Financial Times

Energy policy under fire after Drax pulls out of carbon capture scheme

by Pilita Clark

September 25, 2015 | 2:55 am
  |     |     |   Start Conversation

A flagship £1bn UK climate change plan has been thrown into turmoil after the Drax power company said that it was pulling out because government green policy reversals had made
it too risky to proceed.

Drax’s decision to abandon five years of planning for a carbon capture and storage system next to its huge North Yorkshire power station is the most visible sign yet of how green
energy subsidy cutbacks are jolting investors.

Several “critical reversals” in government support for renewable energy had made “a severe impact on our profitability”, said Peter Emery, the Drax board member chairing the group
developing the White Rose carbon capture project.

“We’ve also got concerns about the government’s future support for the low carbon agenda and that’s left us in a position where we are no longer confident we can persuade our
shareholders that this is an attractive investment, given the obvious risks,” he told the Financial Times.

“The government has to make difficult decisions based on affordability and in turn so are we,” he said, in a thinly­veiled dig at energy secretary, Amber Rudd, who says subsidy cuts
are needed to protect British families.

A series of U­turns on support for renewable energy has sent a chill through a green investment community that had been buoyed by David Cameron’s previous vow to lead the
greenest government ever.

Since the Conservatives won the May election, ministers have scaled back support for wind and solar power, ended the Green Deal home energy saving programme and raised
questions about the level of future support for renewable energy projects.

White Rose is one of more than a dozen carbon capture projects the UK has vainly tried to get off the ground in the past eight years. Such systems theoretically offer a way for fossil
fuel companies to keep burning coal or gas in power stations without affecting the climate. They trap greenhouse gas pollution before it can warm the atmosphere and store it deep
underground.

But efforts to build them have repeatedly foundered around the world because they are so expensive.

Drax has invested £3m in White Rose but would have had to spend much more if the project had gone ahead.

The consortium is one of two remaining bidders in a government contest for £1bn in funding to build Europe’s first carbon capture plant on a commercially operating power station.

Drax’s share price has been battered over the past 18 months as ministers reined in support for wood pellets, a renewable fuel that the company has started burning at its massive
coal power station, the UK’s biggest.

The biggest hit came in July when the government unexpectedly decided that clean power companies would have to start paying a climate­change tax.

Drax has been developing White Rose with consortium partners, France’s Alstom and the BOC industrial gas group.

Leigh Hackett, chief executive of the consortium, said Drax’s decision to stop investing in the scheme was “disappointing” but the remaining shareholders were committed to finishing
the project.

 

Pilita Clark


by Pilita Clark

September 25, 2015 | 2:55 am
  |     |     |   Start Conversation

Big Read |  

Analysis

What Nigeria must do before signing AfCFTA

Nigeria’s President Muhammadu Buhari last Wednesday gave a hint that he would sign the African Continental Free Trade Area (AfCFTA)...


Top 100 (300 x250)

MTN Felele

WSE

Newsletter Fixed income