Author: Alice Roberts

Counting the cost: Why its critical that discussions around Net Zero are based on accurate numbers


  • Ember’s modelling approach has used a number of assumptions that do not align with Drax’s current project ambitions or the government’s proposed design of the power-BECCS business model. 
  • Ember’s analysis is based on a four-unit deployment of BECCS. Drax’s current project plans and planning consent anticipate a two-unit conversion to BECCS. 
  • The analysis has also assumed a 25-year term for any power-BECCS contract, current government proposals are for a 15-year deal. 
  • The likely power-BECCS business model will be a dual CfD for carbon and power, with revenues earned in the Emissions Trading Scheme and Voluntary Carbon Market significantly reducing the amount of support required from the UK government. 
  • Ember have not given appropriate consideration to the counterfactual of BECCS at Drax. Baringa analysis shows that BECCS at Drax could, save the UK £15bn in whole economy costs between 2030 and 2050 providing a more efficient, cost effective and straightforward pathway to meeting Net Zero targets than other potential options 

Recent steps from the UK Government have been a vote of confidence in our plans to deliver bioenergy with carbon capture and storage (BECCS) at Drax’s power station in North Yorkshire, to deliver the world’s largest carbon dioxide removal facility. These decisions show the clear case and backing there is for Drax’s operations in Yorkshire and the Humber and the workers and communities that make this possible. Alongside planning consent, the Government also began consulting on a mechanism to facilitate large-scale biomass electricity generators to transition to power BECCS. As highlighted by the International Energy Agency, BECCS is the only technology that can both remove carbon and produce energy. These two steps together illustrate the decisions needed to ensure the UK’s energy security. 

Last week, we also saw a number of media reports about the cost of BECCS at Drax Power Station. Many of these reports were driven by a piece of analysis undertaken by Ember. Scrutiny on government expenditure is important, but it is critical that the assumptions made in determining the analysis are carefully considered and based on up-to-date information. 

Ember’s analysis ‘Drax’s BECCS project climbs in cost to the UK public’ has made a number of incorrect assumptions which do not align to the current proposed design of the power-BECCS business model or Drax’s current project ambitions. As a result, we believe Ember’s estimates relating to the £43bn overall cost of BECCS at Drax, as well as the projected £1.7bn yearly subsidy for BECCS at Drax is overstated.  

Three assumptions are of particular note: 

  1. Ember misunderstands Drax’s current plans to deploy power-BECCS at Drax Power Station. They have assumed that Drax converts all four biomass units to operate with carbon capture and storage. However, Drax’s current BECCS project plan, and recently successful Development Consent Order, anticipate a two-unit conversion. Any further development of BECCS beyond two units would require a change to the project plan, new engineering solutions and additional planning consents to be granted. This means that Ember’s assumptions have overestimated Drax’s BECCS deployment (and thus cost per year) by a factor of two.

  2. Ember has also misunderstood the currently intended structure of a power-BECCS business model. They have assumed that any contract for power-BECCS will be for a 25-year term. In their recent update on the design of the power-BECCS business model, published at the end of last year, the UK Government announced their minded-to position for a power-BECCS business model to have a term length of 15 years. This is broadly in line with business models proposed for other CCUS sectors. In their view, this provides a balance between subsidy costs and achieving negative emissions through delivering a larger volume of carbon removals. As a result, Ember’s assumption of a 25-year term does not accurately reflect the real-world policy development position and means that their assumption of the ‘lifetime costs’ of BECCS at Drax has been significantly overestimated.

  3. Ember has assumed that a power-BECCS project receives a Contract for Difference (CfD) on power market revenues only, assuming a strike price of £230/MWh. This approach ignores the primary purpose of BECCS which is its ability to produce negative emissions and facilitate the decarbonisation of some of the hardest and/or most expensive sectors of the economy such as aviation and agriculture.


Since some of the earliest proposed designs of the power-BECCS business model were announced back in August 2022, the Government has clearly stated its intent to ensure that remuneration for power-BECCS facilities takes into account both revenues earnable in the power market and in the carbon market. This position has led Government to develop a business model under a ‘dual CfD’ approach; a CfD on power (CfDe) and a CfD on carbon (CfDc). Under this approach, on the CfDc, the Government is exploring options to how a BECCS project will be able to access revenues in carbon markets such as the UK Emissions Trading Scheme (ETS) and Voluntary Carbon Market (VCM) revenues, which displaces revenues under the CfDc. These markets have the potential to bring in private revenues to support BECCS facilities and would reduce the amount of support required from the UK government and the taxpayer under the CfDc. This approach is aligned with the ‘polluter pays’ principle of decarbonisation whereby CO2 intensive companies provide funding to support decarbonisation measures such as BECCS. Examples of this hybrid approach to supporting BECCS projects can be seen with Orsted’s ‘Kalundborg Hub’ which is partly supported by Danish state subsidies and an agreement with Microsoft to purchase negative emissions in the VCM.  

