Drax biomass conversion project qualifies for new subsidies

Dec 4, 2013 - UK power producer Drax Group (LON:DRX) said Wednesday that its plan to switch half its capacity from coal to biomass would be eligible for new government subsidies.

The company is working to convert to biomass three of the six 600-MW coal-fired power generators at the Drax power station at Derby. Operation of the first-converted biomass unit commenced in April this year.

The plan to convert the other two generators will qualify for the Contract for Difference (CfD) of the UK Department of Energy and Climate Change (DECC), which entitles investors to a compensation if the wholesale electricity prices drop under strike prices. Developers will be able to apply for the CfD at the end of next year. The new system will replace the renewable obligation for all new renewable projects from April 2017. In addition, the government confirmed its support for biomass conversion projects, setting final strike prices of GBP 105 (USD 172/EUR 126) per MWh, which will not be changed until 2018/19.

Drax has already received a GBP-75-million guarantee from the government’s GBP-40-billion guarantee scheme for its project.

(GBP 1.0 = USD 1.638/EUR 1.203)

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