Large-scale biomass currently provides around 5% of the UK’s annual electricity generation, with Drax’s 2.6 GW plant operating as a baseload plant running around two-thirds of the year. However, ‘conscious of concerns about sustainability and the level of subsidy biomass plants have received in the past’, the government says Drax will play ‘a much more limited role in the system [from 2027], providing low-carbon dispatchable power only when it is really needed’.

Under a new dispatchable Contract for Difference (CdD) arrangement, Drax will be supported to operate at a maximum load factor of just 27% – operating less than half as often as it currently does. This means that ‘when renewable power is abundant, Drax won’t generate, and consumers will benefit from cheaper wind and solar instead’, explains the government. The new deal also halves the subsidies for Drax, reportedly saving consumers ‘£170mn in subsidy in each year of the agreement compared with the alternative of procuring gas in the capacity market’, says the government.

In addition, the agreement includes a built-in windfall mechanism with rates of 30% and 60% that would ‘claw back excess profits’ made by Drax.

The Drax power station has been controversial over the years.

Recent analysis by think tank Ember found the plant to be one of the UK’s largest emitters of CO₂. However, there are plans to add bioenergy with carbon capture and storage (BECCS) technology to two of the four biomass units at the power station, facilitating the removal of approximately 8mn t/y of CO₂ once both units are fully operational.

In its defence, Drax claims that the use of biomass pellets reduces the plant’s carbon emissions by 80% compared to coal, and that such burning is carbon neutral, as regrowing sustainable forests absorbs similar amounts of CO₂ as burning the wood in a power plant.

The government is also introducing ‘tough new measures on sustainability’ of large-scale biomass plant feedstock, increasing the proportion of woody biomass that must come from sustainable sources from 70% to 100%. In addition, ‘material sourced from primary and old growth forests’ will be excluded from receiving any support payments. ‘There will be substantial penalties on Drax if these criteria are not met,’ states the government.

Last year, Drax paid £25mn into Ofgem’s Voluntary Redress Fund after the regulator found the company had submitted inaccurate data on the sourcing of its wood pellets.

Commenting on the new CfD agreement and subsidies mechanism, Drax Group CEO Will Gardiner said: ‘Drax Power Station is the UK’s largest power station and provides secure capacity equivalent to over 80% of Hinkley Point C. The power station plays a critical role in UK energy security, providing some 10% of all UK renewable energy and over 50% at certain times of peak demand.’

Samantha Smith, Head of Heat and Biomass UK at the Renewable Energy Association, welcomed the news, saying: ‘The role of sustainable biomass is recognised within all credible scenarios for getting to net zero, whether produced by the Climate Change Committee, the International Energy Agency, or the UN Intergovernmental Panel on Climate Change.’

However, while noting the announcement ‘ensures large-scale generators can plan for the future and help to deliver carbon removals via BECCS’, she pointed out there are more than 60 generators that lie outside the scope of support. Collectively, they provide around 1,100 MW of baseload generating capacity and have the potential to transition to BECCS in the future. Smith warned: ‘Some guarantee of support is needed for those not located in a carbon capture cluster, and with the Renewables Obligation starting to come to an end in 2027, time is of the essence.’