Author: Alice Roberts

Energy security shouldn’t come at the cost of climate goals

18 January 2023

Sustainable bioenergy

Key takeaways:

  • Europe’s energy security is dependent on moving away from imports of Russian gas, but climate targets and emissions reductions can’t be ignored.
  • The European Parliament’s proposed changes to the EU’s Renewable Energy Directive, in particular restrictions on the use of “primary wood biomass”, will hamper climate efforts by limiting opportunities for bioenergy.
  • Woody biomass is the EU’s largest renewable energy source, of which 51% comes from primary woody biomass, accounting for 20% of all renewable energy
  • Reports by the EU and expert parties have repeatedly pointed to bioenergy as crucial to both reducing natural gas-dependency and reaching climate goals – when sourced sustainably.
  • Restricting primary woody biomass as a feedstock for electricity and heat would exacerbate rising consumer energy prices and make long-term decarbonisation more costly.
  • EU policy decisions must support net zero goals and enhance energy security, both of which bioenergy is forecast to play a significant role in delivering.

Europe’s dependence on natural gas from Russia was thrown into painfully sharp focus in 2022. The country’s invasion of Ukraine prompted global gas supply restrictions and fears of embargos, making clear the need for Member States to rapidly move away from Russian imports and establish greater energy security.

The transition is an important juncture on the road to a future energy system that remains affordable for consumers of heat and electricity, in homes and businesses.

However, European Parliament proposed revisions to the EU’s Renewable Energy Directive (REDIII) are detrimental to that ambition. Plans to significantly restrict “primary woody biomass”, wwould impact the EU’s energy security and climate targets, at a time when affordable transition is needed most.

It is important that EU policy makers consider these important impacts during the ongoing trilogue discussions on this legislation and that they are brought to the attention of your national government (including Permanent Representation in Brussels), MEPs (in particular those sitting on the ENVI and ITRE committees) and the European Commission (DG Energy).

Find out more about proposed changes to the Renewable Energy Directive: 

  • Healthy managed forests need markets. The harvesting of these forests is primarily driven by long-lived solid wood product sectors and restricting the use of primary woody biomass will not stop harvesting. Eliminating or reducing markets for low-grade, by-products of the timber industry can lead to forest degradation and loss.

Biomass and BECCS are critical to Europe’s net zero efforts but investment is needed now to ensure the technology will be in place to deliver negative emissions at scale in the 2030s.

The EU has identified the role that increased use of biomass will play in reducing demand for Russian gas

Over the course of 2021, the EU imported 155 billion cubic metres of natural gas from Russia – accounting for 40% of the block’s gas consumption.

The short-term solution from countries both in and outside the EU looking to wean themselves off Russian gas has been to increase expensive imports from other sources, and expand the use of other fossil fuels, such as coal. But long-term energy security must also allow the world to meet its climate targets. Many experts consider biomass, when sourced sustainably, to be integral to meeting these combined goals.

A report by the European Climate Foundation considered whether and how the EU could deal with an end of Russian gas supplies from winter of 2022 to 2025, without jeopardising medium-term energy and climate targets. It put forward 15 structural levers for the EU to reduce gas demand, including to “increase biomass use in power and heat generation”.

The report estimated that increased biomass use could offset up to 2 billion cubic metres of natural gas, amounting to a positive cumulative climate impact of 4 million tons of saved CO2 emissions.

The Foundation’s work with the International Energy Agency (IEA) further reiterated the importance of biomass, stating that dispatchable low-emission generation from bioenergy can and should be maximised. The joint report claimed that the EU’s bioenergy plants could generate up to 50 terawatt hours (TWh) more electricity (almost as much as the 62.1 TWh consumed by all of Great Britain in Q3 2022) with the introduction of appropriate incentives and sustainable supplies of bioenergy.

The European Commission’s Impact Assessment also found that to meet climate targets, the use of bioenergy will have to increase by an average of 69% by 2050, compared to 2030 projections. This included the need for biomass as a source of grid balancing power, as well as biofuels in hard-to-decarbonise industries, like the maritime and aviation sectors.

These proposed routes to an energy secure future that can also meet climate goals would all be hindered by excessive restrictions on woody biomass. Bioenergy deployment is needed to support scenarios in which reliable energy supply and decarbonisation is tenable and affordable. But the regulatory and legislative environment must be in place to deliver it.

Combating high prices  

The European Parliament proposed REDIII restrictions on “primary woody biomass” haven’t been subject to an impact assessment. As such, the full effects such policies could have on energy supply, decarbonisation efforts, forest health, and consumers, aren’t being properly considered. In particular, the cost of the energy transition to economies and energy users is left open to question.

One of the other issues caused by the uncertainty in Russian gas supply is the rocketing cost of energy. Around the world, energy prices reached record highs through the winter period, impacting the cost of products and services across economies. Restricting the ability for countries to use woody biomass will only further drive-up prices for both business and domestic, electricity and heating consumers.

Biomass has the ability to be co-fired alongside coal, or existing coal power stations can be converted to run on biomass alone. This can make it a more cost-effective means of rapidly deploying an alternative to gas and coal.

Woody biomass is also one of the most affordable technologies to deliver renewable heating. Combined heat and power (CHP) plants offer effective sources of district heating. Other decarbonisation efforts like installing heat pumps or hydrogen boilers at scale will take years in many countries.

Today, woody biomass is the EU’s largest renewable energy source, of which 51% comes from primary woody biomass, accounting for 20% of all renewable energy. To pass legislation that hampers its use will leave countries dependent on expensive, carbon-intensive fossil fuel imports, that slows progress towards reaching climate goals and makes energy unaffordable for more consumers.

Policy proposals threaten Europe’s climate ambitions and healthy forests

Sustainable bioenergy

Ross McKenzie, Group Director of International Affairs, Drax

Key takeaways:

  • Dispatchable, low-carbon power from bioenergy can provide energy security, helping to reduce the EU’s reliance on Russian gas and reduce CO2 emissions. It can also play a key role displacing coal, produce sustainable aviation and maritime fuels, and produce negative emissions through Bioenergy with Carbon Capture and Storage (BECCS)
  • Proposed changes to the EU’s Renewable Energy Directive (RED III) introduce an indiscriminate subsidy ban on utilising sustainably sourced biomass from forest residues for all end uses. This will have an immediate and negative impact on Europe’s energy security and climate targets.
  • Misunderstandings about the role “primary woody biomass” plays in providing secure, reliable, and renewable power will have negative and material impacts across Europe and around the world.
  • Economic cascading already addresses issues associated with “best use” of woody fibre, with the bioenergy industry only having the purchasing power to use wood where there is no competition from higher paying markets.

