Drax: climbing out of the carbon coal hole

When you arrive at Drax, the independently run power station near Selby in North Yorkshire, it becomes clear why the four-gigawatt plant has been a site of protest for many environmental campaigners. Two other coal plants are in view: British Energy’s Eggborough plant and Scottish & Southern’s in Ferrybridge. Both are almost 2GW in capacity but look insignificant behind Drax’s 12 cooling towers.

Climate Camp campaigners, who in 2008 tried to stop coal trains going to the plant, point out Drax is the UK’s largest industrial emitter of carbon dioxide and one of Europe’s top five. It burns almost 38,000 tonnes of coal per day to produce 7% of the UK’s electricity and 22 million tonnes of CO₂ per year.

Drax is also Europe’s largest single source of nitrogen oxides (NO_x) emissions, producing 58,300 tonnes per year, and one of the largest emitters of sulphur dioxide (SO₂). In 2007, it released 20,480 tonnes of SO₂.

Campaigners also say the gigantic plant, planned in the 1960s, is out of date. But because the state-owned Central Electricity Generating Board built Drax in two phases, it is actually the UK’s newest coal plant. The first three 660-megawatt boilers were commissioned in 1974, the remaining three in 1986. Any coal plant built today would have more efficient supercritical boilers and space to install carbon capture and storage equipment (CCS).

Drax became an independent firm in 2003 after its then parent, American energy company AES, walked away from the plant leaving it with over £1 billion in debts. The plant’s problems were caused by the collapse of TXU Europe, its main customer. It now makes healthy profits, grossing £307 million in the first half of 2008.

Despite the criticisms, Drax is the UK’s most efficient coal-fired power station, emitting 807 grams of CO₂ per kilowatt hour of power generated in 2008 compared with the 939g CO₂/kWh average (see table, p 32). By 2011, the plant’s emissions will have dropped to about 700g CO₂/kWh after a £100 million turbine upgrade (ENDS Report 386, p 14 ) and an increase in biomass co-firing to reach 12.5% of its power output (ENDS Report 406, p 19 ). These initiatives will reduce the site’s emissions by 3 million tonnes of CO₂ per year, equivalent to 43% of the entire cut expected in the UK under phase II of the EU’s emissions trading scheme (EUETS).

A step ahead, but not out of the woods
Drax’s efforts to lower its global warming impacts dwarf most measures in the government’s climate change programme. For example, the government’s main policy to cut emissions from big non-industrial energy users - the Carbon Reduction Commitment - will lower emissions by only 1.2 million tonnes of CO₂ per year by 2020.

The company is also tackling emissions of other pollutants. In 1994 it became the UK’s first plant to commission flue-gas desulphurisation equipment to cut SO₂ emissions. It also intends to install technology to meet EU emission limits for NO_x in 2016, most likely selective catalytic reduction.

Given that huge investment in reducing pollution, it could be argued that Drax is among the country’s most progressive energy firms. But its continuing and colossal environmental impact means its future is in doubt. From 2013 to 2020, it will have to buy allowances to cover all its emissions under phase III of the EUETS through auctions. This contrasts with the current phase II, in which Drax was given free allowances to cover 60% of its emissions.

A phase III allowance price of €30 per tonne would land Drax with an annual bill of €575 million. Some analysts have suggested the carbon price could actually hit €66/tonne in 2020, which would cost Drax €1,264 million per year (see figure, p 32).

It also faces calls to install CCS. During negotiations of the EU’s recent climate package, some MEPs said all coal plant should install CCS or face closure. The UK government’s Committee on Climate Change appears to support this idea. Its first report, issued in December, called on the government to state that coal plants cannot operate "beyond the early 2020s" without CCS (ENDS Report 408, pp 35-37 ). "Plants which choose not to retrofit [CCS] should [only] be allowed to generate for a very limited number of hours," it says.

Dorothy Thompson, Drax’s chief executive, appears relaxed about these pressures, particularly those posed by the EUETS and the rest of the EU’s climate package. Her initial response when asked about it was: "We’re happy with it."

