Drax provides update of biomass operations

By Erin Voegele | November 24, 2015

Drax Group plc released a trading update on Nov. 24, reporting that trading conditions in the markets in which the company operates have remained challenging. Biomass operations, however, are continuing in line with expectations.

According to Drax, further weakness has been experienced in power prices, but the company continues to benefit from good operational performance and has strengthened its 2015 and 2016 hedges for power sales at prices significantly above the current market. Overall, the expectations for the full year remain unchanged.

Regarding biomass, Drax said the first major planned biomass unit outage was completed over the summer. No biomass related issues were identified, and the unit is now back in full operation. The company also reported that in addition to the existing U.K. east port facilities, Drax has added further import capability with new facilities at Liverpool.

Drax also briefly addressed the investment contract for the third biomass unit conversion, noting it remains subject to EU State Aid clearance.

The company’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. 

Drax’s full year results are expected to be released in February.