Drax provides update of biomass operations

By Erin Voegele | June 08, 2015

On June 8, Drax Group plc issued a trading update, reporting progress with its U.S. pellet plants and providing an update of the company’s biomass conversion projects.  The trading update also addresses operational performance and power sales contracted for 2015 and 2016.

Regarding its biomass operations, Drax said its first two converted biomass units continue to perform in line with expectations. A third biomass unit conversion was awarded an investment contract, but that contract remains subject to European Union state aid clearance.

Drax’s third biomass unit conversion is one of eight renewable energy projects awarded a Contract for Difference (CfD) by the U.K. Department of Energy and Climate Change under the final investment decision (FID) enabling for renewables process. The other seven projects include five off-shore wind projects, the Lynemouth biomass conversion and the Teesside dedicated biomass with combined-heat-and-power (CHP) project.

In July 2014, the EC granted state aid approval to the five wind projects as part of a larger announcement from the commission that indicated the U.K’s Contracts for Difference (CfD) subsidy program is in line with EU state aid rules. In January, the EC approved the U.K’s plan to provide state aid to the proposed Teesside CHP plant. In February, the EU announced it had opened an in-depth investigation to assess whether the U.K.’s plans to support the biomass conversion of the coal-fired Lynemouth power plant are in line with EU state aid rules. To date, the Drax and Lynemouth biomass conversion projects are still awaiting EC state aid approval. 

The trading update issue by Drax also addresses the company’s two U.S. pellet plants. According to the company, both of its U.S. pellet plants are being commissioned and have produced pellets that have been successfully processed at Drax.

The pellet plants under development by Drax Biomass include the 450,000-ton-per-year Morehouse BioEnergy facility in Bastrop, Louisiana, and the 450,000-ton-per-year Amite BioEnergy plant in Gloster, Mississippi. In April, the company announced the first vessel loaded with pellets from the its U.S. plants sailed away from Drax Biomass’ Baton Rouge port facilities, destined for the Port of Tyne in the U.K.

In its trading update, Drax also said that trading conditions in the markets in which it operates have remained challenging since the company published its preliminary results in February. According to Drax, weak gas markets have resulted in the continuation of weak power prices. The company, however, said it continues to benefit from a strong contracted position and the good operational performance of its generating units. Expectations for the full year remain unchanged.

Drax also noted that it has extended its contracted position, including additional power sales of 3.4 TWh and 2.7 TWh for 2015 and 2016, respectively, compared to the position reported in February. As of June 1, the company has 23.8 TWh of power sales contracted, with 22.3 TWh of fixed power sales at an average price of £49.90 ($76.57) per MWh, and 1.5 TWh in fixed margin and structured power sales. In 2016, the company has 12.1 TWh contracted, including fixed power sales of 10.4 TWh at an average price of £48.80 per MWh and 1.7 TWh in fixed margin and structured power sales.