Drax loses appeal over green power subsidies, to proceed with conversion
08 Aug 2014
UK power generating company Drax, said in a statement that its second unit conversion was no longer eligible for an investment contract, Biomass magazine reported.
The company would proceed with the conversion with support under the Renewables Obligation, it added.
The company planned to convert half of its generators to run on imported US woodchips rather than coal. However, the biomass technology as it is called, is not economical and requires substantial subsidies to run.
Drax planned to convert three of six units at its massive Selby complex in Yorkshire from coal to biomass and had expected to get state subsidy for two of the conversions.
However, the government agreed to fund only ones, saying the other was not eligible, which prompted a legal fight.
According to the release, the UK Court of Appeal had in the matter of the appeal by the UK Department of Energy and Climate Change (DECC) decided against a recent High Court judgment that Drax's second unit conversion was eligible for an investment contract.
According to Drax's statement, the Court of Appeal had allowed DECC's appeal and dismissed Drax's application for judicial review.
''Accordingly, the second unit conversion is no longer eligible for an Investment Contract. Having taken legal advice, Drax will not appeal against this decision,'' said the company in its statement. ''Drax will now consider its options for the full conversion of this unit, where eligibility for support under the Renewables Obligation has been confirmed.''
The DECC had indicated in late 2013, that it would award an early Contract for Difference (CfD) to two Drax unit conversions, but later withdrew support from one conversion under the Final Investment Decision Enabling mechanism.
The company's shares fell 8 per cent after the company lost the battle with the government over subsidies, thisismoney.co.uk reported.
Drax approached the court after ministers pulled financial support from another project this year.
Though the initial case was upheld by the High Court, yesterday the appeals court overturned the ruling.
According to analyst Peter Atherton at Liberum, the UK government had cooled on its enthusiasm for large scale biomass conversions. He added, as the government juggled its various energy priorities the government could act arbitrarily and unpredictably
Drax could use an older subsidy scheme - Renewables Obligation Certificate (ROC) - but preferred a more generous mechanism, a Contract for Difference.