Europe is currently grappling with the question of how to shape a future where energy security can be assured and climate change tackled. That’s a complicated task at a time when geo-political challenges are reducing access to gas imports, and an ever increasing amount of extreme natural weather events are impacting lives and economies around the world.

Policies, at global and domestic levels, must meet the need for dispatchable, renewable power and essential carbon removals, while supporting healthy natural environments and ecosystems. But European Parliament’s proposed changes to the EU’s Renewable Energy Directive (RED III) will lead to unintended consequences for both the energy sector and the health of forests around the world.

Delivering power and carbon removals

Biomass offers dispatchable, renewable power at scale. It’s already the EU’s largest source of renewable energy by some distance. In 2020, solid biomass – woodchips, pellets, and waste materials – accounted for around 40% of the final consumption of renewable energy.

The addition of carbon capture and storage to biomass power (BECCS) is also considered crucial to helping Europe achieve net zero through carbon removals.

Carbon-intensive industries, such as steel, cement, chemicals, and the aviation sector, will depend on these types of innovations and mechanisms to decarbonise.

According to the Intergovernmental Panel on Climate Change (IPCC) it may be necessary to capture 10 billion tonnes of CO2 annually by 2050 – through BECCS and other carbon removal technologies – to prevent catastrophic climate change.

Sustainable biomass wood pellet storage domes at Drax Power Station in North Yorkshire

Sustainable biomass wood pellet storage domes at Drax Power Station in North Yorkshire

One such project aiming to deliver carbon removals at scale is Zero Carbon Humber. The project aims to deliver a net zero industrial cluster by 2040 through shared carbon capture and storage and hydrogen infrastructure. Drax Power Station serves as an anchor for Zero Carbon Humber, with the BECCS technology already at a more advanced stage than at any other project globally. The project is on track to deliver the first scaled up BECCS initiative from 2027, while at Drax, we plans to be a carbon negative business by 2030, through the emissions removals BECCS makes possible.

Achieving ambitious BECCS plans in Europe requires action now. Policy frameworks and timeframes must be realistic to support the advancement of biomass technologies throughout the 2020s and enable BECCS to be delivered at scale in the 2030s.

BECCS is unlikely to be scaled up until the second half of the 2020s and RED III must acknowledge this. It also needs to enable sustained investment in carbon capture technologies on timelines that correspond with key EU emission reduction targets, for example 2030.

Beyond power and carbon removals, policy needs to support healthy forest landscapes. But REDIII restrictions on ‘primary woody biomass’ will stunt forest management that’s essential to ensuring healthy, resilient forest landscapes.

Incentivising healthy, resilient forests

Introducing restrictions on the use of ‘primary woody biomass’, as proposed by the European Parliament in REDIII, will not stop harvesting from taking place because harvesting is primarily driven by solid wood product sectors, like lumber. Instead, such restrictions may result in a reduction in markets for the low-grade by-products of the timber industry.

The low-quality or low-value wood used by the biomass industry includes woodchips, sawdust, shavings and other residue from sawmill processes. It also includes wood removed in forest management practices such as thinning and low-grade wood left over from lumber harvests, which might otherwise be burned. The industry also uses pulpwood where there is no demand from other industries and therefore no other market for the fibre. In the US South in particular, the paper and pulp industry is in decline, and therefore there is fibre availability in the form of pulpwood that can and should be able to be used to generate renewable power.

The natural economic cascading principle already ensures that wood is utilised to its highest value, with the bioenergy industry only having the purchasing power to use wood where there is no competition from other markets.

Instead of an indiscriminate ban on “primary woody biomass”, policy and legislation should ensure that energy from biomass is produced in a way that minimises undue distortive effects on the biomass raw material market through an appropriate application of the cascading principle with due regard to national and regional specificities.

Misunderstandings of common forestry practices and of the economic cascading will have negative and material impacts across Europe and around the world.

Without the market for low-value wood that biomass offers, there are fewer economic incentives to sustainably manage forests and less revenue from harvests in communities that depend on forests.

Thinning is periodic felling of a proportion of the weaker and less healthy trees in a forest to promote vigorous growth of the remaining trees. Fewer trees mean less competition for light, water, and nutrients. Thinning a forest also mitigates threats like forest fires, pests, and disease, making forests more resilient. Allowing greater levels of sunlight to reach the forest floor, leads to a more diverse herbaceous layer, improving forest biodiversity and supporting wildlife.

Clear-cuts are another important sustainable forest management practice. It’s a myth that the act of clearcutting is unsustainable. The practice is an accepted regeneration technique in Europe and North America that’s guided by science to mimic natural disturbance, such as wildfire and storm damage.

The access to sunlight that clear-cuts allow sets the stage for stronger forest regrowth and biodiversity than if weaker trees were left to regenerate a forest. It also plays a vital role in supporting habitat diversity, especially for species which thrive after natural disturbances.

Similarly to thinning, clear-cuts generate low-grade fibre that can’t be used for solid wood products, but that must be removed to ensure forests remain healthy and productive.

Without the market for low-value wood that biomass offers, there are fewer economic incentives to sustainably manage forests and less revenue from harvests in communities that depend on forests.

But the European Parliament proposals under REDIII would, confusingly, put both valuable sawlogs and low-grade wood under the shared classification of ‘primary woody biomass’.

Proposals to introduce a cap and ‘phase down’ this type of material will stunt the growth of the sector. This would be at odds with widely held global views that demand for sustainable biomass will increase between now and 2050.

Putting policies in place for the future

The biomass sector has long operated in Europe and North America. Even with the sustained use of what might become categorised as ‘primary woody biomass’, these are regions where deforestation is not a threat to working forests.

Biomass is an established source of reliable, renewable power. As we’re proving at Drax Power Station, it can deliver carbon removals at scale through BECCS and help decarbonise hard-to-abate industries.

But this is only possible with the right policies in place. Policies that support sustained innovation and preserves a market for low-grade wood that encourage forest management.

With the right policies implemented now, we can take action to unlock a sustainable future for forests landscapes and help create net zero economies by 2050.

