New turn in CfD decision for Drax's 2nd biomass unit

Aug 8, 2014 - The British government has been successful in its appeal against the High Court’s recent ruling that the second unit of Drax Group’s (LON:DRX) coal-to-biomass conversion project is eligible for an investment contract, the firm said yesterday.

In mid-July, the High Court ruled that the particular unit is eligible for the “early” contracts under the Contract for Difference (CfD) subsidy scheme. As a result, the Department of Energy and Climate Change (DECC) said it would reconsider its prior decision to refrain from awarding an investment contract, but still lodged an appeal against the ruling.

Now that the Court of Appeal has passed its judgement and after Drax took legal advice on the matter, the company has decided it will not appeal against the latest decision. It also noted it will mull over its options for the full conversion of the unit, which will be eligible for support under the Renewables Obligation scheme.

Drax 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 2013.

Under the CfD mechanism investors will receive a variable premium over the wholesale electricity price until the total amount reaches the pre-defined "strike prices".

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