Drax passes State Aid test for third biomass conversion

The European Commission has concluded that UK support for the conversion of a unit at the Drax power station, so it uses wood fuel instead of coal, complies with EU State Aid rules.

The  645MW capacity unit will be the third to be fuelled with wood pellets and it will be supported with a ‘Contract for Difference’, under which the plant will receive a guaranteed price for its power until 2027.

The Commission opened an investigation in January 2016 to check that the aid would not lead to overcompensation and undue distortions of competition in the biomass market. But the Commission said the increased demand for wood pellets to fuel the power plant could be fulfilled by the market without undue negative side-effects.

Cornwall Energy analyst Thomas Edwards noted that without the State Aid approval the  conversion was expected to go ahead with support from the Renewables Obligation. The approval means Drax will not be exposed to price risk in the energy market; it also means there is less likely to be oversupply of Renewables Obligation Certificates, which will help maintain their value.