Drax CfD contract gets European green light

The European Commission has finally approved the CfD investment contract awarded to Drax by the UK Government for its third biomass unit conversion.

The Commission had begun an investigation into government support for the project in January but has now concluded that it complies with EU state aid rules.

“The project will further EU environmental and energy targets without unduly distorting competition in the Single Market,” it said.

The unit at Drax’s North Yorkshire site will have 645MW of capacity running exclusively on wood pellets.  The strike price under the CfD contract is £100/MWh.

The unit will begin operating as a fully converted biomass unit under the contract in the coming days, having previously operated as a co-firing unit under the Renewables Obligation.

‘Positive step’

Approval of the contract was a condition of the proposed acquisition of Opus Energy and Drax said the commission’s announcement “represents a positive step towards the completion of this process”.

Dorothy Thompson, Chief Executive Officer of Drax Group, said:

"We are pleased the European Commission has completed its review of the contract and approved it in line with our expectations. We now look forward to fully converting the unit to run on sustainable biomass.

“Drax is already playing a vital role in helping change the way energy is generated, supplied and used as the UK moves to a low carbon future.”
Along with the impending commissioning of two major offshore windfarms, the Drax decision will impact on the recently introduced CfD obligation levies for energy users.

Although the cost of the Renewables Obligation (RO) scheme will be reduced by the Drax conversion, this may not result in lower tariffs due to the wider increase in costs of the scheme.

> Read our blog

> Read the commission's statement