UK utility Drax is "reviewing the timing of its investment programme in 2020", and expects investment in its biomass strategy to be lower "in the short term", it said today.
But the firm "hasn't changed its target", it said today. "Building a long-term future for sustainable biomass remains [Drax's] strategic objective."
Drax's plan for 2020 originally included investment of £230-250mn, with half of this set to go towards its plan to increase its biomass self-supply. The firm is targeting 5mn t/yr of self-supply by 2027 through its subsidiary Drax Biomass. It has 1.5mn t/yr of pellet production capacity and 350,000 t/yr under development.
Biomass generation "performed well" in the first quarter and the Covid-19 pandemic has not yet had any "measurable impact on biomass generation", Drax said. But any lengthy reduction in electricity demand could result in a fall in renewables obligation certificate (ROC) prices. Of Drax's four 645MW biomass-fired units, three operate under the UK's RO subsidy, including two base-load and one peak-load unit. The firm has "adjusted its expectations for the full year", although it points to its "strong forward power sales position" to 2022, which has helped shield it from the recent decline in UK power prices.
Drax's biomass-fired output is dependent on a robust wood pellet supply chain, and as yet there has been no material impact on the global supply chain from the Covid-19 outbreak, with utilities well stocked and producers still able to deliver shipments. And while there are concerns about shutdowns and curtailments at sawmills, potentially limiting pellet feedstock supply, "Drax has not experienced declining feedstock supplies and we remain optimistic we will be able to source what we need", Drax Biomass told Argus earlier this month. And key sectors required for biomass production and delivery — including forestry, rail and port operation — are permitted to continue operations in North America. But any "protracted suspension of the supply chain could lead to lower levels of biomass generation, resulting in a reduction of [Drax's] expectations", it said.
Drax has diverse supply sources in North America and Europe — including its own production plants in Louisiana and Mississippi — and UK port facilities with throughput capacity of 11mn t/yr, well above the firm's consumption of approximately 7mn t/yr. Alongside its biomass storage capacity of 300,000t, Drax "currently has visibility of over 1mn t of biomass in transit", the firm said, which is enough to operate its 645MW base-load unit 1 for four months. Drax's unit 1 runs under the UK's contracts for difference subsidy.
Drax noted "incremental progress and support" for bioenergy with carbon capture and storage (Beccs) in the UK's March 2020 budget. In addition to increasing its biomass self-supply, Drax is running a pilot Beccs scheme at its Selby, North Yorkshire, plant. It is also "exploring options to service biomass demand in other markets — Europe, North America and Asia."