Critical role supporting UK energy system and progress with BECCS

15 December 2022

Investors

RNS Number : 7670J
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Operational Highlights

  • Critical role supporting UK energy system with biomass, pumped storage and hydro
  • System support – strong pumped storage and hydro performance in H2-22
  • Strong contracted power sales 2022-24
  • >99% of generation from renewables – biomass, pumped storage and hydro
    • Jan to Nov Drax generated 20% of UK renewables at peak demand and 11% in total

 Financial Highlights

  • 2022 Adjusted EBITDA(1) now slightly above the top of the range of analyst expectations(2)
  • Remain on track to be significantly below 2x net debt to Adjusted EBITDA by the end of 2022

Strategic Highlights

  • Growing global demand for negative emissions and increasing opportunities for BECCS
    • Development of North American options including two new-build BECCS power stations, a pellet plant with BECCS and coal-to-biomass-to-BECCS
    • £30 million development expenditure in 2023 to support options in North America
    • MoU signed for sale of 2Mt of Carbon Dioxide Removal (CDR) certificates
  • UK BECCS
    • “Track 1” Power-BECCS application submitted, shortlisted projects selected in Q1-23
    • UK Government – publication of Power-BECCS business model consultation
  • Pellet Production
    • $300m investment in new US pellet plant, port and capacity expansion – c.0.6Mt
    • 90kt pellet plant acquired – Princeton, British Columbia

Drax Group CEO, Will Gardiner said:

Will Gardiner, Drax Group CEO

“Drax plays a critical role in supporting the UK energy system, generating more renewable power by output than any other company. During the difficult winter ahead, we will continue to optimise our biomass operations to ensure that more renewable power is available, when the country needs it most.

“As governments around the world increasingly look to introduce supportive policies for carbon removals, Drax is considering more exciting global opportunities for deployment of BECCS, advancing our ambition to be a leader in this critical technology.

“Drax is a growing, international business at the heart of the green energy transition and we are accelerating our plans to invest billions of pounds in critical renewable energy and carbon removal technologies which could create thousands of jobs and generate the secure, renewable power that this planet urgently needs.”

Pellets Production

The Group’s sustainable biomass pellet business has continued to support efforts to optimise biomass power generation and security of supply in the UK at times of higher demand this winter.

As outlined at the Group’s half year results, in July 2022, there has been an incremental increase in costs in North America, primarily in transportation and utility costs. These cost increases have continued in the second half of 2022 and taken together with costs incurred in providing supply-side flexibility, production costs for the business are expected to be higher in 2022 and 2023. These increased costs have been considered in an adjusted transfer price, which was implemented in the second half of the 2022.

Drax remains focused on opportunities to reduce the cost of biomass but will balance this against the need to optimise its supply chain to deliver value for the Group.

In the second half of 2022, Drax commissioned a second 40kt satellite plant at Russellville (Arkansas) and in August 2022, Drax acquired a 90kt pellet plant in Princeton (British Columbia) from Princeton Standard Pellet Corporation. In addition, following commissioning in the first half of 2022 both the Demopolis (Alabama) and Leola (Arkansas) pellet plants have continued to work towards full production and these four plants combined will add over 500kt of full production capacity.

Investment in new production capacity

Drax has taken a Final Investment Decision (FID) to invest in two new pellet production projects – a 450kt new-build pellet plant at Longview (Washington State), including the development of a new port facility at this location, and a 130kt expansion of its Aliceville site (Alabama). The combined investment in these three projects is expected to be in the region of $300 million, inclusive of the effect of inflation on construction costs.

The development of the new plant at Longview will provide the Group with access to a new fibre basket and Drax will also develop port infrastructure at the Port of Longview, adding a fifth port to the Group’s North American supply chain, with the opportunity to consolidate additional capacity in the future. The US Pacific North-West will be the Group’s fourth major fibre basket alongside; the US South; British Columbia; and Alberta. The new facility is expected to support further diversification of the Group’s fibre sourcing production and export capacity, supporting sales into Asian and European markets, as well as own-use.

The Longview plant will be located next to the Port of Longview, removing the need for rail or road transport of pellets, significantly reducing transport time, cost and carbon emissions.

The plant and port are expected to begin commissioning in 2025.

The Aliceville expansion includes upgrades to existing systems as well as new truck dumps and pelletiser units which will allow for an increase in the amount of sawmill residuals processed. The additional capacity is expected to begin commissioning in 2024.

Generation

The Group’s biomass, pumped storage and hydro assets have continued to support UK security of supply, providing power system stability at a time of higher gas prices and volatility on the power system.

Drax has continued to optimise biomass generation across all four biomass units (ROC and CfD), maximising generation in the winter, based on system need and sustainable biomass supply.

In October 2022, due to a fall in gas prices and a consequential fall in short-term power prices, Drax bought back certain existing forward sold power sales for 2022 on its ROC units. As a result, Drax has taken steps to reprofile and optimise biomass supplies between own-use and third-party supply.

The Group’s pumped storage and hydro assets have performed strongly in the second half of 2022, providing a wide range of services to the system operator in support of system stability and renewable electricity.

Generation contracted power sales

As at 8 December 2022, Drax had 28.3TWh of contracted power sales between 2022 and 2024 on its ROC and hydro generation assets at an average price of £135.8/MWh, with a further 1.4TWh equivalent of gas sales (transacted for the purpose of accessing additional liquidity for forward sales from ROC units and highly correlated to forward power prices) plus additional sales under the CfD mechanism.

Contracted power sales 8 December 2022202220232024
ROC (TWh)10.711.16.1
- Average achieved £ per MWh90.2154.5159.0
Hydro (TWh)0.3<0.1-
- Average achieved £ per MWh255.6--
Gas hedges (TWh equivalent)-0.11.3
Pence per therm-153.2133.9
Lower expected level of ROC generation in 2023 due to major planned outages on two units

Generation biomass costs

Over the past 12 months the cost of biomass in the European spot market has increased significantly, with cargoes trading at over three times their historic average.

Reflecting higher production costs in its own supply chain, those of third parties and higher spot market prices, Drax has incurred additional costs in the second half of 2022, securing biomass to support its reliable and dispatchable generation. Accordingly, the Group currently expects its all-in contracted cost of biomass for the UK generation business to be over £100/MWh in 2023. This is above the historic average, in part reflecting increased transportation and fuel costs associated with higher energy costs, inflation and the lower value of Sterling captured in the Group’s foreign exchange hedges.

These factors, alongside the Electricity Generators Levy (EGL) (see note below), could make generation at certain times less economic and is expected to restrict the Group’s purchase of additional biomass cargoes at spot prices.

Coal

In July 2022, at the request of the UK Government, Drax entered into an agreement with National Grid, to provide a “winter contingency” service to support the UK power system via its legacy coal units.

The units will not generate commercially for the duration of the agreement and will only operate if, and when, instructed to do so by National Grid. To date National Grid has not instructed the units to run, other than for testing. The contract, which covers the period October 2022 to March 2023, provides Drax with a fixed fee for the provision of the units with National Grid remunerating Drax for costs, including the coal and carbon associated with any generation.

