#AxeDrax Campaign

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Axe Drax: Not forests, communities, or the climate!

Drax is the largest coal-fired power station and the single greatest emitter of carbon in the UK.

Now it is also the biggest biomass power station in the world.

In return for trashing forests and digging up communities, Drax is receiving massive subsidies when it should have been closed down years ago.  For forests, communities, and the climate, it’s time to #axedrax!

#AxeDrax AGM Protest 2016
The briefing that was handed to Drax’s shareholders, current and potential investors during the Drax 2016 AGM

What are Drax’s plans?

Drax Biomass Impacts

Drax Coal Impacts

Drax’s subsidies

Drax and the Green Investment Bank

Other Coal to Biomass Conversions

 

What is drax doing and what are their plans?

GP023XC (copy)

Drax power station has six units and Drax plc are on course to converting three of those units to biomass and plan to continue burning coal in the other three.

Drax converted its a first unit to wood pellets in April 2013, although it had already been co-firing large quantities of biomass with coal before then. It has now converted a second unit and has started converting a third. Importantly for Drax, it has had subsidies guaranteed for three biomass units and two coal power units. At full capacity, each biomass unit would burn pellets made from around 5 million tonnes of wood. In 2014, Drax burned over 4 million tonnes of pellets made from around 8 million tonnes of wood – far more than any other power station in the world.

Drax alone will be burning around 1.5 times as much wood as the UK produces in total every year, if it completes its conversion of three power station units.

Power station operators such as Drax Plc are getting some good PR for supposedly “going green”, but the truth of course, is far from that. Burning wood for electricity is no less disastrous for the climate than burning coal.  Per unit of electricity, biomass actually emits more CO2 from smokestacks than burning coal does.  Biomass supporters claim that this CO2 should be ignored because it will be absorbed by future trees but trees take decades to grow and minutes to burn – and there is no guarantee that clearcut forests will ever be allowed to regrow. These conversions are really about keeping old, dirty power stations alive for longer, and cashing in on government subsidies.

Drax shouldn’t be burning coal or biomass because of the huge impacts both have on communities, the environment, and the climate. Drax must be closed down.

Drax Biomass Impacts

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With three out of six units converted to biomass, Drax would require around 7 million tonnes of pellets every year. [1] The vast majority of the wood that Drax burns is imported from the southern US and Canada, with imports expected to increase significantly as new pellet facilities begin production. Even at the early stages of the growth of this industry, whole trees are being turned into pellets, with a significant proportion of Drax’s biomass being sourced from biodiverse hardwood forests in the southern US.

In its latest 2013/14 biomass sourcing report, Drax insists it uses predominantly ‘forest residues’ and ‘thinnings’. However, on-the-ground research in the southern US shows that much of the biomass being sourced, consists of whole trees cut from mature hardwood forests which are being clearfelled. This has serious impacts on biodiversity, and means that the carbon emissions quoted by Drax are likely to be serious underestimates.

As an example of this, US-based Dogwood Alliance and NRDC conducted this investigation to show the sourcing impacts at the Ahoskie Pellet Mill in North Carolina, operated by Drax’s largest pellet supplier Enviva.

If evidence collected on Enviva’s wood sourcing is applied to DECC’s own recently published BEAC biomass carbon calculator, it can be shown that a significant proportion of wood that Drax burns could, in the medium term, results in up to 3 times more overall carbon emissions than the CO2 emitted from burning coal. [2] Drax is currently getting away with reporting substantial carbon emission reductions because of a flawed carbon accounting methodology. Drax’s carbon accounting relies on the Ofgem Solid and Gaseous Biomass Carbon Calculator (B2C2) – a framework that does not account for changes in the carbon stock of the forest, foregone carbon sequestration of land, or indirect impacts on carbon stocks in other areas of land.

You can read more about the impacts of Drax’s sourcing on the Dogwood Alliance website and NRDC’s Our Forests Aren’t Fuel campaign page, and we’ve got more resources on biomass and the carbon impacts of it.

The impacts of the huge expansion of the pellet industry are likely to be felt more widely too – as European and North American wood is increasingly burned in power stations, paper companies are looking for ever more wood from the global South, in countries such as Brazil. More directly, the Brazilian company Tanac SA has reported entering into a sourcing agreement with Drax which will see the company build a large pellet plant, which is likely to result in the expansion of monoculture tree plantations in the Brazilian state of Rio Grande do Sul. Monoculture tree plantations in Brazil are associated with the displacement of indigenous and traditional communities, deforestation, water and soil depletion, and pollution.


[1] Drax annual pellet requirements: This figure is an estimate based on the following calculations by Biofuelwatch.

