Subsidies for Drax BECCS plant could cost £32bn

Subsidies for Drax’s proposed bioenergy with carbon capture and storage (BECCS) plant could cost consumers almost £32 billion – or £470 for each person in the UK – according to a new report from the environmental think tank Ember.

Drax has disputed the figures, saying they are based on “a series of false assumptions” that do not reflect its current proposals.

Ember noted that Drax has proposed a hybrid funding model for BECCS, whereby the plant would receive Contracts for Difference top-up payments for the power generated, as well as carbon payments from general taxation for the “negative emissions” the company claims to be able to deliver.

However, the think tank said its estimates assumed the company would only receive subsidies for power generation. It said the lack of competition between large-scale BECCS projects, means it is unlikely the plant would be able to compete in an open Contracts for Difference (CfD) auction and a strike price would instead need to be negotiated directly with government, as was the case for the Hinkley Point C nuclear plant.

Ember also assumed the proposed BECCS plant would receive a 25-year contract, partly based on a 2020 study commissioned by the Department for Business, Energy and Industrial Strategy (BEIS) and conducted by Ricardo, which estimated the cost of energy from a BECCS plant over a 25-year lifespan at between £149/MWh and £230/MWh – giving a central figure of £181/MWh.

The think tank took BEIS’ 2019 forecast for average wholesale electricity prices over the next several decades of £58/MWh and subtracted this from the cost estimates to determine the likely value of the top-up payments per megawatt-hour.

Ember said the four biomass units at Drax’s power station in North Yorkshire generated 14.1TWh of electricity in 2020 but said the company has estimated that the carbon capture process would consume around a quarter of this, leaving 10.2TWh of eligible output.

On the basis of these numbers, Ember calculated the total value of the top-up payments at between £23.5 billion and £44.3 billion, with a central estimate of £31.7 billion. If taking the latter figure, the think tank said the subsidies would add £16 per year to the average energy bills over the 25-year contact.

For comparison, the National Audit Office has forecast that Hinkley Point C will receive £30 billion in subsidies over its 35-year contract.

Drax took issue with a number of the assumptions in the report. “Firstly, key figures generated by the report relate to the building of a brand new BECCS power station, as opposed to the retrofit scheme that is being planned by Drax,” said a spokesperson for the company.

“In addition, it is claimed that Drax will develop carbon capture and storage (CCS) across all four of its biomass units when in fact its current plans include the conversion of only two units.

“Finally, the report assumes any government support contract, or CfD, would be for a 25-year period, as opposed to the 15-year contract length which is currently being envisaged by government for CCS projects and would therefore be consistent with its support for other low carbon/renewable technologies such as offshore wind.”

The spokesperson said the two BECCS units it is proposing to build could capture around million tonnes of carbon dioxide per year by 2030 and that it is “widely recognised that in order for the UK to reach its legally binding net zero target, negative emissions technologies like BECCS must be deployed.”

However, the report from Ember also questioned whether the plant would be able to deliver negative emissions as claimed. It said this ability rests on the assumption that burning wood to generate power is carbon neutral to begin with, with an equal amount of carbon emissions being absorbed as forests regrow.

“Depending on the type of wood burned, carbon can remain in the atmosphere for decades or centuries,” the report explained. “The magnitude of carbon impacts of burning wood, and the timescales over which they occur, can vary greatly.

“Impacts depend on the type of wood used, the effects on forest carbon sinks of harvesting wood for bioenergy, the emissions involved in drying, pelleting and transporting wood, and comparisons of wood-burning projects against counterfactual situations in which wood is not burned.”

“Therefore, the ability of BECCS projects, such as that proposed by Drax, to deliver timely negative emissions at the scale proposed must be called into question and treated with great caution,” it added.

“Accordingly, awarding a multi-billion-pound contract to Drax’s for a BECCS project that cannot guarantee delivery of negative emissions represents an extremely risky investment of large-scale public funds.”

Ember said it is not seeking to “entirely discount” the possibility that BECCS could deliver negative emissions but said the technology should not “monopolise attention” when there are possible alternatives for such as nature-based solutions or direct air carbon capture and storage. It raised concerns that its incorporation into decarbonisation plans has not been based on “a thorough investigation of BECCS and comparisons against alternatives” but instead on the assumption that it is “low-hanging fruit”.

The think tank said government should proceed carefully with support “until the negative emissions it is paying for are guaranteed – within a timescale relevant to achieving the UK’s climate ambitions.” It urged Drax to publish estimates for the subsidy requirements for BECCS as well as a full lifecycle assessment of the carbon impact of their biomass feedstocks with “realistic counterfactuals”.

The report also called for UK regulations on biomass to be “tightened” and for negative emissions to “unbundled” from residual emissions in carbon accounting and budgets. It said there should be more exploration less risky sources of biomass feedstock, especially domestic energy on degraded land, and highlighted the “urgent need” for greater understanding of alternative routes to provide negative emissions.

Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit, commented: “In an era of ever-cheaper renewable energy, anything that pushes up energy bills should be properly scrutinised. Rushing to sign off a new project that will impact household budgets, especially when questions continue to be asked over its true carbon footprint, could very well be a decision that is regretted in years to come.

“It is always cheaper to cut carbon than to rely on technology to deliver negative emissions, yet there remain a whole host of policy gaps that need filling. It would be more sensible to use means of decarbonising that exist today our economy than rely heavily on uncertain and untested schemes like BECCS to deliver net zero”

Eamonn Ives, head of energy and environment at the Centre for Policy Studies, said: We should always be wary when any business goes cap-in-hand to the government for subsidies – especially one from the energy sector.

“If Ember’s analysis is correct, British consumers will be forking out for expensive electricity with questionable environmental credentials. Subsidies like this are perfect ammunition for critics of net zero, who will no doubt weaponise them in the debate on whether to take greater action to end our contribution to climate change.”