Tag: Drax Power Station

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

10 August 2023

Financial News

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).

Enquiries:

Drax Investor Relations:

Mark Strafford
+44 (0) 7730 763 949

Media:

Drax External Communications:

Chris Mostyn
+44 (0) 7548 838 896

Sloan Woods
+44 (0) 7821 665 493

END

Updated expectations for full year 2022

6 July 2022

Investors

RNS Number : 5930R
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

In response to increased pressure on European gas markets and associated concerns about electricity security of supply in the UK this winter, Drax continues to optimise its biomass generation and logistics. To accomplish this Drax is reprofiling biomass generation and supply from the summer to the winter, enabling it to provide high levels of reliable renewable electricity generation in the UK throughout the winter when demand is likely to be higher. 

The Group also expects to provide additional support from pumped storage hydro at Cruachan Power Station, building on a strong year to date performance, which reflects a high level of system support activities.

Separately, at the request of the UK Government, Drax has now entered into an agreement with National Grid – in its capacity as the electricity systems operator – pursuant to which its two coal-fired units at Drax Power Station will remain available to provide a “winter contingency” service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and only operate if and when instructed to do so by National Grid.

Under the terms of the agreement, Drax will be paid a fee for the service and compensated for costs incurred, including coal costs, in connection with the operation of the coal units in accordance with the agreement.

Full year expectations

Reflecting these factors, 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.

Notes:

(1)   Earnings before interest, tax, depreciation, amortisation, excluding the impact of exceptional items and certain remeasurements.

(2)   As of 5 July 2022, analyst consensus for 2022 Adjusted EBITDA was £613 million, with a range of £584-£635 million. The details of this company collected consensus are displayed on the Group’s website.

https://www.drax.com/investors/announcements-events-reports/presentations/

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

END

Six-month extension of coal operations at request of UK Government

Investors
View of Drax Power Station

RNS Number : 5919R
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

In response to increased pressure on European gas markets and associated concerns about electricity security of supply in the UK this winter, the UK Government has asked owners of legacy coal-fired generation assets, including Drax, to work together with National Grid to temporarily extend the life of their coal generation assets to March 2023.

At the request of the UK Government, Drax has now entered into an agreement with National Grid – in its capacity as the electricity systems operator – pursuant to which its two coal-fired units at Drax Power Station will remain available to provide a “winter contingency” service to the UK power system from October 2022 until the end of March 2023. The units will not generate commercially for the duration of the agreement and only operate if and when instructed to do so by National Grid.

Under the terms of the agreement, Drax will be paid a fee for the service and compensated for costs incurred, including coal costs, in connection with the operation of the coal units in accordance with the agreement.

Will Gardiner, Drax’s Group CEO, said:

“At the request of the UK Government, Drax has agreed to delay the planned closure of its two coal-fired units and help bolster the UK’s energy security this winter.

“Drax has played a central role in ensuring Britain’s energy security over several decades and our workforce is proud to be providing this critical support to the UK energy system.

“Drax is the UK’s largest generator of renewable power, producing enough reliable, renewable electricity for 5 million households from our sustainable biomass and hydro operations and we remain committed to delivering a coal-free future.

“The UK’s long-term energy security depends on investment in innovative green technologies like bioenergy with carbon capture and storage (BECCS), which provides reliable, renewable power whilst permanently removing CO2from the atmosphere.

“Drax aims to invest billions of pounds developing BECCS in the UK by 2030, provided that the UK Government has in place policies to support the feasibility and delivery of negative emissions technologies, which it has committed to developing this year.”

Drax ended commercial operations on its two-remaining coal-fired generation units in March 2021, and formal closure was planned for September 2022, following the fulfilment of the Group’s Capacity Market obligations on these units.

A limited six-month extension to March 2023 is not expected to result in a material level of coal generation(1). Throughout 2021, coal-fired generation accounted for 3% of the Group’s generation output and in the first three months of 2022, this was less than 1%, with the balance from renewables – sustainable biomass, pumped storage and hydro.

The decision 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 more than 95% 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.

Investment in renewables

To date, Drax has invested over £2 billion in renewables and UK security of supply, with options for a further £3 billionto be invested this decade, subject to the right investment environment. These investment options include the development of negative emissions technologies and pumped storage, which the UK Government has said are necessary to decarbonise the electricity generation sector by 2035 and reach net zero by 2050.

No expected impact on BECCS

Drax continues to expect to take a final investment decision on its Drax Power Station BECCS project in 2024, subject to the right investment environment and, in 2022, is investing incrementally in the development of this option. This includes the removal of certain coal infrastructure. A six-month extension of coal is not expected to impact on the timing of a final investment decision or intended commissioning date for the project. Site preparation works for BECCS are ongoing and will accelerate following formal closure of the coal units in March 2023.

