LONDON - Britain's biggest coal plant needs better renewable energy support to invest in new facilities to burn woodchips instead of coal and fully utilize its existing carbon cutting capability, the chief executive of Drax told Reuters on Friday.
Under Britain's existing renewable energy support scheme, called the Renewables Obligation (RO), the amount of renewable energy that can come from burning biomass instead of coal is capped in a system designed to push big multi-plant utilities to invest in other types of clean energy projects.
But Drax, which runs just one big plant -- the largest single source of carbon emissions in Britain -- has invested heavily in technology to use cleaner organic fuel -- called co-firing -- and wants the cap lifted.
"The government policy is not designed to encourage large scale co-firing at coal stations and that seems crazy because what is becoming clear is that there are vast quantities of biomass available and this is one of the most competitive forms of renewable energy," Drax CEO Dorothy Thompson told Reuters in an interview.
"The most important thing is that there is a lifting of the cap on co-firing."
Power producers can sell ROCs to suppliers if they generate electricity from renewable sources such as wind, wood chips or solar power.
Drax can get up to 2 ROCs for every megawatt hour (MWh) of electricity it produces from burning wood chips in dedicated boilers, but the government has not guaranteed that level of support over time and it gets just half a ROC for co-firing.
The British government said in a statement on Friday it was reviewing whether to provide more certainty for biomass projects.
"We're reviewing whether current arrangements already available provide enough certainty for investors," the statement said. "In doing this we must be particularly mindful of the sustainability of biomass and the impacts on energy consumers' bills."
Drax does not expect to fully use its capacity for co-firing this year because falling carbon and coal prices coupled with rising biomass prices make it more economic to burn coal.
"Although we will be co-firing as we go forward we don't believe that we are going to be capable of using our full capacity," Thompson said, adding that the power plant would burn energy crop biomass that it has already bought and hedged.
"But we will burn and we have committed contracts that we will honor."
Whether Drax's plans to build three dedicated biomass burning boilers at an estimated cost of 2 billion pounds become a reality will depend on negotiations with government.
"We are moving forward with developing the business case for those investments. We are clear we are not going to do it unless we have clarity on the regulatory framework," she said.
The European Union's emissions trading scheme forces big polluters to submit an emissions permit or EU Allowance (EUA) for every tonne of carbon dioxide emissions, raising costs in particular for coal-fired power plants.
Lower EUA prices favor burning coal. Benchmark EUAs were trading 12.5 euros on Friday, near 10-month lows.
"Given the modest wholesale power price at present burning biomass is not economic," said Citigroup analysts.
Under Britain's existing renewable energy support scheme, called the Renewables Obligation (RO), the amount of renewable energy that can come from burning biomass instead of coal is capped in a system designed to push big multi-plant utilities to invest in other types of clean energy projects.
But Drax, which runs just one big plant -- the largest single source of carbon emissions in Britain -- has invested heavily in technology to use cleaner organic fuel -- called co-firing -- and wants the cap lifted.
"The government policy is not designed to encourage large scale co-firing at coal stations and that seems crazy because what is becoming clear is that there are vast quantities of biomass available and this is one of the most competitive forms of renewable energy," Drax CEO Dorothy Thompson told Reuters in an interview.
"The most important thing is that there is a lifting of the cap on co-firing."
Power producers can sell ROCs to suppliers if they generate electricity from renewable sources such as wind, wood chips or solar power.
Drax can get up to 2 ROCs for every megawatt hour (MWh) of electricity it produces from burning wood chips in dedicated boilers, but the government has not guaranteed that level of support over time and it gets just half a ROC for co-firing.
The British government said in a statement on Friday it was reviewing whether to provide more certainty for biomass projects.
"We're reviewing whether current arrangements already available provide enough certainty for investors," the statement said. "In doing this we must be particularly mindful of the sustainability of biomass and the impacts on energy consumers' bills."
Drax does not expect to fully use its capacity for co-firing this year because falling carbon and coal prices coupled with rising biomass prices make it more economic to burn coal.
"Although we will be co-firing as we go forward we don't believe that we are going to be capable of using our full capacity," Thompson said, adding that the power plant would burn energy crop biomass that it has already bought and hedged.
"But we will burn and we have committed contracts that we will honor."
Whether Drax's plans to build three dedicated biomass burning boilers at an estimated cost of 2 billion pounds become a reality will depend on negotiations with government.
"We are moving forward with developing the business case for those investments. We are clear we are not going to do it unless we have clarity on the regulatory framework," she said.
The European Union's emissions trading scheme forces big polluters to submit an emissions permit or EU Allowance (EUA) for every tonne of carbon dioxide emissions, raising costs in particular for coal-fired power plants.
Lower EUA prices favor burning coal. Benchmark EUAs were trading 12.5 euros on Friday, near 10-month lows.
"Given the modest wholesale power price at present burning biomass is not economic," said Citigroup analysts.