Assumptions:
Net Calorific value by mass of 1 kg of wood pellets = 4.8 kWh/kg
(http://www.biomassenergycentre.org.uk/portal/page?_pageid=75,20041&_dad=portal&_sche
ma=PORTAL)
Efficiency of 1 Drax unit = 40%
Capacity of 1 Drax Unit = 630 MWW
Hours of operation per year = 7000

Calculation:
Mass of pellets required to produce 1 MWh thermal = 1000/4.8 = 208.3 kg pellets
Mass required to produce 1 MWh electricity = 208.3/Efficiency = 520.75 kg pellets
Mass of pellets required to produce 1 MWh x Capacity of unit x hours of operation = Mass of
pellets burned in 1 year
520.75 x 630 x 7000 = 2296507500 kg pellets = 2296508 tonnes of pellets = 2.3 million tonnes
of pellets
2.3 million tonnes x 3 units = 6.9 million tonnes of pellets per year
This figure could be an underestimate, as conservative figures for efficiency, generating capacity and hours of operation have been used.

[2] For example, documented evidence by environmental organisations in the southeastern US can be used to show that certain sourcing by Enviva, a major Drax pellet supplier, is comparable to BEAC Scenario 13(a) resulting in a carbon intensity of 3346 kg CO2/MWh, and BEAC Scenario 13(b) resulting in a carbon intensity of 2717 kg CO2/MWh. An average of these two scenarios results in a carbon intensity 3 times the 1018 kg CO2/MWh attributed to burning coal.
See also https://www.foe.co.uk/sites/default/files/downloads/decc-s-biomass-carbon-calculator-beac-what-it-means-bioenergy-74112.pdf

Drax Coal Impacts

Cerrejón_mine (another copy)Drax’s partial biomass conversion allows it to keep its remaining coal units open by lowering the plant’s overall sulphur dioxide emissions, and therefore complying with the EU’s Industrial Emissions Directive (IED). [1] Without biomass, it would be increasingly hard for Drax to remain operating post-2016, and would likely have resulted in the plant’s closure. Biomass burning is therefore extending coal burning into the future.

If Drax converts 3 units to biomass, it will still be burning as much as 4 million tonnes of coal a year. [2] This is a significant proportion of the UK’s overall coal use, and is incompatible with recent party pledges to phase out unabated coal burning. If we are to have any hope of avoiding the worst impacts of climate change, we have to leave remaining fossil fuels in the ground. This means phasing out Drax’s remaining coal units as quickly as possible. However, in contradiction to this, Drax will receive a direct subsidy in the form of Capacity Market payments on two of its operating coal units, which will only make the continued burning of coal at Drax more profitable.

Drax’s coal has serious implications for communities around the globe, as well as the carbon emissions it is responsible for. For example, Drax burns coal from Colombia, where communities have been violently displaced for coal mining operations, and continue to be impacted by the environmental and health implications of the huge mines.  Human rights abuses in Colombia due to conflict between communities and coal mining companies, have been extensively documented by many organisations over many years. For example see here and here.


[1] According to Secretary of State Vince Cable, without the conversion to biomass and the loan from the Green Investment Bank that has helped to finance it, Drax “would have closed down because it has to meet European rules on coal use and it wouldn’t have been able to survive“.
In addition, Drax state “Our FGD plant already complies with known future SO2 emissions limits to 2016.”, but do not confirm compliance beyond 2016.

[2] This figure is an estimate based on the following calculations:

Assumptions:
Net Calorific value by mass of 1 kg of thermal coal = 9.2 kWh/kg
(http://www.biomassenergycentre.org.uk/portal/page?_pageid=75,20041&_dad=portal&_sche
ma=PORTAL)
Efficiency of 1 Drax unit = 40%
Capacity of 1 Drax Unit = 660 MWW
Hours of operation per year = 7000

Calculation:
Mass of coal required to produce 1 MWh thermal = 1000/4.8 = 108.7 kg coal
Mass required to produce 1 MWh electricity = 208.3/Efficiency = 271.75 kg coal
Mass of coal required to produce 1 MWh x Capacity of unit x hours of operation = Mass of
coal burned in 1 year
271.75 x 660 x 7000 = 1255485000 kg coal = 1255485 tonnes of coal = 1.3 million tonnes
of coal
1.3 million tonnes x 3 units = 3.9 million tonnes of coal per year

Drax’s Subsidies

_MG_1091 (copy)The renewable energy subsidies awarded to Drax have meant that, instead of facing imminent closure, it has been given a new lease of life. Without the subsidies and biomass conversion, Drax would have suffered a similar fate to many other old, dirty and inefficient coal-fired power stations in the UK – it would have shut down.

Renewable electricity subsidies are the main form of support offered to Drax, but they aren’t the only ones. As well as Renewable Obligation Certificates and a new Contract for Difference, Drax will also receive a direct subsidy for two of its coal units in the form of a Capacity Market Payment. It has also been granted a Treasury Loan Guarantee of £75 million, which basically removes the risk of defaulting from Drax and gives it to the Treasury, and a Green Investment Bank loan of £50 million. Both of these are considered subsidies by the EU.

