European Commission launches in-depth probe of Drax's biomass plans

The European Commission will open an in-depth investigation into whether the UK’s plans to support the conversion of part of the Drax coal power plant to biomass are in line with EU state aid rules.

The EC, whose investigation will focus on UK estimates for the plant’s performance, said the help may lead to overcompensation.

It added that the estimates “may be too conservative” and could allow the plant to make more money than anticipated.

It will also look into whether the plant’s demand for around 2.4m metric tonnes of wood pellets a year mainly from the US and South America would distort competiton in the biomass market.

“The Commission fully supports member state efforts to increase the use of renewable energy and pursue EU energy and climate objectives. At the same time, EU state aid rules make sure that the cost of such support for consumers is limited and does not give certain operators an unfair advantage over competitors.

“Therefore, the Commission will now investigate further to make sure that the public funds used to support the Drax project are limited to what is necessary and do not result in overcompensation.”

The Drax power plant is one of several projects selected under the Final Investment Decision Enabling for Renewables, a UK support measure for renewable energy projects.

The plans notified by the UK concern state support to convert one of the six units at the Drax plant to operate entirely on biomass.

Last year, German energy company RWE won EU approval to convert its Lynemouth power station from coal to biomass.

Drax said on Tuesday that the EC's formal Phase 2 investigation was "the next step in the process for obtaining State aid approval and is in line with expectations".

At 1430 GMT, Drax shares were down 4% to 222.10p.