Power producer Drax has shelved plans for a 290MW dedicated biomass-fired renewable energy plant after the £700 million scheme no longer became financially viable.
The operator of Britain's largest coal-fired power station confirmed it was scraping plans for the green energy site, which would have saved around 1.8 million tonnes of carbon dioxide (CO2) each year, and provided enough renewable electricity to power 512,000 homes.
The company said a "number of factors had put pressure on the economics" but insisted it would continue to invest in biomass to supplement its existing operations.
And they highlighted the £700 million cost of the 290MW new-build, dedicated biomass plant compared to the £50 million investment to achieve a 300MW co-fired power station.
In October last year, the Department of Energy and Climate Change announced plans to increase support for mixing biomass with coal, or co-firing, but proposed to reduce subsidies for stand-alone biomass plants by 7%, from April 2016.
One industry analyst today described the decision as a “significant blow” to the UK's renewable energy industry.
James Barrett-Miles, a director at Ernst & Young, added: “The announcement from Drax signals a potentially significant blow to the development of the UK bio-energy sector and the job market which would have benefitted from new employment opportunities. It also creates another obstacle for the Government and their ambitious 2020 mandatory renewable energy targets.
“Bio-energy provides valuable baseload renewable generation and as such has an important role to play in the UK's low carbon energy mix.
“Although the Government has shown some positive sentiment towards the biomass sector recently, as seen by the improved subsidy levels for co-firing and the introduction of the Renewable Heat Incentive, much more needs to be done.
“Specifically, raising the level of Renewable Obligations support for dedicated biomass and extending the deadline for grandfathering of the 0.5 ROC for good quality heat usage, would be a step in the right direction.”
Consent for Drax's bio-fuel Ouse Renewable Energy Plant was provided by Energy Minister Charles Hendry in August last year.
The £1.4bn scheme was a joint venture between Drax and Siemens Power Ventures and would have consumed nearly 1.5 million tonnes of biomass a year.
It was to be located at Drax's current power station site in Selby but the inland location was said to be a contributing factor to the decision that the project was no longer financially viable.
The plant, which would have created 850 jobs, was to be water-cooled, using water from the nearby River Ouse, and biomass fuel would have been transferred to the site via conveyors from off-loading facilities. Electricity would have been exported from the plant on to the national electricity transmission network.
However, during the planning stage Drax made it clear that any progress with the investment was dependent on the Government’s final decision on the future support levels under the Renewables Obligation.
Drax chief executive Dorothy Thompson said the current planned framework of subsidy support made the case for investment “highly challenging”.
She added: "Drax is ready to transform itself into a predominantly renewable generator, but to do so we need appropriate regulatory support, and to that end we look forward to the timely conclusion of the government's current review.
"We have expressed disappointment with the proposed level of support for this technology, which makes the investment case for the independent biomass generators highly challenging.
"The development planned for the Drax power station site has proved the most difficult for a number of reasons, including its inland location which increases logistics costs."
Thompson added that given the significant financial liability that "we would face were we to delay our investment decision until we have certainty over the final support level for dedicated biomass, we have decided to cancel the project."
Phil Crosland, Manchester around 2 months ago