This hybrid (dual CfD) approach means that, even if you take Ember’s £230/MWh cost of BECCS at face value, UK energy bill payers will not face a £1.7bn annual bill as claimed. ETS and/or VCM revenues supporting the project (via the CfDc) would have the potential to significantly reduce the amount of Government support required for the project. Later this year, the UK Government intends to consult on the integration of negative emissions into the UK ETS and the role of VCMs.  

Ember’s analysis has also not given appropriate consideration to the counterfactual to BECCS at Drax, i.e. what is the incremental cost of the UK meeting its legally binding net zero targets in the absence of the carbon removals delivered by Drax Power Station’s BECCS units? For example, the backing data of Ember’s ‘Cutting the Bills’ report, outlines how a 98% clean electricity system can be achieved by 2030 and the contribution that 0.6GW of BECCS must make in order to achieve this target and reduce electricity bills by £300 per year. For context, 0.6GW of BECCS is approximately equivalent to the power output of one and a half operational Drax BECCS units.  

In a report commissioned by Drax and published by Baringa this week, their modelling shows that two units of BECCS at Drax could, if implemented, save the UK £15bn in whole economy costs between 2030 and 2050 providing a more efficient, cost effective, and straightforward pathway to meeting Net Zero targets than other potential options. The other potential options include an investment of £8.5 billion in synthetic natural gas production (using biomass to create gas for consumption in industry etc.), an increase in biomass imports to feed this increase in synthetic natural gas production, the rollout of an additional 735,000 more heat pumps in hard-to-treat homes costing £5 billion, and the additional deployment of onshore and offshore wind costing £3 billion plus associated storage and network costs. Whilst it is recognised that it is impossible to accurately predict the future and no counterfactual can be 100% accurate, it is nonetheless important to develop robust assumptions for a counterfactual to understand savings as well as costs. The overall savings delivered by BECCS at Drax in meeting net zero far outweigh the costs associated with its deployment.  

In conclusion, Drax recognises the importance of ensuring that all CCUS and energy projects in the UK represent good value for money for the taxpayer and that differing parties may have different views and assumptions when modelling the cost of a project. We believe that Ember’s interpretation of both the scope of Drax’s BECCS project and the business model being developed to support power-BECCS deployment in the UK has resulted in an inaccurate and overstated picture of the cost of Drax’s BECCS project to UK electricity consumers. We remain committed to discussing these matters with government and remain confident in our ability to demonstrate that our project is value for money and expect that once the power-BECCS business model has been finalised, it is highly likely that the government will publish a full account of the strike price of Drax’s BECCS project, as they do with other CfD supported projects 

Development of UK CCS infrastructure and BECCS business model

Drax notes the announcement by the UK Government of further policy support for the development of carbon capture utilisation and storage clusters (CCUS) in the UK, including an update on the Track-1 expansion and Track-2 processes.

The UK Government has also reiterated its ambition to deploy at least 5 MtCO2/year of engineered greenhouse gas removals by 2030, potentially scaling to 23 MtCO2/year by 2035 and up to 81 MtCO2/year by 2050, and published its latest position on the design of a Power BECCS business model, which includes a 15-year CfD with a dual payment mechanism linked to both low-carbon electricity and negative emissions.

Drax Group CEO, Will Gardiner said:

Will Gardiner, Drax Group CEO

“Today’s announcements by the Government will further progress the development of CCUS clusters in the UK and are an important step forward in facilitating the deployment of large-scale BECCS.

“We welcome the publication of further details on a BECCS business model and the Government’s continued commitment to deploy at least five million tonnes of greenhouse gas removals by 2030, which we believe can only be achieved through delivering BECCS at Drax Power Station.

“BECCS has the potential to deliver carbon removals whilst generating renewable power and installing this technology at Drax Power Station will enable it to continue to play a critical role in the UK’s energy security, creating and supporting thousands of jobs in the Humber region and helping the country meet its Net Zero targets.”

Details of the update from the UK Government:

Track-1 expansion – the Government has agreed Heads of Terms with the operator of the East Coast Cluster CO2 transport and storage network and will now consider the best time to launch an expansion process for the East Coast Cluster from 2024.

Track-2 cluster deployment – the Government has confirmed plans for the assessment of an initial “anchor phase” of capture projects connecting to the Acorn and Viking clusters, which will target projects for deployment in 2028/9, and the development of a “buildout phase” for additional projects to connect thereafter.

The updates on Track-1 expansion and Track-2 cluster deployment continue to affirm that there are two potential routes which could support BECCS at Drax Power Station as well as wider CCS projects in the Humber region by 2030 – the East Coast Cluster and Viking CCS cluster. Drax is in discussions with all relevant stakeholders in the region about the potential of deploying BECCS at Drax Power Station.

Separately, Drax continues to expect that a public consultation on a bridging mechanism will commence shortly.


