loud and brash. He is eager to talk and before I can get my first question out we are already deep in discussion.

He tells me he had many motivations for joining Drax as chief financial officer in 2015 and then taking up the role of chief executive at the beginning of this year. But mainly he was attracted by the chance to do his part to help tackle climate change. “Our purpose, which is changing the way energy is generated, supplied and used for a better future, is one of the core reasons why I am here,” he says.

“One of the things I was very inspired by, for example, was Claire Perry challenging the Committee on Climate Change to figure out how we could get to a zero carbon position by 2050,” he adds. “For me, that’s central to the way I think about things.”

He was also excited to enter an industry that has gone from relative stability to fast and accelerating change in a short space of time. As a smaller player (compared to the big six), he believes Drax has “a real opportunity to do things differently”.

Before coming to Drax, Gardiner worked in telecommunications, technology and finance, most recently for the semi-conductor business CSR.

Although sectors such as these have often been praised for their high levels of innovation compared to the energy sector and held up as examples to follow, he believes this is no longer the case.

In his previous roles, he witnessed several “seismic” shifts that shook up the markets in which he operated, including the arrival of smart phones and the advent of affordable broadband. But he says the mobile phone business, for example, has reached a new normal following the successful rollout of 4G and is now “pretty static”.

By contrast, Gardiner believes the transformation taking place in the energy industry is still in its infancy and will last for decades: “You have all of these changes coming at the same time, and huge opportunities.”

He is less enthralled with the regulatory aspects of his work, especially in the face of inertia from decision makers. “Where you have lots of different stakeholders with lots of different views and you need to make changes that have to go through regulators or government, it is much more challenging,” he says.

Inertia is not a charge that can be easily levelled against Drax.

Since 2013 the company has converted four of the six units at its massive 3.9GW power station in Yorkshire to run on biomass. Three receive Renewables Obligation Certificates (Rocs) for their output, while the other is subsidised through a contract for difference (CfD).

Drax had originally hoped to secure another CfD for the latest unit to be converted but the government declared that it was ineligible. The company went to court over that decision but ultimately lost.

They nevertheless went ahead with the switch after the government decided that a new cap on the number of Rocs that more recent biomass conversions could receive should be applied across the whole of a power station rather than to individual units. Without this last minute change, Gardiner says the conversion would not have been economically viable.
“Fundamentally, it’s a better answer for the system because it doesn’t cost the country or the consumer of power anything more,” he adds. “It actually means we can run more when the system needs us.”

Drax switched the unit off in June to undertake the conversion and following its completion turned it back in August.
Gardiner says biomass has a vital role to play in the decarbonisation of the power sector.

The latest Digest of UK Energy Statistics from the Department for Business, Energy and Industrial Strategy shows renewables made up 29.3 per cent of the generation mix in 2017. Bioenergy accounted for 32.1 per cent of renewable generation – more than either onshore or offshore wind – and of this 63 per cent came from plant biomass.

When ministers boast about the growth of low-carbon generation in the UK, biomass is one of the main pillars supporting this claim.

Not everyone is happy for biomass to share the same limelight with wind and solar. Chatham House, for example, claimed in a report published in 2017 that far from being low carbon, biomass is in fact worse in terms of emissions than either gas or coal.

The report said that while the carbon dioxide released from burning biomass may eventually be reabsorbed, this can take decades or even centuries. Cutting down trees to burn in power plants, it said, not only releases the carbon stored in the trees themselves, but also stops them from continuing to grow and absorb more, as well as freeing carbon trapped in the soil. The report warned it can be 10 to 20 years before a forest returns to being a carbon sink following replanting.

It said even burning waste materials from the wood industry – although much better – can increase the amount of carbon dioxide in the atmosphere, if they would have otherwise been used to produce products.

Gardiner takes a very different view. He insists biomass, “if done in the right way”, can contribute to the growth of healthy forests: “I’m very comfortable that what we’re doing is the right thing. It’s actually contributing to capturing more carbon in the forests, not less.”

Drax’s website claims the company only sources feedstock from carefully managed working forests, while ensuring that carbon stocks are not diminished by their demand, as required by the government’s criteria for sustainable biomass.