The UK Government recognises the important role which BECCS has to play in delivering net zero, requiring at least 5Mt of CO2 per year from BECCS and other engineered Greenhouse Gas Removals (GGR) by 2030. To support this ambition, in July 2022, the UK Government published a consultation on engineered GGR’s. Separately, in order to develop the financial model required to support BECCS – and reflective of its advanced technological readiness and the co-benefits of both power and negative emissions – the UK Government is expected to publish a power BECCS business model consultation during summer 2022.

The Group believes that negative emissions and BECCS represent a trillion-dollar global market opportunity and is separately continuing to develop options to deliver 4Mt of negative CO2 emissions each year from new-build BECCS outside of the UK by 2030.

Notes:

(1)   Drax will work with National Grid to source up to approximately 400,000 tonnes of additional coal (which together with current stocks is enough for c.1TWh of electricity generation) to deliver the service, and will only operate if and when instructed to do so by National Grid.

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

END

Global collaboration
is key to tackling
the climate crisis

Will Gardiner, Chief Executive Officer, Drax Group

22 April 2021

Opinion

Leaders from 40 countries are meeting today, albeit virtually, as part of President Joe Biden’s Leaders’ Summit on Climate. The event provides an opportunity for world leaders to reaffirm global efforts in the fight against climate change, set a clear pathway to net zero emissions, while creating jobs and ensuring a just transition.

Since taking office President Biden has made bold climate commitments and brought the United States back into the Paris Agreement. Ahead of the two-day summit, he announced an ambitious 2030 emissions target and new Nationally Determined Contributions. The US joins other countries that have announced significant reduction goals. For example, the EU committed to reduce its emissions by at least 55%, also South Korea, Japan and China have all set net-zero targets by mid-century.

Here in the UK, Prime Minister Boris Johnson this week outlined new climate commitments that will be enshrined in law. The ambitious new targets will see carbon emissions cut by 78% by 2035, almost 15 years earlier than previously planned. If delivered, this commitment which is in-line with the recommendations of the Climate Change Committee’s sixth carbon budget will put the UK at the forefront of climate action, and for the first time the targets include international aviation and shipping.

What makes climate change so difficult to tackle is that it requires collaboration from many different parties on a global scale never seen before. As a UK-North American sustainable energy company, with communities on both sides of the Atlantic, at Drax we are keenly aware of the need for thinking that transcends borders, creating a global opportunity for businesses and governments to work together towards a shared climate goal. That’s why we joined other businesses and investors in an open letter supporting the US government’s ambitious climate actions.

Collaboration between countries and industries

It’s widely recognised that negative emissions technologies will be key to global efforts to combat climate change.

At Drax we’re pioneering the negative emissions technology bioenergy with carbon capture and storage (BECCS) at our power station in North Yorkshire, which when up and running in 2027 will capture millions of tonnes of carbon dioxide (CO2) per year, sending it for secure storage, permanently locking it away deep under the North Sea.

Experts on both sides of the Atlantic consider BECCS essential for reaching net zero. The UK’s Climate Change Committee says it will play a major role in removing CO2 emissions that will remain in the UK economy after 2050 from industries such as aviation and agriculture that will be difficult to fully decarbonise. Meanwhile, a report published last year by New York’s Columbia University revealed that rapid development of BECCS is needed within the next 10 years in order to curb climate change and a recent report from Baringa, commissioned by Drax, showed it will be a lot more expensive for the UK to reach its legally binding fifth carbon budget between 2028 and 2031 without BECCS.

A shared economic opportunity

Globally as many as 65 million well-paid jobs could be created through investment in clean energy systems. In the UK, BECCS and negative emissions are not just essential in preventing the impact of climate change but will also be a key component of a post-Covid economy.

Government and private investments in clean energy technologies can create thousands of well-paid jobs, new careers, education opportunities and upskill workforces. Developing BECCS at Drax Power Station, for example, would support around 17,000 jobs during the peak of construction in 2028, including roles in construction, local supply chains and the wider economy. It would also act as an anchor project for the Zero Carbon Humber initiative, which aims to create the world’s first net zero industrial cluster. Developing a carbon capture, usage, and storage (CCUS) and hydrogen industrial cluster could spearhead the creation and support of tens of thousands of jobs across the Humber region and more than 200,000 around the UK in 2039.

Under the Humber Bridge

Additional jobs would be supported and created throughout our international supply chain. This includes the rail, shipping and forestry industries that are integral to rural communities in the US South and Western Canada.

