U.K. and its major power producer brawl over biomass subsidies

LONDON -- Britain's biggest coal-burning power station has gone to war against the government over its lack of support for the use of biomass. The move by the 4,000-megawatt power complex -- the size of four large nuclear power plants -- could undermine the nation's legally binding goal of getting 15 percent of primary energy from renewable sources by 2020.

The Drax Power Station, located in the northern English county of Yorkshire, generates some 7 percent of the country's electricity, along with about 4 percent of its carbon dioxide emissions. In a high-profile move designed to force the government's hand, it has threatened to shelve plans to boost burning of biomass, including wood, elephant grass and other forms of non-fossil fuels.

Its plan was to build exclusive biomass-burning furnaces and thereby reduce its carbon emissions. The threat leaves it sitting on contracts for 2 million tonnes of biomass from various sources, some of which it can still mix with coal in so-called co-firing. The rest it may have to sell.

Instead, it has said it would be cheaper to continue burning coal and simply buy the E.U. emission offsets needed to raise the limit set on its emissions than to go ahead with the planned $3 billion investment in biomass burning. It is also battling to get a current cap in the use of biomass co-firing with coal either lifted altogether or at least raised to 17.5 percent -- the same figure by which Drax has said it wants to cut its carbon emissions.

Currently, Drax emits about 23 million tonnes of carbon dioxide in the process. It gets permits under the E.U. Emission Trading System to emit about 10 million tonnes of CO2 and buys offsets for the rest. Offsets can be purchased from other greenhouse gas emissions-lowering projects.

"The current regime does not incentivize the displacement of coal by biomass -- co-firing receives one-quarter of the support given to offshore wind," a company spokesman told E&E.

Taking the high or the low 'carbon path'?

"We are soon to be in a position to make significant carbon emission reductions. We believe it is the right thing to do. However, government is forcing us to take a high-carbon path in the country's transition towards a low-carbon economy when we believe we should take a low-carbon path," he added.


Drax says that after taking into account the cost of coal and biomass and then applying the appropriate tax and subsidy schemes, biomass still works out about one-third more expensive per unit of electricity produced.

As part of its offensive, Drax has let it be known that it would prefer to burn only biomass -- a distinctly tall order, given that it currently burns about 9 million tonnes of coal a year and biomass is typically three times the price of coal.

The attack is based on two main issues: that under existing rules the level of subsidy for biomass-generated electricity is a fraction of that for both onshore and offshore wind, and that the wind subsidy is guaranteed for 20 years, whereas the biomass subsidy is reviewed every five.

The government has promised to review the subsidy regime for biomass but has already indicated it is unwilling to quadruple the subsidy period because the price of biomass varies so widely and it doesn't want to saddle the public with what could turn out to be an excessively high-cost bill.

"Of course companies want greater incentives, but we have to ensure value for money for the customer, as well, because they in the end pay the subsidy," energy minister Lord Hunt said recently. "I've got to be sure that we know enough about costs going forward for 20 years before we can give the companies the kind of certainty they want."

A Drax spokeswoman said the company expected some news on the review next month around the time of the annual national budget. Greenpeace anti-coal campaigner Joss Garman said the five-year review period made it impossible for proper budgeting on such high-priced fuel shifts.

Can wind and tidal power meet the target?

But he also noted that even if Drax's carbon emissions were cut by 17.5 percent, the plant would still be belching nearly 19 million tonnes of carbon dioxide into the atmosphere each year,leaving it well up the table of top European polluters. "What they should really do is shut it down," he said. "This is a really just a ploy to get more money out of the government."

A report in 2007 by environmental group WWF on "Europe's dirty thirty" ranked what it said were the biggest power station carbon emitters in Europe. It found that Drax came fourth after one Polish plant and two German plants, all of which burned brown coal, while Drax burns more efficient hard coal.

On that list, even if Drax's emissions were cut to about 19 million tonnes a year, it would still be in the top six. But the picture is further clouded by questions over whether the United Kingdom will be able to achieve its E.U. 15 percent renewables target for primary energy, which translates into getting about 35 percent of the country's electricity from renewable sources within a decade.

It is a very ambitious target that the government says is possible to reach with a major expansion of wind power, which currently provides only about 4 percent of the country's electricity. Biomass, by comparison, produces about half that, according to the Renewable Energy Association.

But the government has also been seen to be trying to move the goal posts, arguing that even if a renewable project like the proposed controversial and massively expensive tidal barrage across the estuary of the River Severn in southwest England had been approved but not yet built by 2020, it should be included in the renewable target.

A fight compounded by regulatory and political uncertainty

The other two main political parties -- the Conservatives and the Liberal Democrats -- have been noticeably reticent on the achievability of the 2020 target. Given that the country's Labour government must hold a general election by June and opinion polls show it either losing or being forced to try forming a coalition to hold onto power, the uncertainty over future carbon reduction efforts -- or at least the pace -- is underscoring Drax's unwillingness to go ahead with such a major biomass investment.

"We do not believe we can create a credible investment case for our shareholders if there is complete regulatory uncertainty," the utility's chief executive, Dorothy Thompson, told the London Times newspaper late last week, announcing the biomass plan delay.

The irony is that if the plans to build three dedicated biomass burning plants, together producing 15 percent of the country's renewable energy, were to go ahead, they would make the country's biggest single source of carbon dioxide emissions the key to meeting its 2020 targets.

Fuelling Drax's sense of outrage, some of its main power competitors are reported to have been lobbying hard behind the scenes to mothball coal-fired power plants that they own but that are slated for closure in 2015 under E.U. anti-pollution rules. The shift would keep them ready for emergency use.

Drax has already spent a lot of money fitting the smokestack scrubbers needed to remove the offending nitrogen and sulfur oxides that make it confirm to the European Union's large combustion plant directive.

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