Drax withdrawal from White Rose hints at need for UK energy re-think

6th Oct 2015

Last month, UK power generator Drax announced that it no longer plans to provide support for the White Rose Carbon Capture and Storage Project following its existing feasibility study commitment.

Working with partners Alstom and BOC, Drax had originally planned to build a high-efficiency, low emission coal-fired plant that had biomass and CCS capability. The company’s plans were, however, thrown in doubt in July, when the Government announced that subsidies for biomass would end in August. The company said that the decision would cost it £30m in 2015 and £60m the year after. In recent weeks the company’s share price also dropped by 30%.

On announcing plans to end support for White Rose, Drax Group Operations Director, Peter Emery said: ‘‘Several ‘critical reversals’ in government support for renewable energy had made a severe impact on our profitability’’.

The Drax announcement is significant for three reasons.

Firstly, Leigh Hackett, CEO of Capture Power, which represents the other consortium members, said following the announcement that the company ‘‘remains committed to delivering the White Rose CCS Project”. The ultimate litmus test, however, will be in the coming months when the final investment decision is made by the Government.

Secondly, questions should be raised over the UK’s energy security. Coal still provides a significant chunk of the UK’s energy pie and is important in times of high-demand, such as in colder winters. In recent years, aging coal-fired power stations have closed without equivalent energy sources coming online. Indeed, last month following the most recent closure, ScottishPower said that spare capacity would fall to 53 GW, below the estimated peak demand of 56 GW. This hardly provides confidence to the Secretary of State’s recently announced priority of ‘keeping bills as low as possible for hardworking families and businesses and powering the economy while decarbonising in the most cost-effective way’.

Finally, spending on energy projects played a major role in the UK’s recovery following the Global Financial Crisis. A recent report by the Department of Energy and Climate Change, said energy projects made up 60% of the country’s total infrastructure project pipeline totalling over £200 billion. Change to energy policy, such as dropping support for biomass, hurts investor confidence. The UK needs a clear energy strategy. Acknowledging the continuing role of fossil fuels – including coal – will be a major part of this outcome.