Energy bill savings promised as Drax subsidies cut
Both the government and wood-burning power provider are painting a new
operational agreement as a success. with Drax pointing to benefits from not only
lower bills but improved energy security.
Business and economics reporter @SkyNewsBiz [http://twitter.com/@SkyNewsBiz]
Monday 10 February 2025 09:59, UK
The contribution to energy bills from a government deal with a biomass
electricity provider will fall in the coming years as subsidies are cut under a
new agreement.
The Department for Energy Security and Net Zero (DESNZ) revealed that consumers
would save £170m per year under a new deal with Drax
[https://news.sky.com/topic/drax-9444] covering 2027-2031.
That projection is based on the halving of the North Yorkshire power station’s
government subsidy in that time.
Money latest: Costco membership ‘shake-up’
[https://news.sky.com/story/money-inflation-interest-rate-mortgage-consumer-news-butcher-michelin-cheap-eats-live-13040934]
DESNZ said Drax would also play a much more limited role in the power system in
that time, providing electricity only when it is really needed.
Drax, a former coal-fired plant which now burns wood pellets, is currently paid
to generate energy [https://news.sky.com/topic/energy-6467] using wood that must
be 70% sustainable.
That sustainability figure will rise to 100% by 2027 under the new deal.
Power giant Drax told by own advisers to stop calling biomass ‘carbon neutral’
Criminal proceedings against Drax over ‘harmful’ dust exposure dropped following
new evidence
Drax: Subsidies for power giant questioned as annual profits soar
Its operations are classed, controversially, as renewable in the UK because the
emissions released from burning the wood can be reabsorbed by new trees that
grow in the place of those burned.
Drax is currently classed as Britain’s largest renewable power generator by
output as it has the capacity to power the equivalent of five million homes.
The company, which has previously been fined for misreporting data
[https://news.sky.com/story/government-subsidised-energy-giant-drax-agrees-to-pay-25m-fine-for-misreporting-data-on-wood-it-burns-13205170]
on wood it has used and criticised over its CO2 emissions, also operates hydro
power projects.
The government is aiming to decarbonise the power sector by 2030.
Please use Chrome browser for a more accessible video player
This is a modal window.
Beginning of dialog window. Escape will cancel and close the window.
End of dialog window.
This is a modal window. This modal can be closed by pressing the Escape key or
activating the close button.
This is a modal window. This modal can be closed by pressing the Escape key or
activating the close button.
Meeting this target will require a large increase in renewable energy, such as
wind and solar, as well as projects
that store energy for when there is insufficient wind or sun.
Ministers say a new energy mix, that cuts the country’s reliance on
internationally priced gas, will not only bring down bills in future but
guarantee domestic power supplies.
New nuclear is also part of that equation.
DESNZ said: “This government will do whatever it takes to deliver energy
security and protect billpayers now and into the future”.
Drax shares rose by 6% on news of the new settlement which guarantees the Selby
power station’s future.
Group chief executive Will Gardiner said: “The Government’s low-carbon
dispatchable CfD framework for biomass, announced today, is an investment in UK
energy security, which will result in a net saving for consumers and support the
delivery of Clean Power 2030.
“Analysis from Baringa indicates the proposed agreement will result in a
£1.6-3.1 billion reduction in electricity system costs, versus the construction
of new fossil fuel power stations, and Government has concluded today that Drax
offers the lowest cost option for bill payers during this period.”
Be the first to get Breaking News
Install the Sky News app for free
He added: “Under this proposed agreement, Drax can step in to increase
generation when there is not enough electricity, helping to avoid the need to
burn more gas or import power from Europe, and when there is too much
electricity on the UK grid, Drax can turn down and help to balance the system.
“The size, flexibility and location of the power station makes it important for
UK energy security and the proposed agreement helps protect the jobs and skills
of today and the future, creating options for billions of pounds of investment
in growth across Britain, including the development of large-scale carbon
removals and data centres.”
