Drax reports strong year for 2023, targets 8Mt pa of pellet production capacity by 2030

Drax Group, a major provider of renewable power in the United Kingdom that operates pellet plants in North America, has reported a strong financial year for 2023.

It reported adjusted EBITDA rising from £731 million ($1.26 billion Cdn) in 2022 to £1.214 billion ($2.09 billion Cdn) in 2023. The growth was attributed to an expansion in system support services, renewable generation, and energy solutions for customers. Overall, it reported operating profit of £908 million ($1.57 billion Cdn) for 2023, up from £146 million ($251.8 million Cdn) in 2022.

“Drax performed strongly in 2023 and we remained the largest provider of renewable power output in the UK,” said Will Gardiner, Drax Group CEO. “We have created a business which plays an essential role in supporting energy security, providing dispatchable, renewable power for millions of homes and businesses, particularly during periods of peak demand where there is low wind and solar power.”

Gardiner noted that policy support for its Bioenergy with Carbon Capture and Storage (BECCS) project in the UK “continues to progress and we remain in formal discussions with the UK government to ensure Drax Power Station can play a long-term role in UK energy security, creating thousands of jobs during construction and helping the country reach net zero.”

Pellet production

On the pellet production front, Drax is targeting post-2027 recurring adjusted EBITDA of more than £250 million ($431 million Cdn) from own use and third-party sales. It is targeting 8Mt pa of pellet production capacity by 2030, “subject to clarity on UK BECCS.” It also is targeting the development of more than 20Mt pa of carbon removals through the 2030s.

For 2023, it reported EBITDA from pellet production of £89 million ($153.6 million Cdn), down from £134 million ($231.2 million Cdn) in 2022.

Drax has positioned itself as a crucial player in the UK’s energy sector, particularly in providing dispatchable, renewable power during peak demand periods, it said in its earnings report.

The company’s long-term strategy includes substantial investment in BECCS and biomass pellet production, aiming for significant capacity increases by 2030. Drax’s plans also feature expanding its Cruachan Power Station and developing new energy solutions to support the transition to renewable energy.

Operational challenges

Despite facing operational challenges, including major planned outages, Drax’s biomass generation and system support services continued to perform well, it said. The company also made strides in pellet production, supporting both UK generation needs and third-party sales, such as a significant contract with a Japanese entity for 5Mt over five years.

It also signed a letter of intent for sale of up to 1Mt of biomass to European utility for projects including sustainable aviation fuel.

It noted progress on its construction of the new Longview pellet plant in Washington state, and said the expansion of its pellet plant in Aliceville, Alabama, is complete.