Drax’s decision, in 2020, to end coal generation supports the Group’s purpose of enabling a zero-carbon, lower-cost energy future and the transition to a flexible, renewable generation model. This has led to a c.99% reduction in the Group’s Scope 1 and Scope 2 carbon emissions since 2012 and enabled Drax to become the UK’s largest source of renewable electricity by output.

Full year expectations

Reflecting these factors, and the strong pumped storage and hydro performance in the second half of 2022, Drax now expects that full year Adjusted EBITDA(1) for 2022 will be slightly above the top of the range of analyst expectations(2), subject to continued good operational performance and logistics for the remainder of the year.

The power sales reflected in the Generation business’s contracted power sales book includes some exchange traded contracts, with higher power prices resulting in an increase in collateral payments on these contracts in 2022. Inclusive of these temporary cash outflows the Group continues to expect net debt to Adjusted EBITDA(1) to be significantly below 2x at the end of 2022.

Electricity Generators Levy

In November 2022, the UK Government announced a windfall tax on renewable and low-carbon generators, the EGL.

The EGL, which is expected to be implemented from 1 January 2023, represents a levy on power sales above a threshold and would apply to Drax’s three biomass units operating under the Renewable Obligation scheme and its run of river hydro operations, but does not include the sale of ROCs. Drax’s CfD biomass unit is exempt, along with Cruachan pumped storage hydro power station and coal generation.

Through November and December Drax has engaged with the UK Government regarding the precise details of the EGL, including UK investment allowances and the treatment of costs for dispatchable generators. Drax notes the UK Government’s reference to the potential for cost adjustments in its EGL technical note published in November 2022. Drax anticipates an update from Government on these issues shortly.

Bioenergy Carbon Capture and Storage (BECCS) – UK

Drax has continued to commit development expenditure into its Drax Power Station BECCS project, including continuing a Front-End Engineering Design study.

The project would see the addition of post combustion Carbon Capture and Storage (CCS) to two of the existing biomass units, using sustainable biomass and adapting a proven technical solution from Drax technology partner, Mitsubishi Heavy Industries. By 2030 the project aims to permanently remove 8Mt of CO2 per annum from the atmosphere. In doing so Drax Power Station aims to become one of the largest sources of Carbon Dioxide Removals (negative CO2) in the world.

The UK Government recognises the important role which BECCS has to play in delivering net zero, requiring at least 5Mt of CO2 removals per annum from BECCS and other engineered Greenhouse Gas Removal technologies by 2030.

In August 2022, the UK Government published a Power-BECCS business model consultation which set a viable investment framework based on a CfD mechanism for both power generation and negative emission production. In addition, the UK Government also set out the timeframe for the selection of “Track 1” Power-BECCS projects, stating that shortlisted projects could be confirmed from December 2022 with draft heads of terms for the contracts in the first half of 2023. “Track 1” projects are expected to commission in the mid-2020s and along with expected clarity on the financial model, this supports Drax’s aim to take a FID in 2024 and commission a first unit in 2027, with a second by 2030.

The six-month extension of coal unit availability to March 2023 is not expected to impact the timing of a FID or intended commissioning date for the project. Site preparation works for BECCS are ongoing and will continue following formal closure of the coal units in March 2023 on conclusion of the contract with National Grid (see above).

BECCS – North America

Drax aims to realise its ambition to become a carbon negative company by 2030 primarily through the development of BECCS, including the development of BECCS globally.

To realise these opportunities, the Group is progressing a number of work streams including regulation and policy, technology, fibre sourcing, logistics and commercial.

Over the course of the year, the Group has made good progress towards its ambition to deliver 4Mt per annum of CDRs from new-build BECCS outside of the UK by 2030, with a primary focus on North America.

Opportunities under consideration include two new-build 300MW BECCS power units each capable of producing 2TWh of renewable electricity from sustainable biomass and each capturing over 2Mt of CO2 per annum. Drax is also developing options for a pellet plant with BECCS and the addition of BECCS to existing generation assets, including coal-to-biomass-to-BECCS.

Key considerations for these opportunities include proximity to sustainable biomass fibre, CCS infrastructure, regulatory support, commercial potential and technology.

Drax is evaluating a range of potential financial models for these projects, which could include long-term Power Purchase Agreements (PPAs), long-term CDR offtake agreements and government investment frameworks. As part of the development of these models, in September 2022, Drax announced a Memorandum of Understanding (MoU) for the world’s biggest carbon removals deal with Respira, a carbon broker. Under the terms of the MoU, Respira will be able to purchase up to 2Mt of CDRs over a five-year period from Drax’s North American BECCS projects.

Regulation and policy development

The regulatory environment for BECCS in the US has continued to develop in 2022, with the inclusion of BECCS as an eligible technology under the Department of Energy climate goals funding scheme and the increase in 45Q support to $85 per tonne of CO2 captured, under the Inflation Reduction Act. A recent National Renewable Energy Lab report highlights that by 2035, the US could need c.100Mt of negative emissions from BECCS to offset remaining carbon emissions in the power sector.

In addition, recent State level developments in Louisiana and California have both been supportive of the development of BECCS. The Louisiana Congress approved a bill that classifies biomass as carbon neutral and BECCS as carbon negative. Similarly, California’s net zero strategy identifies BECCS as a critical tool in the delivery of their climate targets. The California Air Resources Board, which is responsible for climate policy, has stated its intention to deploy 75Mt of carbon removals, including BECCS, by 2045.

Potential for significant growth in CDRs

Research by the Intergovernmental Panel on Climate Change (IPCC), the world’s leading authority on climate science, states that CDR methods, including BECCS, are needed to mitigate residual emissions and keep the world on a pathway to limit warming to 1.5oc.

All the illustrative mitigation pathways assessed in the IPCC’s latest report use significant volumes of CDRs, and specifically BECCS as a key tool for mitigating climate change. The IPCC believes that globally between 0.5 and 9.5 billion tonnes of CDRs via BECCS will be required and the UN-backed Principles for Responsible Investment estimate that the CDR market could be worth over a trillion dollars by 2050.

Drax sees significant growth opportunities linked to BECCS in North America and in order to progress these opportunities in 2023, expects to invest in development expenditure in the region of £30 million with a view to progressing these opportunities to a FID. Drax expects to update on progress with these opportunities in the first half of 2023.

 

Biomass Sustainability

Delivering positive outcomes for people, climate and nature are at the core of Drax’s business model and ensuring that Drax only uses biomass which is sourced sustainably is central to this ambition.

Biomass – when sustainably sourced – supports good forestry, is a renewable source of energy, and an important part of both UK and international renewable energy policy.

