Drax reports good operational year, discusses future in biomass

Drax Group has released its preliminary results for 2016, accompanied by a webcast presentation given by CEO Dorothy Thompson, who discussed challenges and successes over the past year, as well as some of the company’s future goals and prospects in relation to biomass conversions and wood pellet production.

Thompson said Drax’s power generation business has a good operational year, highlighting the its state aid approval for a contract for difference (CfD) in December after a lengthy delay, and completion of the conversion of Drax’s third power unit to wood pellets.

In 2016, 75 percent of Drax’s power generation was derived from biomass, Thompson said, granting it the title of the largest single-source of renewable energy in the United Kingdom, having produced 1.27 terawatt-hours (TWh) of renewable power. Drax generates 16 percent of the renewable electricity in the U.K., she added, but in terms of support costs, it only represents around 10 percent. Currently, two of Drax’s units are supported by grandfathered renewable obligation credits (ROCs), and the other by the CfD.

Thompson said in terms of sustainability, Drax continues to strictly adhere to its robust sustainability policy, is fully compliant with U.K. mandatory standards, and had a particularly good year in terms of low-carbon fuel. Not only lower carbon, but a substantial drop in NOx emissions. “Biomass and wood pellets are a naturally low-NOx fuel, but we also installed additional NOx reduction equipment for our coal generation…that combination means we were able to more than half our emissions of NOx from our plant in Yorkshire,” she said.

Drax’s U.S. pellet plants and port facility are operating well, Thompson said. “Our focus here is very much on reliable production, and really low-quality [fiber] pellets at cost…that’s the key, getting the cost of these pellets down.” The utility is targeting 20-30 percent self-supply, she said, which would nearly double its current production capacity.

To do that, two main initiatives are underway, according to Thompson. “One is an incremental investment in existing plants,” she said. “Right now, we have the capacity of 900,000 tons per year, and we’re going to be spending £10 million to increase that production capacity by 150,000 tons. That’s a very low cost for incremental capacity, but more importantly, it enables us much higher percentages of using secondary residues in the production of pellets…mainly byproducts of wood processing industries, the most typical of which is saw mills.”

The second initiative will be to capitalize on the auction or sale of distressed wood pellet plants in the U.S. and Europe, Thompson said. “Because of three warm winters in Europe, and a shortage of demand, that has put financial pressure on these [plants]…some we expect to come up for auction or sale. If they have the right quality of equipment, we may be interested in purchases, and see that as a real opportunity to increase our own capacity and self-supply.”

On future projects, Thompson said Drax continues to explore options for future unit conversions, focusing on low cost technologies, and that the utility would be “doing some trials in the coming weeks on one of our units to learn more about the viability of one of those options.”