The European Commission has opened an in-depth investigation to assess whether the United Kingdom's plans to support the conversion of part of the Drax coal power plant to operate on biomass are in line with EU state aid rules.
In April 2015, the UK notified plans to subsidise the conversion of one unit of the coal-fired Drax power plant to operate entirely on wood pellets (645 MW) and to set a strike price for the electricity generated, enabling Drax to receive an additional payment in case of low market prices. According to UK estimates, the project would operate until 2027 and supply about 3.6 TWh/year of electricity. The plant would require approximately 2.4 Mt/year of wood pellets, mainly sourced from the United States and South America.
The European Commission will review the plant's economic estimates, considering that the actual rate of return could be higher than the parties estimate and could lead to overcompensation. In addition, the huge amount of wood pellets consumed by the project could distort competition in the global biomass market, outweighing its positive effect on achieving EU 2020 targets for renewable energy.
The Commission has already approved the construction of the Teesside CHP biomass plant (January 2015) and the conversion of the 420 MW Lynemouth power plant to biomass (December 2015).
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