A global company

As a British-North American company, Drax embodies the positive impact that clean energy investments have. We directly employ 3,400 people in the US, Canada, and the UK, and indirectly support thousands of families through our supply chains on both sides of the Atlantic. Drax is strongly committed to supporting the communities where we operate by investing in local initiatives to support the environment, jobs, education, and skills.

From the working forests of the US South and Western Canada to the Yorkshire and Humber region, and Scotland, we have a world-leading ambition to be carbon negative by 2030. At Drax, we believe the challenge of climate change is an opportunity to improve the environment we live in. We have reduced our greenhouse gas emissions by over 80% and transformed into Europe’s largest decarbonisation project. Drax Power Station is the most advanced BECCS project in the world and we stand ready to invest in this cutting-edge carbon capture and removal technology. We can then share our expertise with the rest of the world – a world where major economies are committing to a net zero future and benefiting from a green economic recovery.

If we are to reach the targets set in Paris, global leaders must lock in this opportunity and make this the decade of delivery.

Capacity Market agreements for existing assets

9 March 2020

Investors
Engineer below Cruachan Power Station dam

RNS: 3530F
Drax Group plc
(“Drax” or the “Company”; Symbol:DRX)

Drax confirms that it has provisionally secured agreements to provide a total of 2,562MW of capacity (de-rated 2,333MW) from its existing gas, pumped storage and hydro assets(1). The agreements are for the delivery period October 2023 to September 2024, at a price of £15.97/kW(2) and are worth £37 million in that period. These are in addition to existing agreements which extend to September 2023.

Drax did not accept an agreement for the 60MW Combined Cycle Gas Turbine (CCGT) at Blackburn Mill.

A new-build CCGT at Damhead Creek and four new-build Open Cycle Gas Turbine projects participated in the auction but exited above the clearing price and did not accept agreements.

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

Notes:

  1. Existing assets – gas (Damhead Creek, Rye House, Shoreham and three existing small gas turbines at Drax Power Station), Cruachan Pumped Storage and the Galloway hydro scheme (Tongland, Kendoon and Glenlee).
  2. Capacity Market agreements stated in 2018/19 real-terms, with payments indexed to UK CPI.

END

End of coal generation at Drax Power Station

27 February 2020

Investors
Coal picker, Drax Power Station, 2016

Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)
RNS Number : 2747E

Following a comprehensive review of operations and discussions with National Grid, Ofgem and the UK Government, the Board of Drax has determined to end commercial coal generation at Drax Power Station in 2021 – ahead of the UK’s 2025 deadline.

Commercial coal generation is expected to end in March 2021, with formal closure of the coal units in September 2022 at the end of existing Capacity Market obligations.

Will Gardiner, Drax Group CEO, said:

“Ending the use of coal at Drax is a landmark in our continued efforts to transform the business and become a world-leading carbon negative company by 2030. Drax’s move away from coal began some years ago and I’m proud to say we’re going to finish the job well ahead of the Government’s 2025 deadline.

“By using sustainable biomass we have not only continued generating the secure power millions of homes and businesses rely on, we have also played a significant role in enabling the UK’s power system to decarbonise faster than any other in the world.

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

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

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

Coal in front of biomass storage domes at Drax Power Station, 2016

Coal in front of biomass storage domes at Drax Power Station, 2016

Drax will shortly commence a consultation process with employees and trade unions with a view to ending coal operations. Under these proposals, commercial generation from coal will end in March 2021 but the two coal units will remain available to meet Capacity Market obligations until September 2022.

The closure of the two coal units is expected to involve one-off closure costs in the region of £25-35 million in the period to closure and to result in a reduction in operating costs at Drax Power Station of £25-35 million per year once complete. Drax also expects a reduction in jobs of between 200 and 230 from April 2021.

The carrying value of the fixed assets affected by closure was £240 million, in addition to £103 million of inventory at 31 December 2019, which Drax intends to use in the period up to 31 March 2021. The Group expects to treat all closure costs and any asset obsolescence charges as exceptional items in the Group’s financial statements. A further update on these items will be provided in the Group’s interim financial statements for the first half of 2020.

As part of the proposed coal closure programme the Group is implementing a broader review of operations at Drax Power Station. This review aims to support a safe, efficient and lower cost operating model which, alongside a reduction in biomass cost, positions Drax for long-term biomass generation following the end of the current renewable support mechanisms in March 2027.

While previously being an integral part of the Drax Power Station site and offering flexibility to the Group’s trading and operational performance, the long-term economics of coal generation remain challenging and in 2019 represented only three percent of the Group’s electricity production. In January 2020, Drax did not take a Capacity Market agreement for the period beyond September 2022 given the low clearing price.

