Yahoo Finance Drax scrambles to secure lifeline for £2bn carbon capture project
The owner of the UK's biggest power station is scrambling to secure a lifeline for its £2bn carbon capture biomass project after it was rejected by ministers in an initial funding round.
Drax's shares tumbled as much as 12pc on Thursday morning after it failed to get so-called Track-1 status from Grant Shapps, the Energy Secretary, which would have granted subsidies for its biomass project with carbon capture and storage.
However, Drax said it has been invited to enter "formal bilateral discussions" with the Government immediately.
Its shares then recovered to trade 5.4pc higher.
The Government has committed to publish its biomass strategy by the end of June, which will set out how the technology could be deployed.
In the Commons on Thursday, energy minister Graham Stuart insisted that Drax and its carbon capture technology “are critically important to this country”.
Drax had said 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.
Carbon capture and storage, known as CCS, is the process of capturing and storing carbon dioxide before it is released into the atmosphere.
The technology can capture up to 90pc of CO2 released by burning fossil fuels in electricity generation and industrial processes such as cement production.
Once the CO2 has been captured, it is compressed into liquid state and transported by pipeline, ship or road tanker. CO2 can then be pumped underground to be stored into depleted oil and gas reservoirs and coalbeds.
Will Gardiner, chief executive of Drax, said: “Delivery of BECCS at Drax power station will help the UK achieve its net zero targets, create thousands of jobs across the north and help ensure the UK’s long-term energy security.
“We note confirmation that our project has met the Government's deliverability criteria and Government remains committed to achieve 5Mtpa [million tonnes per year] of engineered greenhouse gas removals by 2030 – a goal that cannot be achieved without BECCS at Drax Power Station.
“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.”
Fears were raised in Whitehall this month that Drax may divert its £2bn of planned investment in carbon capture to the US after Joe Biden's massive package of green subsidies.
The President's Inflation Reduction Act offers subsidies and tax credits worth about $370bn (£309bn) for a range of green technologies.
Mr Gardiner told the Times: “The risk is, if the UK government doesn’t continue at pace, that investment moves to other countries, including the US, and that’s something that is absolutely part of our thinking.”
He added it would “accelerate” its plans in America while the UK would “become less of a priority over time”.
