Coal giant sees future in biomass

Facing pressure from environmental regulations and direct action from protest groups, coal power operator Drax Group has announced plans to develop a 900MW biomass-fired business with the help of German engineering giant Siemens.

The companies announced this week that they plan to build, own and operate three dedicated biomass-fired generation plants in the UK at the cost of about £2bn. Each plant is expected to pay back the costs of construction in six years from the time it becomes operational.

The companies claim that the plants will be responsible for supplying at least 15 per cent of the UK's renewable power and up to 10 per cent of total UK electricity. Work on the first plant is expected to start in late 2010 with the backers estimating it will be up and running in 2014.

"We believe our venture into dedicated biomass-fired generation underpins our commitment to reduce the carbon footprint of electricity generation from the continued, but necessary, reliance on fossil fuels, while delivering secure and reliable supplies of electricity," said Drax chief executive Dorothy Thompson.

But some green groups have warned that while burning biomass such as palm oil has benefits compared with fossil fuels, it also has environmental costs. "It is important to remember that the potential for using biomass to reduce emissions is strictly limited and there is no substitute for cutting emissions at source, " Friends of the Earth said in a statement. "It must also be recognised that failure to undertake a cautious, sustainable approach to the development of the biofuel and biomass market will do more harm than good."

Two of the three new facilities are planned to be built in Hull and Immingham, Grimsby. The final site of the third plant is still under discussion but it could be built close to the company's existing coal-powered plant in Yorkshire.

Through its subsidiary Drax Power, the company claims it owns the largest, but cleanest, coal-fired power station in the UK.

However, it seems that green groups are not as convinced about the "clean" part of Drax's description. In June this year, 30 climate campaigners boarded a train on its way to Drax power station in Yorkshire which Greenpeace describes as Britain's single largest source of CO2 emissions. "The campaingers used safety signals to stop the train at a bridge on a branch line used by the power station, before jumping aboard and shovelling coal off on to the tracks," according to a recent Greenpeace blog.

Earlier this year Drax announced that it has seen its profits fall 28 per cent in the past year, partly as a result of the rising price of the carbon credits it has to buy under the EU's emissions trading scheme. The company said at the time that it would seek to reduce its carbon emissions as a means of minimising costs.

Commenting on the deal with Drax, Dr Wolfgang Bischoff, managing director at Siemens Project Ventures, said his company was used to finding "solutions" to important issues such as climate change. "We believe that the development of dedicated biomass plants will make a significant contribution to the renewable energy needs of the UK," he said.

Drax claims it has entered a Joint Development Agreement with Siemens Project Ventures to build the facilities, which will see ownership of the biomass-fired business split 60 per cent to Drax and 40 per cent to Siemens. Drax will manage and operate the biomass business and will also be responsible for all the biomass procurement and trading while the plants will use Siemens' turbine technology.