Drax is looking to supply biomass into global markets, while pursuing a 233 per cent increase in self supply over the next seven years to take generation subsidy-free.
The power giant has committed to the sustainable feedstock for the long term, with coal to be banished this time next year.
If achieved by 2027, the company said it would be able to develop carbon capture and storage - “subject to the right support from the UK government”.
Drax, with partners, is behind a huge scheme embracing the Humber’s heavy industry and the cluster’s position as the UK’s largest C02 emitting cluster, to channel emissions into depleted oil and gas chambers beneath the North Sea. Some would also be used to create hydrogen and for other industrial applications.
It has also already stated plans to increase use from 7.5 million tonnes to 10 million tonnes at the North Yorkshire power station.
Will Gardiner, chief executive of Drax Group, warned the £60 million hit anticipated from the coronavirus pandemic could curtail investment - forecast at £230 to £250 million - but said: “Whilst the group continues to see its biomass strategy as both a primary long and short-term source of value, Drax is reviewing the timing of its investment programme in 2020 and in the short-term investment is expected to be lower.
“Biomass sustainability remains at the heart of the group’s activities and building a long-term future for sustainable biomass remains the group’s strategic objective. Drax remains focused on reducing biomass costs to a level which makes biomass generation in the UK economically viable when the existing renewable schemes end in 2027.”
It currently operates to a strike price of £116 per MWh, with a biomass cost at or below £75 MWh giving a margin of over £40 MWh. New offshore wind projects to be built off the Yorkshire coast are being brought forward against a £39.65 Contracts for Difference allocation.
Explaining how the UK’s largest single-site generator will get there, having provided base load through a transformational time for the UK energy infrastructure, Mr Gardiner said: “The group is targeting five million tonnes of self-supply capacity by 2027, with greater scope for operational leverage and cost reduction. These savings will be delivered through further optimisation of existing biomass operations, greater utilisation of low-cost wood residues and an expansion of the fuel envelope to incorporate other low-cost renewable fuels across its expanded self-supply chain. Drax remains alert to sector opportunities for organic and inorganic growth.
“By 2027 these activities would enable Drax to develop a biomass generation business operating without the current renewable schemes and potentially the development of BioEnergy Carbon Capture and Storage, subject to the right support from the UK Government. Drax notes the incremental progress and support announced for carbon capture and storage at the UK Government’s Budget in March 2020.
“These efforts support the Group’s ambition to become a carbon negative company by 2030. In addition, the group is exploring options to service biomass demand in other markets – Europe, North America and Asia.”
