U.K.’s Drax confirms unit 4 capacity market omission

Drax will enter only its coal-fired units 5 and 6 in this year’s auction, due to be held on Dec. 8, 2015. The same units were allocated one-year capacity agreements in 2014.

The utility said in July that it was considering entering unit 4 in this year’s auction because of the uncertainty surrounding the availability of government subsidies for coal-to-biomass plant conversions. But it decided against pursuing this option in order to keep the unit eligible for subsidy support if it becomes available. Plants that are awarded a contract in the capacity market become ineligible for subsidy support through the government’s contract-for-difference (CFD) subsidy scheme for renewable energy development, or its predecessor the renewable obligation. The delivery year of this year’s auction is also not until 2019, meaning that Drax would have been unable to convert it until 2020 at the earliest had unit 4 been awarded a capacity agreement. 

Units 2 and 3 are 100pc biomass-fired, having completed conversions from using coal in 2013 and 2014, respectively. Unit 1 is currently co-firing 85pc biomass with coal as Drax awaits an EU state aid decision for the CFD that it was granted for a conversion last year before moving to 100pc biomass.

Biomass market participants have been pinning their hopes on the utility carrying out a fourth conversion, particularly because other sources of demand in the U.K. have not materialized. Simec Uskmouth Power’s plan to convert its 363MW Uskmouth plant in Wales to burn biomass looks unlikely to come to fruition because the government has not “made up its mind on biomass”; and the 2GW Eggborough coal-fired plant in North Yorkshire, north England, said recently this month that a biomass conversion is no longer a viable option because the U.K. has cut subsidy support. 

The capacity market aims to ensure security of power supply by offering a financial incentive to generators to make their capacity available to the market when it is needed the most. Generators had to decide by Aug. 14 whether they wished to pre-qualify their capacity for this year’s auction, with the results of pre-qualification expected on Sept. 25. Transmission system operator National Grid is aiming to procure 45.4GW of capacity for delivery in 2019-20.

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