Links to documents


Drax Investor Relations:
Mark Strafford
+44 (0) 7730 763 949


Drax External Communications:
Chris Mostyn
[email protected]
+44 (0) 7548 838 896

Andy Low
[email protected]
+44 (0) 7841 068 415



Trading Update – Strong System Support Performance

RNS Number : 6382V
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)


  • 2023 Adjusted EBITDA(1/2) and EGL(2) expectations in line with consensus estimates(3)
  • Continued progress on UK BECCS – bridging mechanism consultation expected shortly
  • Letter of Intent agreed for sale of up to one million tonnes of biomass to major European utility for projects including biofuels
  • £150 million share buyback programme completed

Drax Group CEO, Will Gardiner said:

Will Gardiner, Drax Group CEO

“We continue to deliver a strong system support and generation performance, providing dispatchable, renewable power for millions of homes and businesses.

“Drax Power Station is the UK’s single largest provider of renewable energy by output during 2023 and a critical contributor to the country’s security of supply.

“We are excited about the opportunity to deliver BECCS in Yorkshire, which could help the UK meet its net zero targets and continue to support the country’s long-term energy security, whilst creating thousands of new jobs across the region.

“BECCS can also help deliver the global energy transition and we are continuing to screen options for projects in North America, which could provide long-term, large-scale carbon removals and attractive opportunities for growth as part of a potential trillion-dollar global carbon removals market.”


The Group’s UK generation assets – backed up by its integrated global biomass supply chain – have performed well, supporting UK energy security, with flexible and reliable renewable power generation and a wide range of system support services.

Generation contracted power sales

As at 30 November, Drax had over £4.4 billion of forward power sales between 2023 and 2025 on its ROC, pumped storage and hydro generation assets – 30.2TWh at an average price of £146.6/MWh(4/5/6). Both 2023 and 2024 are effectively fully hedged.

The Group has a further 3.3TWh of CfD generation contracted for 2023 and 2024.

Contracted power sales as at 30 November 2023202320242025
Net ROC, hydro and gas (TWh)(4/5)
- Average achieved £ per MWh(6)169.1148.0115.3
CfD (TWh) 1.22.1-

Pumped storage and hydro

Cruachan pumped storage and the Lanark and Galloway hydro schemes continue to perform well. The primary driver of this performance is Cruachan, which delivers system support services via the short-term balancing mechanism, in addition to ancillary services, power generation and the Capacity Market.

Drax now expects 2023 full year Adjusted EBITDA for pumped storage and hydro to be significantly above full year 2022 (£171 million).

Drax believes that the retirement of dispatchable assets and increased reliance on intermittent renewables in the UK system will continue to drive further demand for dispatchable power and system support services, creating long-term enduring earnings opportunities for assets like Cruachan.

Drax is continuing to develop options for Cruachan, including a 600MW expansion.

Biomass generation and supply chain

The current operating environment highlights the importance of continued investment to ensure good operational performance and availability. As a part of this investment programme, two major planned outages were completed at Drax Power Station in July and November.

The Group has a robust and diversified global supply chain comprised of third-party suppliers, as well as operating around five million tonnes of production capacity across the Group’s own 17 facilities in the US and Canada. This diversification provides a high level of operational redundancy designed to mitigate any potential disruption at supplier level.

In the UK, Drax utilises dedicated port facilities at Hull, Immingham, Tyne and Liverpool, with annual throughput capacity and biomass rail sets providing supply chain capacity significantly in excess of the Group’s typical annual biomass usage.

Drax Power Station has c.300,000 tonnes of onsite biomass storage capacity. Taken together with volumes throughout its supply chain the Group currently has visibility of around one million tonnes of biomass in inventories. This adds significantly to the resilience and security of the UK power market over the winter period, with around 30% of the UK’s largest gas storage site required to produce the equivalent electricity supported by Drax’s inventory.

As a vertically integrated producer, user, buyer and seller of biomass, Drax operates a differentiated biomass model from its peers and sees the current global biomass market as representing a balance of short-term risks and long-term opportunities for the Group.

Pellet Production

Against the backdrop of a more challenging operational and market environment the business has continued to deliver a robust performance and has now commenced supply of a new 450,000 tonne five-year contract with a Japanese customer.

The Group currently has contracted over 17 million tonnes of long-term biomass sales to third parties in Asia and Europe extending to the mid-2030s.

In December, Drax agreed a Letter of Intent for the sale of up to one million tonnes of biomass to a major European utility, for projects including a biofuel project which is targeting a final investment decision during 2025.

Drax believes that these developments demonstrate the growing demand for biomass pellets in Asia and Europe and its wider application in the energy transition, including for BECCS, sustainable aviation fuel (SAF) and other industrial processes.

With its robust and diversified global supply chain Drax believes that it is well placed to support increased demand for sustainable biomass in a wider range of applications and in doing so create value for stakeholders.


The Industrial and Commercial (“I&C”) business has continued to perform well reflecting strong growth in renewables.

In September, Drax acquired BMM Energy Solutions (“BMM”), an installer of electric vehicle charge points. The acquisition of BMM strengthens Drax’s end-to-end EV charging proposition, as part of the Group’s commitment to support customers in achieving their net zero ambitions.