Drax sources its biomass from well-established forestry markets in the US and Canada as well as Europe. The main output from these markets is sawlogs, which are processed for use in construction and manufacturing, such as house building. When used in this way, these materials represent a source of long-term carbon storage and when the forest regenerates or is replanted these growing trees absorb carbon from the atmosphere.

Drax supports these forest economies by providing incremental secondary revenues to forest landowners through the purchase of material which is not merchantable to a sawmill, such as bark, branches, low-grade wood and woody material from forest management activities (thinning), in addition to purchasing sawmill residues from sawmills. These materials often have limited alternative uses. In some instances, where there would otherwise be no demand for these materials, they are burned to reduce the risk of wildfire, the spread of disease and to allow the forest to be replanted – this is especially prevalent in Canada.

In the US South, the periodic thinning of a forest helps improve the size and quality of sawlogs when the trees reach maturity, the economic value of the timber produced and the carbon absorbed and stored, as well as forest health and biodiversity. If forests were not thinned, the revenue from sawlogs would be reduced and landowners may consider other uses for their land, such as agricultural crops and livestock farming. The management of forestland to produce sawlogs ensures forests are growing vigorously, absorbing carbon, and forests remain a carbon sink.

Forests in the areas where Drax sources material are subject to national and regional regulation and typically supported by, and independently monitored for compliance by, forest certification schemes such as: the Forestry Stewardship Council® (FSC)(3), Sustainable Forestry Initiative (SFI) and Programme for the Endorsement of Forest Certification (PEFC).

Drax supplements this regulation through its own biomass sourcing policy and checks of its supply chain, with third party verification under the Sustainable Biomass Program (SBP).

Other

In December 2022 Drax agreed a new £200 million credit facility with banks within its lending group. The facility provides an additional source of liquidity to the Group’s undrawn £300 million revolving credit facility, over the next 12 months.

Drax will report its full year results on 23 February 2023. 

Notes:

  1. Earnings before interest, tax, depreciation, amortisation, excluding the impact of exceptional items and certain remeasurements.
  2. As of 12 December 2022, analyst consensus for 2022 Adjusted EBITDA was £668 million, with a range of £651-£681 million. The details of this company collected consensus are displayed on the Group’s website. https://www.drax.com/investors/announcements-events-reports/presentations/
  3. FSC C119787.

Enquiries:

Drax Investor Relations: Mark Strafford

+44 (0) 7730 763 949

Media:

Drax External Communications: Ali Lewis

+44 (0) 7712 670 888

Website: www.Drax.com

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 the Company’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; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected. 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.

END

The role of biomass in securing reliable power generation

5 December 2022

Power generation, Sustainable bioenergy

Key takeaways

  • Since 2021, there has been a sharp rise in the price of electricity, driven by a steep increase in wholesale gas prices in Europe in particular.
  • A number of factors, including the impact of COVID-19 and the effects of the war in Ukraine have contributed to driving gas prices to record highs.
  • The volatility of gas prices means the UK needs to find replacements for the role of gas in helping to balance the electricity grid.
  • Biomass and pumped storage hydro have the capacity to provide reliable, renewable energy to UK homes and businesses, while contributing to keeping the grid stable.

Great Britain, and many other parts of the world, are in a phase of energy uncertainty. Since 2021, soaring power prices have caused energy bills to escalate as much as five-fold and led to a string of collapses of UK energy suppliers.

As of October 2022, the annual energy bill for a UK household with “typical” energy consumption has been capped at £2,500 a year –  96% higher than the winter 2021/22 price cap – the upper limits the rates suppliers can charge for their default tariffs.

The costs of energy to end consumers would be even higher were it not for this energy price guarantee introduced by the UK government on 1 October and currently due to be in place until 31 March 2023. In Germany, the government has committed €200 billion towards a ‘defensive shield’ against surging energy prices, while France has capped energy price increases at 4% for 2022 and 15% from January 2023.

The primary factor in this change is the rise in natural gas prices.

Periods of turbulence driven by commodity prices emphasises the need for a diverse, secure supply of power generation available to the UK grid. As the energy system works through the necessary transition away from fossil fuels to renewable sources, the need for a reliable, low-carbon, affordable power becomes even greater.

What’s driving up gas prices? 

As the world went into lockdown in 2020 the demand for energy, including gas, dropped – and so did supply. When countries began to emerge from lockdown in 2021 and economies started to reboot, supply struggled to keep up with renewed demand, triggering a rise in the price of wholesale gas, and other fuels. The cold winter in 2020-2021 and unusually hot summers in 2021 and 2022 also dented European gas storage levels, further contributing to rising gas prices.

 An already uncertain energy market was further destabilised by Russia’s invasion of Ukraine. This was particularly true in Europe, (most notably Germany) where Russian gas at the time accounted for around 40% of total gas consumption. Gas prices began increase rapidly as a result of factors including fears that Russia would restrict the supply of gas to Europe in response to sanctions against the country, or that an embargo on Russian gas would be introduced.

Constrained gas supplies also increased global demand for alternative sources like liquified natural gas (LNG) imports, which account for about 22% of the UK’s gas. This increase in demand has pushed up the price of these alternatives, forcing countries to compete to attract supplies.

There are several reasons why higher gas prices have such a significant impact on UK energy prices. Firstly, a considerable proportion of UK electricity comes from gas. In the second quarter of 2022, gas represented 42% of the UK energy mix, making it the country’s single largest source of electricity.

The UK also relies heavily on gas to heat its homes. And with those homes being some of the oldest and least energy-efficient in Europe, it takes more gas to heat them up and keep them warm.

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The role of biomass and pumped storage hydro in ensuring security of supply 

In addition to the pressures placed on gas and electricity supplies since 2021, the UK’s journey to net zero depends on increasing reliance on intermittent sources of power, such as wind and solar. As such, there is a renewed need to ensure a diverse range of power generation sources to secure electricity supply globally.

As gas becomes less economical, biomass offers a renewable reliable, dispatchable source of power that can balance the grid and supply baseload power regardless of weather conditions.

The Turbine Hall at Cruachan Power Station

Our four 645 MW biomass-fuelled generating turbines at Drax Power Station make it the largest single renewable source of power in the UK. The plant can produce enough electricity to power the equivalent of five million homes come rain or shine.

Drax’s Cruachan pumped storage hydro power station in the Scottish Highlands also offers National Grid the capacity to store 440 MW of renewable power. By absorbing excess electricity from zero carbon sources, like wind and solar, Cruachan can store and deploy power when the grid needs it most.