Ms Thompson has been at Drax since September 2005, having previously been the head of Dutch power firm InterGen’s European operations. There she was responsible for four gas plants. She began her career in banking.

UK generators already include the cost of EUETS allowances in electricity prices, even though they receive many free. This is why they have been accused of making windfall profits from the scheme, expected to be up to £12 billion during phase II (ENDS Reports 399, p 11  and 372, pp 18-19 ). Because of this, the immediate impact on Drax in 2013 should be small. However, any rise in allowance prices after 2013 would affect it and could even see Drax’s power becoming more expensive than that from natural gas.

Unfazed by carbon prices
But Ms Thompson does not appear concerned. "The carbon price is just one of the many prices we have to take into account," she says. "Actually the key price for us is the cost of gas versus the cost of coal. The point at which carbon starts to affect us is when it outweighs the [price] benefits of coal. It’s not like I can say that [a carbon price of] €50/tonne would suddenly out-price us."

"Right now when you look at what’s happening to carbon, the price has been falling rather precipitously," Ms Thompson adds. "And the markets are basing [the price of] phase III allowances on those for phase II. So at the moment, the signals are that phase III will not… have a very detrimental impact on us."

Drax has an 11-strong trading team, including three traders working specifically on carbon. It will increase to 14 traders, with four working on carbon by the end of the year.

Ms Thompson seems equally relaxed about the controversies swirling around CCS for coal-fired power stations. This involves removing CO₂ from the flue gases, liquefying it and then transporting it for storage underground. The estimated capital cost of the first plants is £500 million - a huge amount to add to the £1 billion cost of a major new power station. The operational cost is expected to be €30-45/t CO₂ (ENDS Report 405, p 12 ).

Most coal plant operators have issued statements on CCS over the past year, either announcing intentions to build pilot plants or calling for government finance to do so (ENDS Reports 407, p 16  and 402, pp 12-13 ). Drax has been almost silent.

The CCS solution
Ms Thompson will happily support CCS in theory. "The wholesale solution for coal’s emissions has to be CCS," she says. "We strongly believe in it. We think that the components of the technology are all there, it’s just a question of scaling it up." But she admits the company’s only public involvement in CCS has been contributing to a Yorkshire Forward report on how best to pipe CO₂ from power stations to offshore storage facilities (ENDS Reports 401, p 4  and 390, p 12 ). Drax did not enter the government’s competition to build a CCS demonstration plant (ENDS Report 402, pp 12-13 ).

"The problem for us is that we are one plant, and our business is that one plant. So when we’re engaged in CCS, it’s all about how we can do that without unduly exposing our business."

Drax is following up the Yorkshire Forward report, contributing to two other groups looking at how to transport CO₂, Ms Thompson says. But all these efforts seem to sidestep the more important question of whether Drax can install CCS. The only way it could capture emissions without knocking down the existing plant is by ‘bolting-on’ post-combustion capture technology, which uses amines to chemically absorb CO₂ from flue gases. The solvent is then heated to release the CO₂ so it can be liquefied.

The problem with this technology is that it uses a lot of energy. It would lead to a 10-12% loss in a power station’s efficiency, making most people believe it could only be used with supercritical boilers in which the steam is raised to unconventionally high temperatures and pressures. These boilers convert some 45% of the energy of coal into electricity. In contrast, Drax’s efficiency will be 40% when it has completed its turbine upgrade and there is little room for improvement.

Ms Thompson believes the most realistic way to put CCS in place is to install new boilers and probably new turbines. Drax is examining the viability of oxyfuel technology, which involves burning coal in oxygen to produce a pure stream of CO₂ . This would require new, airtight boilers.

"All [CCS] technologies will make major demands on the existing kit so the most sensible thing will be complete replacement, especially since the high parasitic power loss implies that one needs the most efficient units possible," she says. "CCS would require considerable extra space for the gas clean-up and CO₂ removal. It might indeed be simpler to build a new plant, but attention will need to be paid to the potential costs and benefits of reusing the [existing] infrastructure such as chimneys and the water cooling towers."