Ofgem and the National Audit Office

In May, Ofgem announced the opening of an investigation into Drax Power Limited’s annual biomass profiling reporting under the Renewables Obligation scheme. In its opening statement, Ofgem confirmed that it had not established any non-compliance that would affect the issuance of ROCs. Drax awaits the conclusion of this investigation.

Also in May, Ofgem (via its audit contractor, Black and Veatch), completed an annual assessment of the Group’s compliance with the Renewable Obligation scheme, with Drax receiving a “Good” rating (the highest of four available ratings).

In September, the National Audit Office (NAO) announced a review of the UK Government’s biomass strategy. Drax believes that the NAO’s report will be published in December.


In August, the UK Government published a Biomass Strategy which set out its position on the use of biomass in the UK’s plans for delivering net zero. The Biomass Strategy outlined the potential “extraordinary” role which biomass can play across the economy in power, heating and transport, including a priority role for BECCS, which is seen as critical for meeting net zero plans due to its ability to provide large-scale carbon dioxide removals.

In September, the UK Government set out an indicative position that large-scale BECCS projects would be eligible to participate in an expansion of the Track-1 carbon cluster sequencing process and confirmed its intent to progress both Track-1 expansion and Track-2.

Both of these options are potentially available to Drax and the timing for their deployment is consistent with the Group’s ambition to develop BECCS at Drax Power Station by 2030.

Further details of the process are expected to be published by the UK Government shortly.

Bridging mechanism

Drax has held formal bilateral discussions with the UK Government in relation to a potential bridging mechanism between the end of the current renewable schemes in 2027 and BECCS operations at Drax Power Station.

Drax believes that a bridging mechanism offers the most effective way to link between the end of the current renewable schemes in 2027 and BECCS operations. This could provide multi-year certainty allowing Drax to secure long-term biomass supplies and continue to support energy security via flexible and reliable renewable biomass operations in advance of BECCS.

In line with the Group’s expectations, the UK Government has confirmed that a consultation on a bridging mechanism will commence shortly.

Consistent with its view that a bridging mechanism offers the best route for Drax Power Station, the Group did not prequalify its biomass units for the next Capacity Market auction, which will take place in February 2024 for delivery of capacity between October 2027 and September 2028.

BECCS – Global

Drax is continuing to develop global options for BECCS, with a primary focus on North America. A number of sites have been identified with the aim of creating a pipeline of development opportunities into the 2030s, although the precise details remain commercially sensitive.

In August, Drax opened a new Global BECCS headquarters in Houston, Texas, and now has over 100 employees working on its Global BECCS programme in the UK and North America.

Full Year Expectations

Drax continues to expect full year Adjusted EBITDA and the Electricity Generator Levy (EGL) for 2023 to be in line with analysts’ consensus estimates, subject to continued good operational performance.

Drax also expects Net debt to Adjusted EBITDA excluding EGL to be around 1x at the end of 2023.

Details of the Group’s definition and the basis of calculation for Net debt are summarised in the 2022 Annual Report and Accounts, note 2.7, with further details of working capital in note 4.3.

Balance sheet and working capital

In November, Drax repaid CAD$100 million of its ESG term-loan and extended the maturity of the remaining CAD$200 million from 2024 to 2026. The facility includes an embedded ESG component which adjusts the margin payable based on Drax’s carbon intensity measured against an annual benchmark.

Separately, the Group has extended a £400 million receivable facility in its Customers I&C business to 2025, reducing to £300 million thereafter. The facility has grown with customer revenues, as power prices have risen, helping to offset the associated working capital requirements and will reduce as contracted positions unwind and power prices fall.

This is a non-recourse facility, with a sale of the underlying receivable asset, accelerating cash receipt. At the point of sale, Drax transfers substantially all the risks and rewards of ownership through the non-recourse nature of the transaction. No obligations are created from the transfer and no obligation is recognised.

Capital allocation

The Group’s policy remains unchanged and Drax continues to assess options for capital investment, further returns to shareholders and the repurchase or retirement of debt.

Following the completion of the Group’s £150 million share buyback programme Drax has c.384.6 million shares in issue, with a further c.40.3 million held in treasury.


Drax will report its full year results on 29 February 2024.


  1. Earnings before interest, tax, depreciation, amortisation, excluding the impact of exceptional items and certain remeasurements.
  2. In December 2022, the UK Government confirmed the details of the Electricity Generator Levy (EGL) on renewable and low-carbon generators, implemented in 2023 and running to 31 March 2028. The levy applies to the three biomass units operating under the Renewables Obligation (RO) scheme and run-of-river hydro operations. It does not apply to the Contract for Difference (CfD) biomass or pumped storage hydro units. Following review, Drax has concluded that EGL will be accounted for as a levy within Gross Profit and therefore Adjusted EBITDA. For the remainder of 2023 Drax will present Adjusted EBITDA including and excluding EGL for ease of comparison.
  3. As of 28 November 2023, analyst consensus for 2023 Adjusted EBITDA before EGL was £1,164 million, with a range of £1,100 – 1,199 million. Analyst consensus for 2023 EGL was £198 million. The details of this company collected consensus are displayed on the Group’s website.
  4. Includes 2.3TWh of structured power sales in 2024 and 2025 (forward gas sales as a proxy for forward power), transacted for the purpose of accessing additional liquidity for forward sales from ROC units and highly correlated to forward power prices.
  5. 2023 includes limited forward selling of pumped storage generation resulting in higher captured prices but lower system support availability.
  6. Presented net of cost of closing out gas positions at maturity and replacing with forward power sales.