Gardiner says the company also makes use of residual materials and thinnings, which previously would have been used to produce pulp and paper. With those markets in decline, “pellets have effectively slotted in there as very good alternative”.

He also stresses the need for some form of thermal generation to fill the gaps left by renewables. Surely, he argues, biomass is better than gas and coal, both of which “emit carbon that been locked up for millions of years.”

And, says Gardiner, combining biomass with carbon capture and storage (CCS) to generate negative emissions – which he describes as “green CO2” – would give it an unparalleled position: “You’re actually contributing more to the reduction of CO2 in the atmosphere than solar or wind could do.”

Drax is planning to do exactly that by testing CCS on one of its four biomass units. It’s not the first time the company has had a crack at CCS.

Drax was a key partner in the White Rose project – a scheme to build a coal-fired plant with CCS next to its existing power station. It pulled out of the project in September 2015, just a few months before the government cancelled the £1 billion commercialisation competition in which it was taking part.

However, biomass with CCS presents a much more exciting prospect for environmentalists than supposedly clean coal.
Drax has an ally in the Committee on Climate Change, which in its 2018 progress report again highlighted the potential for bioenergy with CCS. It also drove home the importance of CCS more generally to the cost-effective decarbonisation of the economy.

The message appears to have been taken onboard by the government. Earlier this year it launched a new taskforce to push forward the development of CCS.

Gardiner is encouraged by its creation. “We’ve been working closely with that taskforce so we understand where it’s going and we can contribute ideas,” he says.

Drax is still undertaking a feasibility study before deciding whether or not to press ahead with its CCS pilot. “If it does work economically, and we have reasonably high hopes that it will, then it fundamentally changes what we’re doing here,” says Gardiner.

At the same time, the government is obviously reluctant to let Drax take up any more of what’s left of the dwindling budget for low-carbon subsidies.

Gardiner recognises this and says the company is working tirelessly to trim costs so it can carry on burning biomass once its existing subsidies eventually run out. It currently costs it around £75/MWh to generate power from biomass. “We think if we can get it down to £50/MWh then we can continue to run without subsidy,” he adds.

To reach this goal, it is targeting both “smaller, incremental efficiency improvements all through the chain” and bigger savings from cheaper feedstock.

Gardiner cites a recently announced deal that will see a new sawmill set up next to one of Drax’s existing pellet plants in the US: “What we’ve agreed is a long-term contract to buy their residuals – the sawdust, the bark, the dry shavings… It’s much cheaper because there’s no transport costs. It’s cheaper because it’s residuals – for them a by-product. And that significantly brings down the cost of our pellets. There’s a lot of work going on to do similar things like that.”

The company is also looking at how new technologies might help: “For example, could we extract sugars from the wood and then sell that as a by-product before you make the pellets?”

As for the two remaining coal units, Drax has given up on trying to convert them to biomass and has instead opted to replace them with combined-cycle gas turbines.

To do this, it will install four new 600MW gas turbines and repurpose the two existing steam turbines to each generate up to 600MW more using waste heat from the exhausts. The total capacity of the power station will rise to almost 6.2GW – making it one of the largest in the world. The company also wants to build two 100MW battery storage systems.

Drax acquired four open-cycle gas turbines projects in 2016, and these, along with the re-powering project, are all part of its plan to find a new role supporting the power grid as more and more renewables come online.

“We’re doing black start, we’re doing reactive power, we’re doing inertia, we’re doing all sorts of services,” explains Gardiner.

He says one of the main challenges it faces is the failure of the energy market to properly reward thermal generation for the value it provides. There is not enough transparency over the procurement of balancing and ancillary services, he complains: “It’s difficult to know what exactly the grid wants. There’s lot of different deals that different people get.”
National Grid has been working to rationalise, standardise and simplify these services, but Gardiner believes this is all happening “a bit slowly”.

More importantly, he says, the capacity market has led a race to the bottom on price. “The capacity that we want to build will provide not just megawatts but system support. It doesn’t get valued in any way differently from demand-side response or from an interconnector that can’t provide those services,” he says.

When asked whether this issue should be addressed through changes to the capacity market itself or to aforementioned balancing and ancillary services, Gardiner is ambivalent. Ultimately, he says, there is definite need for new gas capacity and so one way or another it will eventually get built. The question, as far as he is concerned, is not if but when.