Here are some Drax subsidy highlights:

  • Renewable electricity subsidies generated by Drax in 2014 were equivalent to 79% of their annual gross profits!
  • In 2014, Drax generated £358.5 million in biomass subsidies (ROCs and LECs combined) – that’s £1 million a day in renewable energy subsidies
  • Drax’s renewable electricity subsidies will rise again this year as they steeply increase the amount of biomass burned. Once they’ve converted the third unit (they’ve converted two out of six so far), they can look forward to £637.06 million (presuming the European Commission won’t block the Contract for Difference DECC has granted for one of these units). This figure doesn’t include the £25.6 million coal subsidies they will get, so far for one year, for 2018/19. With these included, it would be £662.66 million during that year (the coal subsidies could be renewed). That’s £1.8 million per day in subsidies.

This subsidy forecast – of £662.66 million a year – is a Biofuelwatch estimate based on the average market price per ROC for the last 12 months, current electricity wholesale prices, and the assumption that running on biomass, each Drax unit will run at 630 MW capacity and at 40% efficiency (which could mean our figures are underestimates):

  • One unit conversion to be subsidised through a Contract for Difference (approved by UK government, but still pending State Aid Clearance by the European Commission): £264.55 million per year [subsidy element calculated as strike price minus wholesale price]
  • Two unit conversions to be funded via ROCs: £185.04 million each i.e. £370.08 million per year
  • In addition, Drax has been granted Capacity Market Payments for two coal units, amounting to £25.6 million per year
  • Total: 2 units on biomass getting ROCs plus 1 unit on biomass getting Contract for Difference, plus two coal units getting Capacity Market Payments: £662.66 million per year

In the Budget in June 2015 George Osborne removed Climate Change Levy Exemption (Levy Exemption Certificates or LECs) from all Renewable Energy. Drax was set to receive £71.57 million a year in these, with three converted units. Drax estimated it would impact profits by £30m in 2015 and £60 in 2016 and this resulted in Drax shares falling 28%.

At the same time, since July 2015, the Government has been slashing subsidies for onshore wind and solar, technologies which can provide significant genuine greenhouse gas reductions when used to replace fossil fuels.

Drax and the Green Investment Bank

GIB1

The Green Investment Bank (GIB) was set-up to help finance low-carbon projects, but its first big loan was given to Drax, which helped to seal the necessary finance for its biomass conversion. In effect, this loan has enabled Drax to avoid having to shut down and meant that they can continue to burn both biomass and coal for the foreseeable future. This is the opposite of the type of green project that the GIB was set up to fund.

Then Business Secretary Vince Cable was quoted as having said that, without the conversion to biomass and the loan from the Green Investment Bank that helped to finance it, Drax “would have closed down because it has to meet European rules on coal use and it wouldn’t have been able to survive“. The GIB can therefore thank itself for being directly responsible for keeping the UK’s biggest polluter open and burning vast quantities of both biomass and coal.

The GIB have also funded other destructive big biomass projects (as well as unpopular waste incinerators) and continue to see biomass developments as a key part of their investment. Part of the problem is that, even though the GIB has 5 guiding green principles, their loans only have to adhere to one of them. So if government policy says that biomass is low carbon, evidence of forest and biodiversity destruction by the pellet industry isn’t enough to put the GIB off granting financial support.

For more detailed information, see our Banking on Big Biomass campaign page

Other Coal to Biomass Conversions

conversions flyer front (copy)For more detailed information on other coal-to-biomass conversions, see our campaign page.

So far, Drax power station has been partly converted to biomass and Ironbridge has been fully converted.  Another coal power station – Tilbury B – was fully converted to biomass in 2011 but closed down in 2013.

Ironbridge, owned by E.On, was fully converted between April and October 2013, although the power station has been running at less than 15% of its capacity since then. Even at such a low capacity, Ironbridge has been burning pellets made from around 1 million tonnes of wood a year – more than any other UK plant except for Drax.However, Ironbridge Power Station is to close at the end of 2015.

Three other coal power station operators are considering whether to convert (fully or partially) to biomass. Two of these have already received planning consent to do so.

– Lynemouth Power Station, owned by RWE Npower: The UK government awarded RWE a lucrative subsidies contract for converting this power station to biomass but the European Commission has opened a full investigation into this award;

– Eggborough Power Station, recently taken over by a Czech energy company called Energetický a Prumyslový Holding (EPH): They have so far failed to attract subsidies from the UK government but might do so in future.  The company has declared their intention to shut the power station down.  There has been recent talk of a new wood pellet technology being used to keep it open however Biofuelwatch believe that the likelihood of this happening is very low.

 Uskmouth Power Station, recently taken over by SIMEC Group: This coal power station was closed by SSE around May 2014 but has been taken over and re-opened by SIMEC Group, who have announced their intention to fully convert it to biomass.

GDF Suez dropped plans for converting their Rugeley coal power station in November 2013, even though they had obtained planning permission for such a conversion. And RWE Npower closed their already converted Tilbury B power station for good in August 2013, following a serious fire the previous year.