Drax power station
Drax power station

Drax is xpanding profitable UK pellet power reporting earnings ahead of expectations

Drax Group plc has released preliminary financial result for 2013, reporting that earnings were ahead of expectations, reflecting good operations and healthy spreads. 4 million tons pellets are already contracted for 2014 and their new pellet production plants in the USA are progressing on time and on budget. Significant technical progress has been made in how to operate the biomass power generatiing units.

”We’re not going to just deliver good performance from these units, we are going to be able to deliver excellent performance, said Dorothy Thompson, chief executive of Drax

“As expected, the increasing cost of carbon drove earnings down year on year. Recognizing this, we have been investing significant capital to transform Drax into one of the world’s largest renewable generators, burning sustainable biomass. ”

Thompson explained that while the first converted unit was commissioned in April, it ran on a temporary fuelling that constrained the unit’s maximum output to about 550 megawatts (MW). Once the new fuelling system was operational near the end of the year, the unit was delivering more than 600 MW and might be increased to even to 645 MW. The company also expects to achieve an efficiency of only 0.5 percent less than coal.

Thompson noted that the company also intends to modify another coal unit and run it as an enhanced co-firing (ECF) unit. The ECF unit will burn up to 85 percent biomass, possibility more, and be used to test additional agricultural fuels and determine what range of technical specifications for wood pellets can be burned. The unit will also trial low-NOx burners.

The full conversion of Drax’s second and third units to biomass is highly dependent on the U.K. government’s contract for difference (CFD) proposal, but are expected to be converted in third quarter of 2015 and the third one by the end of 2016. Also plans for the conversion of a fourth one are advancing.

Drax remains confident that it can get all the biomass it needs, and has already secured more than 4 million metric tons for 2014. The 450,000-metric-ton-per-year pellet plants Drax is developing in Louisiana and Mississippi are progressing on time and on budget.

“What has become clear to us is there is real value for Drax in having our own pellet production,” she said.

Thompson said Drax is pursuing options to develop up to 2 million tons of additional pellet capacity, primarily in the U.S. The company is also in the early stages of considering expanding its straw pellet capacity in the U.K.

“Our fuel production focus remains on North America, where we see the potential for attractive, double-digit returns, but we are also looking at the opportunity for expanding our U.K. pellet production.”