Drax Group Plc shares dropped after the UK government’s carbon-capture program rejected its project to introduce the nascent technology at a power plant in northern England.
(Bloomberg) — Drax Group Plc shares dropped after the UK government’s carbon-capture program rejected its project to introduce the nascent technology at a power plant in northern England.
Drax failed to get so-called Track-1 status for its biomass project with carbon capture and storage, or BECCS, the Department for Energy Security & Net Zero said on Thursday. The company had said it was prepared to invest £2 billion ($2.47 billion) to fit the technology to some of the units at its plant in Yorkshire.
The government’s decision is a setback for biomass in a nation which badly needs more stable electricity generation. It also puts Drax at a crossroads, with the prospect of generous US subsidies drawing its focus and cash across the Atlantic.
US President Joe Biden’s Inflation Reduction Act offers subsidies and tax credits to the tune of $370 billion for a range of green technologies, enticing European firms to invest on the other side of the Atlantic. Drax is already investing heavily in pellet production in the country and plans to build a BECCS plant there.
Drax fell as much as 12% in London before reducing losses to about 5%. A spokesperson for Drax wasn’t immediately able to comment.
But the company’s hopes aren’t yet dashed, according to JPMorgan Chase & Co. analysts including Javier Garrido. The government’s biomass strategy is due for publication in June 2023, which could reaffirm the role of BECCS, the analysts said.
The government said on Thursday it’s still committed to carbon removals and will engage further with Drax. It will do the same with Lynemouth Power Ltd., a smaller BECCS project linked to Czech energy giant EPH, which was also rejected. Track-1 status brings with it subsidy arrangements with the government to ensure security of investment in the UK.
“These projects have not been selected for deployment in Track-1 but the department will engage further with these projects following the assessment outcome,” the government said.
SSE Plc’s Keadby project, which plans to fix carbon-capture technology to its gas plant in Lincolnshire, was also not taken forward to the government’s list to negotiate subsidies. Despite the setback, SSE is still “ready to invest and will work with government to get shovels in the ground as quickly as possible,” a spokesperson said in an emailed statement.
Read: UK Unveils Green Program With Little New Cash to Fight US Plans
(Updates with shares, SSE result.)
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