The chief executive of Drax, Dorothy Thompson, says the Government’s latest biomass subsidy rules make it very hard for her to make the case to investors to fund the company’s £2 billion biomass plans.
Coal giant Drax, which operates Europe’s largest power station supplying around seven per cent of the UK’s electricity, planned to develop three new 290 MW dedicated biomass-fired plants.
The government, under pressure from the biomass industry, increased the level of subsidy available to make biomass more competitive with other forms of renewables such as wind power.
However, key aspects of the government’s changes will be reviewed in 2013 and because building biomass boilers takes more than three years, Ms Thomson has taken the view that without greater certainty beyond the next few years, she “cannot put together the investment case” to shareholders.
She says: “We, along with other biomass plant developers, engaged with the Government advocating the need for a guaranteed level of support for new dedicated biomass plants over their lifetime – known as “grandfathering”.
“We argued that grandfathering provisions are needed to provide certainty for investment decisions.”
The Government has committed to 20 year grandfathering support for biomass. But any
dedicated biomass plant which is accredited after 1 April 2013 will be grandfathered at the rate applicable at that time, which, may differ to the current rate.
MsThompson believes the Government should commit to at least a matching the current rate or investors will not be persuaded to part with their money.
“We don’t believe it is possible to move forward with these investments in the absence of the clarity,” adds Ms Thompson.
“We are urging the Government to address this particular issue as early as possible and we hope for an early conclusion.”