Coal giant emerges as environmental saint

2 March 2021

The 4 GW Drax complex, once the largest coal fired plant in western Europe and despite its history of clean coal innovation sometimes labelled by the press ‘Britain’s dirtiest plant’, has completed its journey towards environmental beatification with the announcement that following three years of protests from environmental groups arguing that its plans were inconsistent with UK government ambitions to lead the world in reducing greenhouse gas emissions it has scrapped its plans to develop what would have been Europe’s largest CCGT facility.

The Drax report on its performance in calendar year 2020, which announced strong progress on its overall strategy, showed an increase in its adjusted EBITDA from £410 million in 2019 to £412m, cash generated at £413m (£471m in 2019) and a dividend increase of 7.5%. However its decision to scrap its plans for gas generation has resulted in a £156 m operating loss for 2020, after recording a total charge of £239 m from the cancelled gas project and writing off the value of its remaining coal inventories, and including the £34m cost of closing its coal burning units.

Drax has now sold all its gas generation assets, and (despite continued scepticism among some scientists about the green credentials of growing trees for biomass firing) is concentrating on wood pellet production at its plants in North America which supply all the fuel for its biomass based generation, which is stated to amount to 11% of all UK generation based on renewables. The company reports an increase of 7% in pellet production together with improved quality and a 5% reduction in cost, the sale of its gas generation assets (completed in January this year) and the end of “commercial coal fired generation” to be completed in March 2021. The possibility remains that Drax will build four smaller (299 MW) gas fired plants designed for short run-times during times of peak electricity demand, and it has retained its options for system support gas in the next capacity auction.

Will Gardiner, CEO of the Drax group: “Our focus is on renewable power. Our carbon intensity is one of the lowest of all European power generators. We aim to be carbon negative by 2030 and are continuing to make progress. The proposed acquisition of Pinnacle Renewable Energy will position Drax as the world’s leading sustainable biomass generation and supply business, paving the way for us to develop bioenergy with carbon capture and storage (BECCS) – taking us even further in our decarbonisation.”

Major acquisitions, recently or in the pipeline, include the Cruachan pumped hydro storage facility in Scotland, together with the smaller run-of-river facilities Lanark and Galloway, and the Daldowie biomass-from-waste facility; and Pinnacle Renewable Energy, a leading manufacturer and distributor of industrial wood pellets, which operates eight production sites in western Canada, and one in Alabama, processing mainly forest residuals from sustainable forests.

  • The Drax timetable to eliminate coal firing supports the UK government’s announcement on 4 February of its intention to consult on bringing forward by one year its deadline for the end of unabated coal power from 2025 to October 2024, as part of its drive to go faster on decarbonising the power sector as it works towards net zero by 2050. Britain’s reliance on coal for electricity has dropped from 70% in 1990 to less than 3% today. The latest statistics show that the UK’s greenhouse gas emissions fell by 2.1% between 2017 and 2018, thanks in large part to the rapid reduction in coal-powered electricity generation. In 2020 more than half of the UK’s electricity came from low-carbon sources.

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