But Drax has no plans for taking any of this forward - or if it does they are a well-kept secret. Ms Thompson points out that the UK will rely on Drax in its current, non-CCS form, for many years to "keep the lights on". The company believes some 20GW of new baseload power plant is needed by 2020 due to the closure of ageing nuclear plants and of coal plants that cannot meet emission limits under the EU’s large combustion plants Directive.

"We think Drax is absolutely essential to UK generation, and if you look at any situation over the next ten years the UK would really struggle [without us]," she says. The company’s modelling assumes the plant will operate until sometime between 2028 and 2038. "We’re very strategic to the UK and the UK needs our generation," Ms Thompson says. "The chances that [the energy gap] can be accommodated by new nuclear or renewables is almost zero."

Such comments do not suggest a company seriously considering installing CCS. Rather, they hint at a firm preparing its arguments as to why it should not invest or at least delay doing so.

If Drax’s commitment to CCS is uncertain, where does its future lie? The answer appears to be biomass, plant material grown as an energy crop or produced as a by-product of farming or timber production. By 2011, Drax aims to generate 12.5% of its electricity from co-firing some 2 million tonnes of biomass a year. This is equivalent to 500MW installed capacity. It also intends to build three 300MW biomass power plants nearby (ENDS Report 406, p 19 ).

If these plans come to fruition, Drax Group could generate up to 2GW of biomass power per year by 2020. That is almost twice the capacity of the largest planned offshore wind farm. Drax on its own would make a big contribution to the EU’s renewables energy Directive, which requires that 15% of all energy supplied in the UK comes from renewable sources.

Jeff Chapman, chief executive of the Carbon Capture and Storage Association (CCSA), says it makes sense for a power company to focus on either biomass or CCS. Under the EUETS, if a plant lowers its emissions by co-firing, it has to buy fewer allowances. But if it installs CCS it does not have to buy any, so there is no added benefit from continuing to co-fire.

The CCSA says the EUETS should be structured so coal plants still receive credit for co-firing biomass after installing CCS, in effect for having a negative carbon footprint, rather than a neutral one. "The way the EUETS is structured right now, it’s a real missed opportunity for removing CO₂ from the atmosphere," Dr Chapman said.

Down the biomass path
Drax first looked into biomass co-firing in 2002, after the government said it would qualify for support under its Renewables Obligation (RO) scheme for expanding renewable energy. Under this scheme, coal plants receive one renewable obligation certificate (ROC) for each megawatt hour of electricity they generate by co-firing biomass. These can be sold to electricity suppliers to meet their renewables targets, currently for £47 each. From April, co-firing of run-of-the-mill biomass will only receive 0.5ROC/MWh to better reflect its costs. But co-firing of purpose-grown energy crops will still get 1ROC/MWh. Biomass does not have to be UK-grown.

Drax first trialled co-firing palm kernels in June 2003 (ENDS Report 342, pp 24-27 ). By 2005, it was co-firing some 162,000 tonnes of biomass a year (ENDS Report 378, p 51 ).

The company has put great effort into developing UK biomass supply chains. For example, it has a long-term contract with energy crop developer Bical for 100,000 tonnes a year of miscanthus, a rapidly growing grass. Last August, it announced it would build a 100,000-tonne capacity straw-pelleting plant in Goole.

Drax is also lobbying the government to classify forestry thinnings as energy crops. At the moment many branches lopped from trees to encourage growth are left to rot, Ms Thompson says.

But the company has struggled to turn these efforts into results. In 2007, less than 5% of the biomass Drax co-fired came from the UK. This included just 317 tonnes of energy crops, all short-rotation willow. Nearly half of the biomass it used was imported wood chips. Other major foreign feedstocks included sunflower pellets and peanut shell husks.

"We’ve found it really hard to get biomass because it’s not a developed market," says Ms Thompson. "What we’ve learned is you have to have a diversified sourcing strategy because opportunities go up and down. Three years ago we were really hopeful that we’d have a well-established UK energy crop programme by now, but what we’ve got is relatively small."