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

END

Capacity Market agreements for existing assets and review of coal generation

31 January 2020

Investors
Drax's Kendoon Power Station, Galloway Hydro Scheme, Scotland

RNS Number : 6536B

T-3 Auction Provisional Results

Drax confirms that it has provisionally secured agreements to provide a total of 2,562MW of capacity (de-rated 2,333MW) from its existing gas, pumped storage and hydro assets(1). The agreements are for the delivery period October 2022 to September 2023, at a price of £6.44/kW(2) and are worth £15 million in that period. These are in addition to existing agreements which extend to September 2022.

Drax did not accept agreements for its two coal units(3) at Drax Power Station or the small Combined Cycle Gas Turbine (CCGT) at Blackburn Mill(4) and will now assess options for these assets, alongside discussions with National Grid, Ofgem and the UK Government.

A new-build CCGT at Damhead Creek and four new-build Open Cycle Gas Turbine projects participated in the auction but exited above the clearing price and did not accept agreements.

T-4 Auction

Drax has prequalified its existing assets(5) and options for the development of new gas generation to participate in the T-4 auction, which takes place in March 2020. The auction covers the delivery period from October 2023.

CCGTs at Drax Power Station

Following confirmation that a Judicial Review will now proceed against the Government, regarding the decision to grant planning approval for new CCGTs at Drax Power Station, Drax does not intend to take a Capacity Market agreement in the forthcoming T-4 auction. This project will not participate in future Capacity Market auctions until the outcome of the Judicial Review is known.

Enquiries:

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

Media:

Drax External Communications
Matt Willey
+44 (0) 0771 137 6087

Photo caption: Drax’s Kendoon Power Station, Galloway Hydro Scheme, Scotland

Website: www.drax.com

Acquisition Bridge Facility refinancing completed

24 July 2019

Investors

Private placement

The £375 million private placement with infrastructure lenders comprises facilities with maturities between 2024 and 2029(2).

ESG Facility

The £125 million ESG facility matures in 2022. The facility includes a mechanism that adjusts the margin based on Drax’s carbon emissions against an annual benchmark, recognising Drax’s continued commitment to reducing its carbon emissions as part of its overall purpose of enabling a zero-carbon, lower cost energy future.

Together these facilities extend the Group’s debt maturity profile beyond 2027 and reduce the Group’s overall cost of debt to below 4 percent. 

Enquiries:

Drax Investor Relations:
Mark Strafford
+44 (0) 1757 612 491

Media:

Drax External Communications:
Matt Willey
+44 (0) 7711 376 087 

Website: www.drax.com

Note

(1)  Drax Corporate Limited drew £550 million under an acquisition bridge facility on 2 January 2019 used to partially fund the acquisition of ScottishPower Generation Limited for initial net consideration of £687 million. £150 million of the acquisition bridge facility was repaid on 16 May 2019.

(2)  £122.5 million in 2024, £122.5 million in 2025, £80 million in 2026 and £50 million in 2029.

Fourth biomass unit conversion

17 January 2018

Investors
RNS Number : 1114C
Drax Group PLC

Drax welcomes the UK Government response to the consultation on cost control for further biomass conversions under the Renewable Obligation scheme, which will enable Drax to convert a fourth unit to biomass.

The response proposes that, rather than imposing a cap on ROC(1) support for any future biomass unit conversions, a cap would be applied at the power station level across all ROC(1) units. This would protect existing converted units and limit the amount of incremental ROCs attributable to additional unit conversions to 125,000 per annum.

The response would enable Drax to optimise its power generation from biomass across its three ROC units under the cap, whilst supporting the Government’s objective of controlling costs under the Renewable Obligation scheme.

Drax will now continue its work to deliver the low cost conversion of a fourth biomass unit, accelerating the removal of coal-fired generation from the UK electricity system, whilst supporting security of supply.

Drax plans to complete the work on this unit as part of a major planned outage in the second half of 2018, before returning to service in late 2018. The capital cost is significantly below the level of previous conversions, re-purposing the existing co-firing facility on site to deliver biomass to the unit.

The unit will likely operate with lower availability than the three existing converted units, but the intention is for it to run at periods of higher demand, which are often those of higher carbon intensity, allowing optimisation of ROC(1) generation across three ROC(1) accredited units. The CfD(2) unit remains unaffected.

Will Gardiner, Chief Executive of Drax Group, commented:

“We welcome the Government’s support for further sustainable biomass generation at Drax, which will allow us to accelerate the removal of coal from the electricity system, replacing it with flexible low carbon renewable electricity.”

“We look forward to implementing a cost-effective solution for our fourth biomass unit at Drax.”

Enquiries:

Investor Relations:

Mark Strafford

+44 (0) 1757 612 491

Media:

Ali Lewis

+44 (0) 1757 612 165

 

Website: www.drax.com

Notes

  1. Renewable Obligation Certificate
  2. Contract for Difference

END