The ability of pumped storage hydro and biomass plants to store energy and quickly adjust output as required will become ever more important as the UK’s use of renewables grows and there are fewer spinning turbines connected to the grid.  As renewable, non-intermittent sources of electricity, biomass and pumped storage hydro are central to a safe, economic, and stable electricity grid – and to the UK’s low-carbon energy future.

The key to sustainable forests? Thinking globally and managing locally

1 December 2022

Sustainable bioenergy

Key takeaways:

  • Working forests, where wood products are harvested, are explicitly managed to balance environmental and economic benefits, while encouraging healthy, growing forests that store carbon, provide habitats for wildlife, and space for recreation.
  • But there is no single management technique. The most effective methods vary depending on local conditions.
  • By employing locally appropriate methods, working forests have grown while supporting essential forestry industries and local economies.
  • Forests in the U.S. South, British Columbia, and Estonia all demonstrate how local management can deliver both environmental and economic wins.

Forests are biological, environmental, and economic powerhouses. Collectively they are home to most of the planet’s terrestrial biodiversity. They are responsible for absorbing 7.6 billion tonnes of carbon dioxide (CO2) equivalent per year, or roughly 1.5 times the amount of CO2 produced by the United States on an annual basis. And working forests, which are actively managed to generate revenue from wood products industries, are important drivers for the global economy, employing over 13 million people worldwide and generating $600 billion annually.

But as important as forests are globally, the key to maximizing working forests’ potential lies in smart, active forest management. While 420 million hectares of forest have been lost since 1990 through conversion to other land uses such as for agriculture, many working forests are actually growing both larger and healthier due to science-based management practices.

The best practices in working forests balance economic, social, and environmental benefits. But just as importantly, they are tailored to local conditions and framed by appropriate regional regulations, guidance, and best-practice.

The following describes how three different regions, from which Drax sources its biomass, manage their forests for a sustainable future.

British Columbia: Managing locally for global climate change

British Columbia is blanketed by almost 60 million hectares of forest – an area larger than France and Germany combined. Over 90% of the forest land is owned by Canada’s government, meaning the province’s forests are managed for the benefit of the Canadian people and in collaboration with First Nations.

From the province’s expanse of forested land, less than half a percent (0.36%) is harvested each year, according to government figures. This ensures stable, sustainable forests. However, there’s a need to manage against natural factors.

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In 2017, 2018, and 2020 catastrophic fires ripped through some of British Columbia’s most iconic forest areas, underscoring the threat climate change poses to the area’s natural resources. One response was to increase the removal of stands of trees in the forest, harvesting the large number of dead or dying trees created by pests that have grown more common in a warming climate.

By removing dead trees, diseased trees, and even some healthy trees, forest managers can reduce the amount of potential fuel in the forest, making devastating wildfires less likely. There are also commercial advantages to this strategy. Most of the trees removed are low quality and not suitable for processing into lumber. These trees can, however, still be used commercially to produce biomass wood pellets that offer a renewable alternative to fossil fuels. This means local communities don’t just get safer forests, they get safer forests that support the local economy.

The United States: Thinning for healthier forests

The U.S. South’s forests have expanded rapidly in recent decades, largely due to growth in working forests on private land. Annual forest growth in the region more than doubled from 193 million cubic metres of wood in 1953 to 408 million cubic meters by 2015.

This expansion has occurred thanks to active forest product markets which incentivise forest management investment. In the southern U.S. thinning is critical to managing healthy and productive pine forests.

Thinning is an intermediate harvest aimed at reducing tree density to allocate more resources, like nutrients, sunlight, and water, to trees which will eventually become valuable sawtimber. Thinning not only increases future sawtimber yields, but also improves the forest’s resilience to pest, disease, and wildfire, as well as enhancing understory diversity and wildlife habitat.

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While trees removed during thinning are generally undersized or unsuitable for lumber, they’re ideal for producing biomass wood pellets. In this way, the biomass market creates an incentive for managers to engage in practices that increase the health and vigour of forests on their land.

The results speak for themselves: across U.S. forestland the volume of annual net timber growth 36% higher than the volume of annual timber removals.

A managed working forest in the US South

Estonia: Seeding the future

Though Estonia is not a large country, approximately half of it is covered in trees, meaning forestry is integral to the country’s way of life. Historically, harvesting trees has been an important part of the national economy, and the government has established strict laws to ensure sustainable management practices.

These regulations have helped Estonia increase its overall forest cover from about 34% 80 years ago to over 50% today. And, as in the U.S. South, the volume of wood harvested from Estonia’s forests each year is less than the volume added by tree growth.

Sunrise and fog over forest landscape in Estonia

Sunrise and fog over forest landscape in Estonia

Estonia has managed to increase its growing forest stock by letting the average age of its forests increase. This is partially due to Estonia having young, fast-growing forests in areas where tree growth is relatively new. But it is also due to regulations that require harvesters to leave seed trees.

Seed trees are healthy, mature trees, the seeds from which become the forest’s next generation. By enforcing laws that ensure seed trees are not harvested, Estonia is encouraging natural regeneration of forests. As in the U.S. South protecting these seed trees from competition for water and nutrients means removing smaller trees in the area. While these smaller trees may not all be suitable for lumber, they are a suitable feedstock for biomass. It means managing for natural regeneration can still have economic, as well as environmental, advantages.

Different methods, similar results

Laws, landownership, and forestry practices differ greatly between the U.S. South, British Columbia, and Estonia, but all three are excellent examples of how local forest management contributes to healthy rural economies and sustained forest coverage.

While there are many different strategies for creating a balance between economic and environmental interests, all successful strategies have something in common: They encourage healthy, growing forests.

Why the Humber represents Britain’s biggest decarbonisation opportunity

5 September 2022

Carbon capture

Richard Gwilliam, Head of Cluster Development at Drax

Key takeaways:

  • The Humber industrial cluster contributes £18 billion a year to the UK economy and supports 360,000 jobs in heavy industry and manufacturing.
  • As demand for industrial products with green credentials rises and net zero targets demand decarbonisation, businesses in the Humber need to begin implementing carbon capture at scale.
  • The size of the Humber and diversity of industries make it a significant challenge but if we get it right, the Humber will be a world leader in decarbonisation.
  • Without investment in decarbonisation infrastructure the region risks losing its status as a world leading industrial cluster putting hundreds of thousands of jobs at risk.

When the iconic Humber Bridge opened in June 1981, it did more than just set records for its size. It connected the region, uniting both communities and industries, and allowing the Humber to become what it is today: a thriving industrial hub that contributes more than £18 billion to the UK economy and supports some 360,000 jobs.

