Released August 08, 2010 | GALWAY, IRELAND
en
Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Coal-fired energy company Drax Power Limited, part of Drax Group plc (LSE:DRX) (Selby, England), has delayed plans to build three biomass projects worth more than £2 billion ($3.2 billion).
The company said that it is not prepared to go ahead with the projects right now, citing concerns about their profitability. The announcement was made as the company announced strong financial results for the first half of 2010. Drax reported an increase of £4 million ($6.4 million) in pre-tax profits, which rose to £132 million ($210 million) for the first six months of the year on revenues of £781 million ($1.24 billion), compared to £707 million ($1.13 billion) for the same period last year.
Drax said that it has been forced to delay the proposed biomass investment because of uncertainty about the level of subsidy the new coalition government plans to provide the biomass projects. Despite needing to reduce its own emissions and its public commitment to investing in more renewable energy projects, Drax said that the biomass investments will now be delayed until at least 2011.
In late 2008, Drax announced a joint venture with Siemens AG (NYSE:SI) (Munich, Germany) to build three dedicated biomass plants with a generating capacity of 300 megawatts (MW) each. Construction was to begin this year and rights to port sites had already been obtained for Hull and Immingham. For additional information, see November 4, 2009, article - Drax Investing $3.3 Billion in Three Biomass-Fed Power Stations.
In late July, the government announced that all the costs associated with biomass plants, along with anaerobic digestion and energy-from-waste (EfW) schemes, would be 'grandfathered' under the Renewables Obligation (RO) scheme. This ensures that these plants will get the same level of support under the RO as they did when they were first established for a period of 20 years. This now puts them on a level footing with other renewable energy technologies and should speed up the number of biomass projects coming online.
Despite the guarantee of financial support for 20 years, Drax Chief Executive Dorothy Thompson said the government's decision to review the entire subsidy regime in 2013 makes the regulatory system too uncertain.
"If you commit to an investment this year, you will not know what the [government support] band will be when you go into operation in 2014," Thompson said. "We believe the government is aware of the issue, and we are hopeful they will review it."
Drax owns and operates Drax Power Station, the largest coal-fired power station in the U.K., which has a generating capacity of 4,000 MW from six generators. The plant supplies 7% of the U.K.'s electricity. Drax has been burning biomass alongside coal for some years, but recently commissioned a new co-firing facility that can generate up to 500 MW, the largest co-firing project in the world.
Speaking about Drax's biomass plans, Thompson said: "Biomass, the fourth energy source, sets out the need for a balanced renewable energy mix, including making the most of the environmentally beneficial and cost-effective opportunities biomass provides. Biomass is the earth's fourth most plentiful energy resource. For years it has provided more electricity in the U.K. than any other renewable resource, but electricity generation from biomass has not increased in recent years due to certain limitations in the policy framework. Electricity generation from biomass has the potential to grow significantly and make a vital contribution to meeting the U.K.'s challenging renewables and climate change targets at least cost to U.K. consumers. This will only happen with the right policy framework."
View Plant Profile - 1073074
View Project Report - 78000482
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The company said that it is not prepared to go ahead with the projects right now, citing concerns about their profitability. The announcement was made as the company announced strong financial results for the first half of 2010. Drax reported an increase of £4 million ($6.4 million) in pre-tax profits, which rose to £132 million ($210 million) for the first six months of the year on revenues of £781 million ($1.24 billion), compared to £707 million ($1.13 billion) for the same period last year.
Drax said that it has been forced to delay the proposed biomass investment because of uncertainty about the level of subsidy the new coalition government plans to provide the biomass projects. Despite needing to reduce its own emissions and its public commitment to investing in more renewable energy projects, Drax said that the biomass investments will now be delayed until at least 2011.
In late 2008, Drax announced a joint venture with Siemens AG (NYSE:SI) (Munich, Germany) to build three dedicated biomass plants with a generating capacity of 300 megawatts (MW) each. Construction was to begin this year and rights to port sites had already been obtained for Hull and Immingham. For additional information, see November 4, 2009, article - Drax Investing $3.3 Billion in Three Biomass-Fed Power Stations.
In late July, the government announced that all the costs associated with biomass plants, along with anaerobic digestion and energy-from-waste (EfW) schemes, would be 'grandfathered' under the Renewables Obligation (RO) scheme. This ensures that these plants will get the same level of support under the RO as they did when they were first established for a period of 20 years. This now puts them on a level footing with other renewable energy technologies and should speed up the number of biomass projects coming online.
Despite the guarantee of financial support for 20 years, Drax Chief Executive Dorothy Thompson said the government's decision to review the entire subsidy regime in 2013 makes the regulatory system too uncertain.
"If you commit to an investment this year, you will not know what the [government support] band will be when you go into operation in 2014," Thompson said. "We believe the government is aware of the issue, and we are hopeful they will review it."
Drax owns and operates Drax Power Station, the largest coal-fired power station in the U.K., which has a generating capacity of 4,000 MW from six generators. The plant supplies 7% of the U.K.'s electricity. Drax has been burning biomass alongside coal for some years, but recently commissioned a new co-firing facility that can generate up to 500 MW, the largest co-firing project in the world.
Speaking about Drax's biomass plans, Thompson said: "Biomass, the fourth energy source, sets out the need for a balanced renewable energy mix, including making the most of the environmentally beneficial and cost-effective opportunities biomass provides. Biomass is the earth's fourth most plentiful energy resource. For years it has provided more electricity in the U.K. than any other renewable resource, but electricity generation from biomass has not increased in recent years due to certain limitations in the policy framework. Electricity generation from biomass has the potential to grow significantly and make a vital contribution to meeting the U.K.'s challenging renewables and climate change targets at least cost to U.K. consumers. This will only happen with the right policy framework."
View Plant Profile - 1073074
View Project Report - 78000482
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