Drax Investor Relations: Mark Strafford
[email protected]
+44 (0) 7730 763 949


Drax External Communications:

Chris Mostyn
[email protected]
+44 (0) 7548 838 896

Andrew Low
[email protected]
+44 (0) 7841 068 415


Forward Looking Statements

This announcement may contain certain statements, expectations, statistics, projections and other information that are, or may be, forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans, beliefs, and objectives for the management of future operations of Drax Group plc (“Drax”) and its subsidiaries (the “Group”), are not warranted or guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although Drax believes that the statements, expectations, statistics and projections and other information reflected in such statements are reasonable, they reflect Drax’s current view and no assurance can be given that they will prove to be correct. Such events and statements involve risks and uncertainties. Actual results and outcomes may differ materially from those expressed or implied by those forward-looking statements. There are a number of factors, many of which are beyond the control of the Group, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These include, but are not limited to, factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; uncertainty as to future investment and support achieved in enabling the realisation of strategic aims and objectives; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected, including the impact of prevailing economic and political uncertainty, the impact of strikes, the impact of adverse weather conditions or events such as wildfires. We do not intend to publicly update or revise these projections or other forward-looking statements to reflect events or circumstances after the date hereof, and we do not assume any responsibility for doing so.


Track-1 expansion process update

As part of the update, DESNZ set out its draft expectation to run the Track-1 extension and Track-2 processes in parallel, subject to T&S capacity and ministerial sign off. Following the designation of the Viking CCS cluster as a Track-2 cluster in July 2023, there are now two potential routes which could support the Drax Power Station BECCS project and wider CCS in the Humber region by 2030 – the East Coast Cluster and Viking CCS cluster.

DESNZ also set out an indicative timeline that shortlisted projects would commence negotiations from Autumn 2024. DESNZ will now receive feedback on its draft proposals pending further updates and the publication of final guidance in due course.

Will Gardiner, Drax CEO, said:

“The Government’s statements are a helpful step forward not just for BECCS in the UK, but for the wider fight against climate change. We can only reach net zero by investing in critical, new green technologies such as BECCS. I welcome the Government’s draft position and urge them to progress with both Track-1 expansion and Track-2 processes in parallel this winter”.

Separately, in August 2023 the UK Government published a Biomass Strategy which set out its position on the use of biomass in the UK’s plans for delivering net zero. The Biomass Strategy outlined the potential “extraordinary” role which biomass can play across the economy in power, heating and transport, including a priority role for BECCS, which is seen as critical for meeting net zero plans due to its ability to provide large-scale carbon dioxide removals. This is in addition to formal bilateral discussions between Drax and the Government in relation to a potential bridging mechanism between the end of the current renewable schemes in 2027 and the commissioning of BECCS at Drax Power Station.


Drax Investor Relations:
Mark Strafford
+44 (0) 7730 763 949


Drax External Communications:
Aidan Kerr
+44 (0) 0784 909 0368



Hear from the experts: the world needs carbon removals

Capturing the opportunity

Drax has an ambition to be a global leader in carbon removals and we have bold plans to eradicate 14 million tonnes of carbon from the atmosphere a year by 2030. The scale of this ambition reflects what I see as a once-in-a-lifetime opportunity to be a founding player in a market which will play a critical role in tackling climate change.

Read Will Gardiner’s latest article here.

Go further with carbon removals by Drax here

Biomass and BECCS are essential in the UK’s journey to Net Zero

The Strategy provides an important steer on the short-, medium- and long-term use of biomass in the UK’s 2050 Net Zero target.

With the Government’s Strategy in hand, I am more certain than ever on two things.  First, that there remains a clear and powerful role for biomass and BECCS in helping the UK balance harder to abate sectors, like aviation, and reach Net Zero.

And secondly, that bioenergy with carbon capture and storage (BECCS) has a vital role to play in our global energy transition – and that Drax is well placed to deliver.

Why we should be confident

In developing the Strategy, the Government has considered several factors including: availability of biomass and the priorities for end use; impacts on air quality; the sustainability of biomass use; as well as the role of BECCS in helping to reach our long-term climate goals.

The ‘Priority Use Framework’ evaluates where biomass would be most sustainably and efficiently used across sectors, given supply constraints. This framework is an important tool, which has been developed with four key principles in mind; sustainability; air quality; the circular economy and resource efficiency; and ability to support us getting to Net Zero.

