British power group Drax could be set to mothball its coal-fired power plants as low gas prices, competition from renewables, withdrawal of government support and the UK’s plan to close its coal-fired plants by 2025 all take their toll.
The company announced a strategy review this week after posting a loss of 64 per cent in its pre-tax earnings for 2015, with profits falling from £166m ($234m) to £59m. The group was forced to more than halve its dividend to shareholders, citing “severe market deterioration and difficult regulatory challenges”.
CEO Dorothy Thompson was quoted as saying that while the firm “may choose to mothball” its coal plants, “what we are keen to do is to work with the government and find the right solution”.
And according to Andy Koss, CEO of Drax Power Ltd, existing coal-fired plants may still be crucial for keeping the UK’s lights on if the government fails to build enough new capacity to make up for the planned plant closures.
Drax has already converted two of the six units at its 39.6 GW coal-fired plant in North Yorkshire to burn biomass, and conversion of a third unit is planned if government aid for the process passes a European Commission investigation.
Koss has warned that unless this aid is delivered within the next two years, the coal-fired boilers may deteriorate to such an extent that conversion would no longer be possible.
Earlier this month, Drax and co-plaintiff Infinis, a renewable power firm, lost an appeal to the UK’s High Court over the government’s decision to remove their exemptions from Climate Change Levy payments. Thompson said the exemptions “have played a critical role supporting investment in a wide range of renewable technologies”.