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Drax has scrapped plans to build a 300MW dedicated biomass power station on the site of its coal-fired plant in Selby, North Yorkshire.
The decision came after the government proposed it would not increase the level of support for biomass under the renewables obligation. A final decision on the subsidies is expected in the summer.
Drax warned last October, when the proposals first came to light, that the investment case for a biomass plant was “highly challenging”. Now it has gone one step further and dropped the project altogether.
The company is still looking to develop a second biomass plant at the port of Immingham in Lincolnshire in partnership with Siemens Project Ventures. The economic case at this site is stronger because the biomass fuel could arrive by sea.
Running a dedicated plant at Selby would require biomass to be transported inland from the port, which pushes up costs. Drax said: “The added transport costs on a marginal project puts more pressure on the economics. At Immingham you haven’t got that, so it looks the more favourable of the two sites.”
Transport costs were not the only factors behind the decision. If the company were to continue developing the plant at Selby it would have to cancel an electrical connection agreement that hooks the plant up to the national grid. This would be costly further down the line, Drax said.
Work still continues on the co-firing of coal and biomass at the Selby power station. The plant has the capability to produce 12.5% of its output from biomass. Drax is looking to raise this to 20% to qualify for enhanced biomass co-firing subsidies, which require a minimum output of 15% from biomass.
Boosting co-firing at Selby will cost £50 million and increase output from the plant by 300MW. The scrapped project of a new dedicated biomass plant with the same output would have cost the company £600 million-£700 million.
Currently, enhanced co-firing of biomass earns one renewable obligation certificate. Dedicated biomass earns 1.5, dropping to 1.4 if plants are not accredited by 2016.
Drax burned 1.3 million tonnes of biomass at Selby in 2011, 600,000 tonnes of which were purely for research and development. Drax explained: “We spent a lot of time and effort looking at different biomass materials, operating conditions and throughput rates to really understand how much we can increase the level of biomass at the power station.”
As a result of these trials, the company is confident that over time the plant can become predominantly biomass, with 50% of output from the fuel.