Critically, the Priority Use Framework states that:

  1. In the short-term (2020s) government will continue to facilitate sustainable biomass deployment through a range of incentives and requirements covering power, heat and transport
  2. In the medium-term (to 2035) government intends to further develop biomass use for utilities such as heat and power with a view to where possible transition to BECCS
  3. Biomass for use in BECCS should be prioritised in the long term (to 2050)

It’s very encouraging to see Government recognise the important role that biomass plays in our energy transition in both the short and medium term, as well as its prioritisation of BECCS in the long term.

Although there are various routes for deploying BECCS across different industries, the strategy further prioritises the deployment of BECCS on existing biomass generation plants with established supply chains, further supported by the development of the Power-BECCS business model for the first BECCS projects.

The Strategy is also promising as it presents an evidence-driven basis for long-term policy stability and I believe if the Government continues in this direction, it will draw investment to the UK’s bioenergy industry.

Why this is critical for the country

Biomass has already played an important role in supporting energy security while helping the UK decarbonise, displacing fossil fuels with a source of renewable, dispatchable power. Our work has also made a significant contribution to the UK economy, adding an estimated £1.8 billion to the UK GDP and supporting 17,800 jobs in 2021 alone.

And, looking to the future, BECCS presents an enormous opportunity to the UK.

Early investment in this critical technology has the potential to support energy security, and climate targets whilst creating jobs and making the UK a leader in the potentially trillion-dollar global CDR market.

This work needs to happen now – nearly all realistic pathways to limit warming to 1.5C require the carbon removal technology and renewable power BECCS offers, and expert voices at the UN’s Intergovernmental Panel on Climate Change, the UK’s Climate Change Committee, and Forum for the Future have said that carbon removals will be needed to address the climate crisis.

Today’s Strategy is a clear signal from Government that they recognise the importance of BECCS and the urgency with which we must employ it within the UK.

Why this is encouraging for Drax

Drax is an international, growing, sustainable business at the heart of global efforts to deliver Net Zero and energy security and I believe the Strategy we have seen from Government today is a clear indication of their support for the work that we do.

With BECCS, Drax has the ability to become a global leader in carbon removals technology. We are engaged in formal discussions with the UK Government about the project and, providing these are successful, we plan to invest billions in transforming Drax Power Station into the world’s largest carbon removals project. The prioritisation of BECCS within the Priority Use Framework shows the Government is aligned to this vision.

As we look forward

We welcome the Government’s Biomass Strategy and will continue to unpack what it means for our business over the coming days and weeks with a mind to our next steps.

Government must now ensure that as it progresses its consultation on biomass sustainability that that process is equally evidence-driven and ensures that science-based methods drive the policy forward. We hope to continue to work alongside Government to support these efforts.

Our formal discussions with the UK Government on BECCS and a ‘bridging mechanism’ to support the transition to BECCS have been productive, but to realise the scale of the ambition included in the Government’s Strategy, we need commitment through the delivery of a clear business model that supports BECCS.

Today’s support from Government brings us a big step closer and we look forward to continuing the work.

Will Gardiner

Read RNS here

UK Biomass Strategy – Highly Supportive of Biomass and a Priority Role for BECCS

The Strategy outlines the potential extraordinary role which biomass can play across the economy in power, heating and transport, including a priority role for Bioenergy Carbon Capture and Storage (BECCS), which is seen as critical for meeting net zero plans due to its ability to provide large-scale carbon removals.

Will Gardiner, Drax CEO, said:

Will Gardiner, Drax Group CEO

“We welcome the UK Government’s clear support for sustainably sourced biomass and the critical role that BECCS can play in achieving the country’s climate goals.

“The inclusion of BECCS at the top of a priority use framework is a clear signal that the UK wants to be a leader in carbon removals and Drax is ready to deliver on this ambition. We are engaged in formal discussions with the UK Government about the project and, providing these are successful, we plan to invest billions in delivering BECCS at Drax Power Station in North Yorkshire, simultaneously providing reliable, renewable power and carbon removals.

“We look forward to working alongside the Government to ensure biomass is best used to contribute to net zero across the economy, through further progression of plans for BECCS and ensuring an evidence-driven, best practice approach to sustainability.”

A priority role for BECCS

The Strategy reiterates the Government’s ambition to deliver 5Mt pa of carbon removals by 2030, with the potential for this to increase to 23Mt by 2035 and up to 81Mt by 2050, with BECCS expected to provide the majority of the total in 2050.

In the period to 2035 Government intends to facilitate the use of biomass for power and heating, whilst supporting projects transitioning to BECCS. BECCS projects, which includes Drax Power Station, are seen as a priority use of biomass given existing generation assets with established supply chains and Carbon Capture and Storage (CCS) technology ready to be deployed. Beyond 2035 there will remain a role for biomass without BECCS in harder to decarbonise sectors and in supporting energy security.

The Strategy notes the active work in government to support BECCS, including the development of business models.

