Drax shares fall after £2bn project misses out on UK carbon cash
Drax, owner of the UK’s biggest power station, is racing to secure a last-ditch lifeline for its multibillion carbon capture biomass project, after it was rejected by ministers in an initial funding round.
The company’s shares tumbled as much as 12 per cent on Thursday morning before stabilising later in the day, after it failed to be shortlisted for Track-1 status from the government.
Track-1 projects are the first approved for subsidies and immediate development, boosting Drax’s plans for its biomass project with carbon capture and storage.
Earlier this month, Drax suspended funding plans for its project until its approval status was confirmed, with Drax pushing for Track-1 status.
Drax previously revealed it was prepared to invest £2bn to fit the technology – known as Bioenergy with Carbon Capture and Storage or BECCS – to some of the units at its Selby plant in North Yorkshire, supporting as many as 10,000 jobs.
However, Drax has now revealed this afternoon it has been invited to enter “formal bilateral discussions” with the government immediately, causing its shares to recover and trade 1.6 per cent up on the FTSE 250.
The government has committed to publish its biomass strategy by the end of June, which will set out how the technology could be deployed.
Carbon capture and storage involves capturing and storing carbon dioxide before it is released into the atmosphere.
The technology can capture up to 90 per cent of CO2 released by burning fossil fuels in electricity generation and industrial processes, such as cement production.
Once the CO2 has been captured, it can be compressed into liquid state and transported by pipeline, ship or road tanker.
CO2 is then pumped underground to be stored into depleted oil and gas reservoirs and coalbeds.
Will Gardiner, chief executive of Drax, said: “We will immediately enter into formal discussions with the government to take our project forward. With the right engagement from the government and swift decision making, Drax stands ready to progress our £2bn investment programme and deliver this critical project for the UK by 2030.”
When approached for comment, a Department for Energy Security and Net Zero spokesperson said: “No company can circumvent the process. The Track-1 clusters announced as part of our Powering Up Britain package are not the end of our ambition, and conversations with companies such as Drax focus on future deployment options.
“Any decision to award support is subject to factors such as compliance with eligibility criteria and assessment of value for money.”