As the UK works towards a low-carbon future, the shift to a green economy will require new regional infrastructure, that once again unites the Humber’s people and businesses around a shared goal.

While the Humber Bridge connected the region across the estuary waters, a new subterranean pipeline that can transport the carbon captured from industries, will unify the region’s decarbonisation efforts.

It’s infrastructure that will be crucial in helping the UK reach its net zero goals, but also cement the Humber’s position as a global decarbonisation leader.

The Humber Bridge

Capturing carbon across the Humber

Capturing carbon, preventing emissions from entering the atmosphere and storing them safely and permanently, is a fundamental part of decarbonising the economy and tackling climate change. Aside from the chemical engineering required to extract carbon dioxide (CO2) from industrial emissions, one of the key challenges of carbon capture is how you transport it at scale to secure storage locations, such as below the North Sea bed where the carbon can be permanently trapped and sequestered.

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Engineers at Drax Power Station

At Drax, we’re pioneering bioenergy with carbon capture and storage (BECCS) technology. But carbon capture will play an important role in decarbonising a wide range of industries. The Humber region not only produces about 20% of the UK’s electricity, it’s also a major hub for chemicals, refining, steel making and other carbon-intensive industries.

The consequence of this industrial mix is that the Humber’s carbon footprint per head of population is bigger than anywhere else in the country. At an international level it’s the second largest industrial cluster by CO2 emissions in the whole of Western Europe. If the UK is to reach net zero, the Humber must decarbonise. And carbon capture and storage will be instrumental in achieving that.

The scale of the challenge in the Humber also makes it an opportunity to significantly reduce the country’s overall emissions and break new ground, implementing carbon capture innovations across a wide range of industries. These diverse businesses can be united in their collective efforts and connected through shared decarbonisation infrastructure – equipment to capture emissions, pipelines to transport them, and a shared site to store them safely and permanently.

Economies of scale through shared infrastructure

The idea of a CO2 transport pipeline traversing the Humber might sound unusual, but large-scale natural gas pipelines have criss-crossed the region since the late 1960s when gas was dispatched from the Easington Terminal on the east Yorkshire coast under the Humber to Killingholme in North Lincolnshire. Further, the UK’s existing legislation creates an environment to ensure they can be operated safely and effectively. CO2 is a very stable molecule, compared to natural gas, and there are already thousands of miles of CO2 pipelines operating around the US, where it’s historically been used in oil recovery.

A shared pipeline also offers economies of scale for companies to implement carbon capture, allowing the Humber’s cluster of carbon-intensive industries to invest in vital infrastructure in a cost-effective way. The diversity of different industries in the region, from renewable baseload power generation at Drax to cutting-edge hydrogen production, also offers a chance to experiment and showcase what’s possible at scale.

The Humber’s position as an estuary onto the North Sea is also advantageous. Its expansive layers of porous sandstone offer an estimated 70 billion tonnes of potential CO2 storage space.

The Humber Estuary

 

But this isn’t just an opportunity to decarbonise the UK’s most emissions-intensive region, it’s a stage to present a new green industrial hub to the world. A hub that could create as many as 47,800 jobs, including high quality technical and construction roles, as well as other jobs throughout supply chains and the wider UK economy.

British innovation as a global export

As industries of all kinds across the world race to decarbonise, there’s an increasing demand for products with green credentials. If we can decarbonise products from the region, such as steel, it will give UK businesses a global edge. Failure to follow through on environmental ambitions, however, will not just damage the cluster’s status, it will put hundreds of thousands of jobs at risk.

Breaking new ground is difficult but there are first-mover advantages. The products and processes trialled and run at scale within the Humber offer intellectual property that industrial hubs around the world are searching for, creating a new export for the UK.

But this vision of a decarbonised Humber, that exports both its products and knowledge to the world, is only possible if we take the right action now. We have a genuine global leadership position. If we don’t act now, that will be lost.

Through projects like Zero Carbon Humber and the East Coast Cluster, alongside Net Zero Teesside, the region’s businesses have shown our collective commitment to implementing decarbonisation at scale through collaboration.

As a Track 1 cluster, the Humber presents one of the UK’s greatest opportunities to level up – attracting global businesses and investors, as well as protecting and creating skilled jobs. We need to seize this moment and put in place the infrastructure that will put the Humber at the forefront of a low-carbon future.

Healthy forests need markets

26 August 2022

Sustainable bioenergy
Forest in LaSalle catchment area

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Key takeaways:

  • Misunderstandings about the role primary woody biomass plays in providing secure, reliable and renewable power will have negative and material impacts across Europe and around the world.
  • European Parliament proposals to introduce a subsidy ban on utilising sustainably sourced, harvesting residues are deeply flawed and will have negative impacts on Europe’s energy security and climate targets.
  • Biomass should not be sourced from high-quality, high-value sawlogs. EU policy making on primary woody biomass should ensure this is the case while being careful not to restrict good sources of biomass, including harvesting residues and other by-products generated during the sustainable management of forests for these higher value products.
  • Forest thinning and regeneration harvests (e.g. clear-cuts) generate low-value fibre that can’t be used for solid wood products but that must be removed to ensure forests remain healthy and productive.
  • Clearcutting is a well-accepted regeneration technique used to encourage the redevelopment of forests which need full sunlight to grow.  This type of regeneration is particularly suited to maintaining certain forest types found in North America, from where the EU receives 2.1 million tonnes of wood pellets a year.
  • Biomass is the lowest value product coming from a forest harvest: it does not dictate harvest practices and only uses by-products.
  • Without markets for low-grade or low-value wood, landowners struggle to manage healthy productive forests and the prevalence of pests, disease, forest fire, and land-use change are increased.

Introducing restrictions to reduce the use of primary woody biomass and clear-cuts will not stop harvesting from taking place because harvesting is primarily driven by long-lived, solid wood product sectors. Instead, such restrictions may result in a reduction in markets for the low-grade by-products of the timber industry that will in turn lead to forest degradation and loss.

Biomass is the EU’s largest source of renewable energy by some distance. In 2020, solid biomass – woodchips, pellets, and renewable waste materials – accounted for ~40% of the final consumption of renewable energy.

Solid biomass, like wood pellets, comes from low-grade or low-value wood from actively managed working forests. The sale of this wood provides a vital revenue stream for landowners practising sustainable forest management. But proposed changes to the EU’s Renewable Energy Directive (RED III) will lead to unintended consequences for sustainable forestry and the energy sector.