Biomass availability and sustainability

The Strategy considers the global availability of sustainable biomass, finding that by using domestic and imported biomass sources there is sufficient material to meet estimated future demand in the 6th Carbon Budget.

Alongside the increased use of sustainable biomass, Government will continue to develop sustainability criteria and Drax supports the development of robust standards across sectors.

A link to the Strategy can be found here.

Scientific assessment of carbon removals from BECCS

Alongside publication of the Strategy, the Government has published an evidence-based assessment of BECCS as a route to negative emissions. The report sets out how “well regulated” BECCS can deliver negative emissions and ensure positive outcomes for people, the environment, and the climate.

BECCS at Drax Power Station

In March 2023, the Government confirmed its commitment to support the deployment of large-scale Power-BECCS projects by 2030 and that the Drax Power Station BECCS project had passed the deliverability assessment for the Power-BECCS project submission process.

Formal bilateral discussions with the Government are ongoing to move the project forward and help realise the Government’s ambition to deliver 5Mt pa of carbon removals by 2030. These discussions include a bridging mechanism between the end of the current renewable schemes in 2027 and the commissioning of BECCS at Drax Power Station.

Drax believes that BECCS at Drax Power Station is the only project in the UK that can enable the Government to achieve this ambition, in addition to the large-scale renewable power and system support services it provides to the UK power system.

In July 2023, the Government designated the Viking CCS cluster as a Track 2 cluster. Progressing a CO2 transport and storage network in the Humber represents a significant step toward helping the region meet its net zero ambitions and ensuring that it remains a source of high-skilled jobs and energy security for decades to come. Along with the East Coast Cluster, Viking creates an additional potential pathway to support BECCS at Drax Power Station.

The Government has also confirmed that during 2023 it will set out a process for the expansion of its wider CCS programme for individual projects, including BECCS (Track 1 expansion and Track 2).


Drax Investor Relations:

Mark Strafford
+44 (0) 7730 763 949


Drax External Communications:

Chris Mostyn
+44 (0) 7548 838 896

Sloan Woods
+44 (0) 7821 665 493


Half year results for the six months ended 30 June 2023

RNS Number: 3301H
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Six months ended 30 June20232022
Key financial performance measures
Adjusted EBITDA (£ million)(1)(2)(excl. Electricity Generator Levy) (EGL)(3)453225
Adjusted EBITDA (£ million)(1)(2)(incl. EGL)417225
Net debt (£ million)(4)1,2741,116
Adjusted basic EPS (pence)(1)46.020.0
Dividend (pence per share)9.28.4
Total financial performance measures from continuing operations
Operating profit (£ million)392207
Profit before tax (£ million)338200

Will Gardiner, Drax Group CEO

Will Gardiner, CEO of Drax Group, said:

“In the first half of 2023, we delivered a strong system support and generation performance, providing dispatchable, renewable power for millions of UK homes and businesses. Drax Power Station remained the UK’s single largest provider of renewable energy by output during the period.

“We continue to focus on our role as the UK’s leading generator of flexible renewable power and our ambition to be a world leader in carbon removals. To that end, in the US, we have made good progress screening options for BECCS projects which can deliver long-term, large-scale carbon removal and attractive opportunities for growth.

“We are excited about the opportunity for BECCS in the UK and are in formal discussions with the UK Government to facilitate the transition to BECCS at Drax Power Station by 2030. Our plans could create thousands of new jobs in the Humber region, help the UK meet its carbon removals targets and support long-term energy security.”

Financial highlights – strong financial performance and returns to shareholders

  • Adjusted EBITDA (excl. EGL) of £453 million up 101% (H1 2022: £225 million)
    • Driven by system support services and dispatchable, renewable generation
  • Strong liquidity and balance sheet – £586 million of cash and committed facilities at 30 June 2023
    • Expect Net debt to Adjusted EBITDA (incl. EGL) to be significantly below 2 times target at the end of 2023
  • Sustainable and growing dividend – expected full year dividend up 10% to 23.1 p/share (2022: 21.0 p/share)
    • Interim dividend of 9.2 p/share (H1 2022: 8.4 p/share) – 40% of full year expectation
  • £150 million share buy-back programme ongoing(5)

2023 outlook

  • Full year expectations for Adjusted EBITDA and EGL unchanged and in line with analysts’ consensus estimates(6), inclusive of increased development expenditure on US BECCS
  • For the remainder of 2023 Drax will present Adjusted EBITDA including and excluding EGL

Progressing options for £7 billion of strategic growth opportunities 2024-2030, primarily BECCS

  • Ambition for the development of over 20Mt pa of carbon removals – 14Mt pa by 2030
    • New-build BECCS – two sites selected in US – targeting c.6Mt pa by 2030
    • Evaluating additional sites for greenfield and brownfield BECCS in US
    • Drax Power Station – targeting 8Mt pa by 2030
  • Targeting 8Mt pa of pellet production capacity and 4Mt pa of third-party sales by 2030
  • Targeting 600MW expansion of Cruachan Pumped Storage Power Station by 2030
    • Planning approval granted (July 2023)


