Drax increases wood pellet production, reduces costs

By Erin Voegele | February 25, 2021

Drax Group plc increased wood pellet production by 7 percent last year while improving quality and reducing costs by 5 percent, according information published in the company’s 2020 financial report, which was released Feb. 25.

The company produced 1.5 million metric tons of pellets in 2020, up from 1.4 million metric tons in 2019. Drax CEO Will Gardiner said increased production was a result of strong operational performance and good fiber availability when compared to 2019 when heavy rainfall restricted commercial forestry activity.

Pellet quality was also up last year, as measured by the level of fines in each cargo, he added. Gardiner noted that lower levels of fines result in biomass that is easier and safer to handle through the supply chain.

Cost of wood pellet production fell to $153 per ton in 2020, down from $161 per ton the previous year. Gardiner said Drax remains focused on opportunities to deliver savings across the supply chain as part of its effort to reduce the cost of biomass to £50 per megawatt hour (MWh) on 5 million metric tons by 2027. As part of that long-term goal, Drax is making intermediate supply chain improvements that are expected to reduce the cost of biomass by $25 per ton, or £13 per MWh, on its existing portfolio by 2022 when compared to 2018.

As part of those efforts, Drax is expanding pellet production at its three existing U.S. pellet plants by 400,000 metric tons. The first phase of that expansion, a 100,000-metric-ton-increase at the Morehouse facility, was completed in the final quarter of last year. The remaining 300,000 metric tons of expansion is expected to be operational in 2022, Gardiner said. Drax is also progressing with plans to develop three new 40,000 metric ton satellite plants, as announced last year.

Drax also recently announced plans to acquire Pinnacle Renewable Energy, a move that is expected to make Drax the world’s largest biomass generation and supply business. The acquisition would add an estimated 2.9 million metric tons of biomass capacity in 2022.

Drax also discussed its bioenergy carbon capture and storage (BECCS) projects, noting that it believes it can become a carbon negative company by 2030, and announced it will not develop new gas fired power at Drax Power Station.

Regarding power generation, Drax reported that its biomass generation was up 5 percent last year, reaching 14.1 terawatt hours (TWh), up from 13.4 TWh in 2019.

Drax reported £412 million in adjusted EBITDA for 2020, compared to £410 in 2019. Cash generated from operations was at £413 million, compared to £471 million the previous year. Adjusted basic earnings per share was at 29.6 pence, relatively flat when compared to the 29.9 pence reported for 2019.

Additional information is available on the Drax website