An incentive for active forest management

The low-quality or low-value wood used by the biomass sector includes sourcing from practices  like thinning – periodic felling of a proportion of the trees in a forest to promote healthy, vigorous growth of the remaining trees. Thinning is an important element of active forest management. Fewer trees mean less competition for light, water and nutrients so the remaining trees can reach sawtimber-size sooner, increasing the landowner’s return on investment and contributing to long-term carbon storage in solid wood products.

Thinning also improves forest health and biodiversity.  Removing weaker and diseased trees, which are more susceptible to disease and pest infestation, contributes to a more resilient forest.  Greater levels of sunlight hitting the forest floor stimulate a more diverse herbaceous layer, which in turn supports a number of endemic wildlife species.

Clear-cuts are another common and important sustainable forest management practice: it is a myth that the act of clearcutting is unsustainable. Clear-cuts are an accepted regeneration technique used in Europe and North America. The practice is guided by science and mimics natural disturbance events such as wildfire and storm damage. It is crucial for forest types which require full sunlight to regenerate and grow and helps prevent forest degradation that would otherwise occur if only weaker trees were left in the forest to regenerate.  In addition, clear-cuts regeneration plays a vital role in habitat diversity, supporting a suite of species which thrive in this early successional habitat.   In many situations clear-cuts set the stage for stronger forest regrowth and are essential for maintaining landscape-level diversity.

Clear-cuts generate low-value fibre that can’t be used for solid wood products but that must be removed to ensure forests remain healthy and productive.

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The European Parliament proposals under RED III would confusingly put both valuable sawlogs and low-grade wood  under the EU classification of ‘primary woody biomass’

The proposal would also place extreme restrictions around how energy produced using primary woody biomass is accounted for in progress towards renewable energy targets. This will negatively  impact the market for low-value wood and in turn, reduce economic incentives to sustainably manage forests. Proposals to introduce a cap and “phase down” of this type of material will stunt the entire growth of the sector, which is at odds to widely held views globally that demand for sustainable biomass will increase towards 2050.

Why markets matter

Without a market for lower quality or lower value wood, there is less incentive to manage forests sustainably. This increases the risk of pests, disease and wildfire, and compromises the long-term health of the forest. Wood that would be removed through thinning or final harvest, for example, may be left to rot on site or be burned.

In British Columbia, forest owners must, by law, dispose of waste wood, meaning millions of tonnes are burned, releasing an estimated 3 million tonnes of CO2 a year into the atmosphere.

The biomass sector has long operated in Europe and North America; regions where deforestation is currently not a threat to working forests even with the sustained use of biomass which might become categorised as ‘primary woody biomass’.

Through sustainable management the US South, where Drax sources around a third of our biomass, saw annual forest growth increase by 112% between 1953 and 2015, while forest coverage increased by 108%.

Supporting biomass this decade to decarbonise the next

Sustainable bioenergy

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Key takeaways

  • Bioenergy with carbon capture and storage (BECCS) can help sectors that struggle to decarbonise, such as agriculture, steel, cement, and aviation, move away from their dependence on fossil fuels.
  • Dispatchable, low-carbon power from bioenergy can provide energy security, helping to reduce the EU’s reliance on Russian natural gas, whilst also reducing CO2 emissions.
  • Policy decisions made now must support the ongoing development of biomass and BECCS to ensure their role in a net zero future.
  • Legislation and regulation must support the scale up of carbon removal technologies now, which should include strong ambition and importantly, realistic timeframes.

Reaching climate goals depends on decarbonisation across every sector of the global economy, all the way through the supply chain. For carbon-intensive industries, such as steel, cement, chemicals and the aviation sector, this is a huge challenge.

Bioenergy, produced from sustainably sourced biomass wood pellets, can play a crucial role in replacing fossil fuels, strengthening Europe’s energy security, and reducing emissions from these industries which are finding it hard to decarbonise. The addition of bioenergy with carbon capture and storage (BECCS) can even allow such industries to take the crucial step of becoming carbon negative.

Achieving ambitious BECCS plans in Europe requires action now to ensure that supportive policy frameworks are in place to support the advancement of biomass technologies throughout the 2020s and then enable BECCS to be delivered at scale in the 2030s.

Proposed changes to biomass support in the 2020s in the EU’s Renewable Energy Directive (RED III) could help reach this goal, but policy decisions must be realistic and not set unachievable expectations, or hamper investment in these critical solutions. Specifically, BECCS is unlikely to be scaled up until later in the second half of 2020s. REDIII must acknowledge this and enable support for carbon capture technologies to be in place on similar timelines to overall EU emissions reductions targets, for example 2030.

Decarbonising heavy industry clusters

One of the key ways to tackle industrial emissions is through the decarbonisation of Europe’s industrial clusters. Zero Carbon Humber aims to be the world’s first net zero cluster by 2040 through shared carbon capture and storage (CCS) and hydrogen infrastructure.

Drax Power Station serves as an anchor for the project, with BECCS technology already at a more advanced stage than any other project around the world. Through the emissions removals BECCS makes possible, we aim to be a carbon negative business by 2030 and play a key part in decarbonising the Humber – the UK’s single most emissions intensive region.

BECCS technology, at Drax Power Station and globally, depends on sustained collaboration between governments and industries. Importantly, Drax is on track to deliver the first scaled up BECCS project from 2027 and we are working with government and industry to ensure both infrastructure availability and appropriate monitoring, reporting and verification is in place at the same time.

Fuelling the future of intensive industries

Carbon removal technologies, such as BECCS, have a key role to play in decarbonising other hard-to-abate industries.

Steel, cement, and chemical production processes require high amounts of energy. Today the vast majority of this comes from fossil fuels. However, biomass, and carbon removal through BECCS, can rapidly decarbonise these carbon-intensive sectors.

Sustainable aviation fuels (SAF) offer another way to decarbonise a vital, but emissions-heavy industry. Research into SAF is ongoing, with a range of feedstocks currently in the mix, including animal fats, vegetable oils, and algae. But the production of these fuels has its own carbon footprint, and BECCS has the potential to mitigate this.

The Sustainable Aviation Fuels Innovation Centre at the University of Sheffield, the first research and testing centre of its kind in Europe, is set to open in 2023. The facility will lead R&D into how BECCS can be used in the manufacture of zero-carbon fuels.

Sustained research and investment into biomass and BECCS innovation are crucial throughout this decade, to prepare essential technology for the next. According to the Intergovernmental Panel on Climate Change (IPCC), 10bn tonnes of CO2 may need to be captured by carbon removal technologies annually between now and 2050 to prevent catastrophic climate change.

BECCS is the most scalable of these and has the potential to be integrated into a wide range of industries. But the right action and policies are needed now to create net zero industries by 2050.