Britain's Drax pauses $2.5 billion biomass carbon capture plans

By Nora Buli and Susanna Twidale

(Reuters) - British power generator Drax will pause its planned 2 billion pound ($2.45 billion) UK investment in bioenergy with carbon capture and storage (BECCS) until it receives more clarity on government support, it said on Tuesday.

Drax welcomed the UK government's recent budget support for carbon capture and storage (CCS) but said the company required a firm commitment to BECCS before it could invest the cash to install the technology at its 2.6 gigawatt biomass power plant in Yorkshire, northern England.

"Until we have this clarity, we are pausing our multimillion-pound investment programme in the UK BECCS project," Drax CEO Will Gardiner said in a statement.

Gardiner urged the government to outline its support in an announcement planned for the end of this month on measures to support energy security.

Britain's climate change advisers this month said that the technology is likely to be needed for the country's plans to cut electricity sector emissions as part of efforts to meet its climate goal of net-zero emissions by 2050.

Other countries are also interested in building BECCS plants and Drax says it has hosted a ministerial visit from Poland, officials and academics from Indonesia and a delegation of bipartisan U.S. state senators.

The U.S. Inflation Reduction Act (IRA) is offering $85 per tonne of stored greenhouse gas removal using BECCS while Britain has yet to establish a market mechanism for the technology.

An existing subsidy scheme for biomass plants, which provide about 6% of the country's electricity, runs out in 2027, which a Drax spokesperson said could make them unviable.

Drax is developing technology to capture and store emissions generated from burning wood-based biomass pellets.

Green groups have heavily criticised the practice, arguing that it is not a carbon-neutral method of energy generation and that pellet production can contribute to deforestation.

Drax says it only uses wood residuals or byproducts from trees primarily used for lumber and that demand for wood from sustainable managed forests can help to increase forest growth.

($1 = 0.8162 pounds)

(Reporting by Nora Buli and Susanna Twidale; Editing by Susan Fenton and David Goodman)