A UK high court judgement has found that conversion to biomass of unit 3 at the 6 x 660 MWe Drax coal plant is after all eligible for an investment contract under what is known as the Final Investment Decision Enabling mechanism. Accordingly, the court has ordered that the decision of the Department of Energy and Climate Change to deem the conversion ineligible must be quashed and the matter remitted to DECC for reconsideration. DECC has been granted leave to appeal. Also, any award of an investment contract for conversion of would be subject to EU state aid clearance, notes Drax.
The UK government is in the processs of introducing Contracts for Difference (CfDs) as a mechanism to support the development of low carbon power generation, in place of the current ROC (Renewables Obligation Certificate) regime. The FID Enabling (aka "early CfD") scheme is an interim measure to avoid an investment hiatus in the UK renewables sector in the run up to full introduction of the CfD regime. The early CfD's are intended to engender investor confidence in advance of what is termed the "enduring" CfD scheme.
In December 2013, the UK government advised Drax that biomass conversions of two units at the plant, units 1 and 3, were eligible for investment contracts. Both units were provisionally ranked equal-first of all the qualifying projects and deemed affordable, Drax points out.
In April 2014, the government offered Drax an investment contract for the unit 1 conversion (and the contract has been signed, although it remains subject to EU state aid clearance) but deemed conversion of unit 3 was no longer eligible for an investment contract. Drax says it "did not receive a satisfactory explanation for this decision...and legal advice confirmed the company had a good foundation to challenge it." Proceedings were therefore initiated.
Unit 2 at the Drax site has already been converted (with subsidies under the ROC regime) and is operating on 100% biomass.
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