Drax wins court appeal over coal-to-biomass conversion investment contract

Drax Group has won a High Court battle to overturn the government’s ruling that one of its coal-to-biomass conversion projects was ineligible for a new subsidy scheme.

In a surprise decision in April, the Department of Energy and Climate Change (DECC) announced that only one of Drax’s two planned unit conversions would receive one of the government’s new investment contracts. 

The new contracts for difference (CfD) will be launched later this year to incentivise generators to switch from coal to more sustainable energy sources.

CfDs will offer a guarantee of an agreed price for electricity. If the market price for electricity falls lower than the agreed “strike price”, then generators are subsidised. If it rises above it, generators pay back the difference. 

Eight major renewable energy projects were offered CfDs ahead of schedule earlier this year, in order to secure necessary investment. Drax’s third conversion project was among them, yet the firm’s second project was excluded, prompting immediate legal action.

In a £700 million plan, Drax hopes to convert its Yorkshire power station from the UK’s biggest carbon emitter into a leading green energy generator, burning wood pellets instead of coal.

They claimed that the government’s rejection compromised the success of the entire scheme. On Monday, Mrs Justice Andrews upheld that appeal, ruling that both conversions are deserving of CfDs.

DECC does have the right to appeal against the verdict, and is said to be considering its options. 

However, shares in Drax surged on Monday after the victory was announced. Shares had fallen by 13% after the government’s initial ruling in April.   

Further reading:

Coal-to-biomass station opens in North Yorkshire

EU set to fund UK carbon capture and storage project

NAO questions government’s £16.6bn renewable energy contracts

Carbon capture and storage must be fast-tracked to UK power plants, MPs urge

Eight renewables projects given go-ahead in ‘green energy investment boom’