The Government has halved subsidies it gives to the Drax power station and warned that the use of “unabated biomass” is not a long-term solution for the Ƶ’s energy needs.
The power station in Yorkshire is one of the biggest sources of power in the Ƶ, and has switched from its former coal burning units to biomass over the last few years. Drax says that switch is better for the environment but it has faced criticism from green campaigners over its burning of wood from forests in North America.
The plant receives substantial public subsidies for its operations but these were due to come to an end in 2027. Now a Contracts for Difference scheme between the Government and Drax has been renewed until 2031, but with the Government saying that previous arrangements were not good value for the taxpayer and didn’t do enough to protect the environment.
In a Ministerial statement, Energy Minister Michael Shanks said that Drax would have to reduce its operations so that its energy came on stream when output dropped from solar and wind power fell. He said it was crucial to the Ƶ’s energy security to maintain Drax’s operations, but that would be at a lower rate of subsidy and with more stringent environmental conditions on the wood used by Drax.
Mr Shanks said the previous subsidies “enabled Drax to make unacceptably large profits”.
Outlining reduced subsides, he said: “These measures represent a profound shift from the past on sustainability and on value for money. In this context, this is the right deal for security of supply and price in the period 2027 to 2031, given the circumstances we have inherited from the previous government.
“But nevertheless, we recognise the strength of concerns about the use of unabated biomass. It is not a long-term solution. We are determined that the next time these decisions are made Government is not left in the circumstances we have been. So we will do the work that was not done by the previous administration on strong and credible low carbon alternatives, so that we have proper options in four years’ time.
“To help that process, we are setting up an independent review to consider how respective greenhouse gas removal, including large-scale power BECCS and DACCS, can assist the Ƶ in meeting our net zero targets and ensuring security of supply, out to 2050. Further details of the review will be shared in due course.”
Drax welcomed the Government announcement and said it would protect jobs at the Selby power station.
Drax Group CEO Will Gardiner said: “The power station plays a critical role in Ƶ energy security, providing c.10% of all Ƶ renewable energy and over 50% at certain times of peak demand, with enough reliable power for 5m homes - equivalent to every home in London, or Wales and Scotland combined. Under this proposed agreement, Drax can step in to increase generation when there is not enough electricity, helping to avoid the need to burn more gas or import power from Europe, and when there is too much electricity on the Ƶ grid, Drax can turn down and help to balance the system.
“The size, flexibility and location of the power station makes it important for Ƶ energy security and the proposed agreement helps protect the jobs and skills of today and the future, creating options for billions of pounds of investment in growth across Britain, including the development of large-scale carbon removals and data centres.”
Environmentalists expressed raised concerns over the continuation of subsidies but welcomed a reduction in payments. Campaigners have long questioned the role of biomass in cutting carbon emissions and accused Drax of sourcing the wood pellets used in its plant from environmentally important forests, although the company has said it is confident its biomass is sustainable and legally harvested.
Clare Oxborrow, nature campaigner at Friends of the Earth, said that at a time when funding is being cut or curtailed in many areas, “it’s disappointing that the Ƶ’s biggest carbon emitter is being given yet more public money at a cost to people and the environment”.
“However, this decision represents a significant roll-back of government support for Drax, with its funding slashed by half and the introduction of much tighter sustainability requirements,” she said.
Drax will issue its 2024 full year results on February 27.