  • UK BECCS investment paused, subject to further clarity on support for BECCS at Drax Power Station
  • Formal discussions with UK Government – bridging mechanism between end of current renewable schemes in 2027 and BECCS

Operational review

Pellet Production – production and sales supporting UK generation, and sales to third parties

  • Adjusted EBITDA £48 million (H1 2022: £45 million)
  • Integrated supply chain model supports resilience and opportunities in a challenging market
    • Producer, user and seller of biomass pellets across multiple international markets
  • Production of 1.9Mt (H1 2022: 2.0Mt)
    • Unplanned outages, wind damage at Port of Baton Rouge and temporary suspension of production at one site due to wildfires, partially offset by production at the Demopolis plant
    • Ongoing disruption in H2 from wildfires and industrial action by Canadian transport workers in July
  • Increase in production cost (maintenance, labour, transport, energy and fibre costs) offset by revenue growth
  • Progressing development of new Longview pellet plant and Aliceville expansion
    • Investment of c.$300 million, operational 2025, 0.6Mt of new capacity
  • Third-party sales – heads of terms agreed for sale of 0.5Mt of biomass over five years to a Japanese customer

Generation – renewable generation and system support services

  • UK’s largest source of renewable power by output, primarily biomass generation at Drax Power Station
    • 9% of annualised UK renewables(7)
  • Adjusted EBITDA (excl. EGL) £457 million up 123% (H1 2022: £205 million)
    • Adjusted EBITDA (incl. EGL) £421 million up 106% (H1 2022: £205 million, £nil EGL)
  • Biomass generation – strong system support and renewable generation performance
    • Period-on-period reduction in generation
      • Maintenance – first major planned outage completed, second major planned outage in H2 2023 and forced outage on one unit due to a transformer issue – unit back in service
    • Higher achieved power price and value from system support
    • Higher biomass costs
  • Pumped storage and hydro – strong system support and generation performance
    • £154 million Adjusted EBITDA (excl. EGL) (H1 2022: £53 million)
    • Includes forward sale of peak power (winter 2022)
    • Increased level of wind capacity, intermittency and volatility underpin long-term need for dispatchable generation
  • Coal – no generation in 2023 – currently decommissioning following formal closure (March 2023)
  • As at 21 July 2023, Drax had 28.1TWh of power hedged between 2023 and 2025 on its ROC, pumped storage and hydro generation assets at an average price of £150.0/MWh(8)
    • Excludes sales under the CfD mechanism, which remains available subject to good ROC unit operational performance and market conditions
Contracted power sales 21 July 2023202320242025
Net ROC, hydro and gas (TWh(8/9/10))11.711.25.2
Average achieved £ per MWh162.7147.5126.2
Lower expected level of ROC generation in 2023 due to major planned outages on two units

Customers – renewable power sales to high-quality Industrial & Commercial (I&C) customers

  • Adjusted EBITDA of £37 million (H1 2022: £24 million) reflects continued improvement in I&C portfolio
    • 8.0TWh of power sales to I&C customers – c.16% increase compared to H1 2022 (6.9TWh)

Other financial information

Adjusted EBITDA and EGL

  • Accrued costs for EGL for the first time in H1 2023 and reported EGL within Adjusted EBITDA
    • H1 charge of £35 million
    • H2 charge expected to increase significantly reflecting higher achieved power price in H2
  • For the remainder of 2023 Drax will present Adjusted EBITDA including and excluding EGL


  • Total operating profit of £392 million (H1 2022: £207 million), including £85 million mark-to-market gain on derivative contracts
  • Total profit after tax of £247 million (H1 2022: £148 million profit after tax, including an £8 million non-cash charge from revaluing deferred tax balances) includes an increase in the headline rate of corporation tax in the UK from 19% to 25% from 1 April 2023
  • Depreciation and amortisation of £109 million (H1 2022: £121 million)

Capital investment

  • Capital investment of £210 million (H1 2022: £60 million) – primarily maintenance and development of OCGTs
  • 2023 expected capital investment of £520-580 million
    • Includes £120-140 million maintenance, including two major planned outages on biomass units; £30 million enhancements; £340-380 million strategic, including OCGT and pellet plant developments
    • OCGTs – c.900MW – three new-build sites in England and Wales, commissioning in 2024 – continuing to evaluate options for these projects, including their potential sale
    • Reduction in expected annual investment due to pause in investment in UK BECCS

Cash and interest

  • Group cost of debt c.4.6%
  • Cash generated from operations £404 million (H1 2022: £185 million)
  • Net debt of £1,274 million (31 December 2022: £1,206 million), including cash and cash equivalents of £125 million (31 December 2022: £238 million)

Capital allocation policy – unchanged

  • Continue to assess capital requirements in line with the current policy
    • Considerations include the timing of capital deployment, leverage profile, any dilution from share issuance and divestment of non-core assets