She blames much of this on jumps in wheat prices during 2007 which saw farmers focus on food crops. The Environment Department (DEFRA) should also shoulder some blame for its haphazard energy crops support programme, she says. This provides support to farmers equivalent to 40% of set-up costs. However, grants have been periodically suspended.

Sources outside Drax say it would get more domestic biomass if it paid farmers high enough prices or offered them contracts that pay in anticipation of crops. Ms Thompson would not disclose the prices Drax pays. But she says: "One of the most difficult things about the biomass market is pricing. It’s not linked to any other fuels. How you hedge and manage that risk is quite difficult."

Despite these difficulties, Drax’s biomass plans are growing. Ms Thompson says it will not stop at 500MW capacity. "It’s quite possible we may be able to push further than 12.5%. We expect there’s somewhere between 15% and 20% where we’d have to do major modifications to our boilers to stop it having an impact on output."

Drax has considered converting one of its six boilers to run just on biomass, but UK renewables legislation makes this a non-starter. Under the RO, any biomass Drax burns is considered co-firing because all the boilers use the same chimney. If the rule was changed so that individual boilers could be deemed dedicated biomass plants, Drax would receive up to 2ROCs/MWh for the electricity from that unit. However, Drax could never convert all its units. "The one thing that would constrain that is logistics," says Ms Thompson. "The requirement for a 4GW plant? You’d be talking about 15 million tonnes of biomass a year. We own a lot of land, but there wouldn’t be the storage space."

New direction
Drax’s decision to build three 300MW biomass plants in the northeast is perhaps the most important sign of the company’s new direction (ENDS Report 406, p 19 ). The plants will be built in a joint venture with German engineering firm Siemens and be sited at the Humberside ports of Hull and Immingham and also at Drax itself. They will require 4 million tonnes of material a year. Work on the first is due to start in 2010 and end in 2014.

The project will cost £2 billion, but Ms Thompson does not expect financing to be a problem. "It’s a challenge, but renewable power is still an attractive proposition for banks given the UK’s targets," she says. Drax believes the project will have a six-year payback period.

"As a result of co-firing we identified ample biomass sources for the plants," says Ms Thompson, explaining the move. "We genuinely believe the UK is facing a large challenge to fill the energy gap, and a tremendous challenge on renewables, so we saw an opportunity there. We also believe the strengths of Drax are being able to run large plant, trade output and source biomass, so the plan is a very natural fit with those core competencies."

However, even if Drax does become as much a biomass as a coal business, it will not end questions about the company’s environmental impact. There is already widespread concern that using crops for biofuel will displace existing agricultural production (ENDS Report 399, pp 30-33 ). This could lead to the clearance of forests to grow more crops with the resulting rise in greenhouse gas emissions outweighing any savings from biofuels.

This concern is spreading to other uses of biomass. For example, under the EU renewables Directive, all users of biomass will have to report details of their sustainability impacts and this could include a requirement to achieve a minimum greenhouse gas saving. The European Commission recently started consulting on potential requirements (ENDS Report 403, p 57 ).

The company’s sustainability policy says all biomass used by Drax should reduce greenhouse gas emissions by at least 70% compared with coal and any crops used must not "result in the net release of carbon from… either forests or agricultural land" or "endanger food supply".

But Drax has a lot of work to do to assess the emissions from its biomass supply chains. Ms Thompson says most of its contracts are direct with suppliers who are required to provide it with data. But Drax still has to work out how to measure emissions. "Take straw planting: how do we do the carbon footprint for that?" asks Ms Thompson. "Do we do an analysis specific to each farm, or do we say we’re going to have a rule of thumb? It’s those sorts of questions we still need to answer."

Drax will not reveal where it buys its biomass from because it does not want to alert competitors. Ms Thompson said the locations are unimportant from a greenhouse gas point of view. She points to a study for the Business Department (BERR) in 2006 which says emissions from the transport of biomass into the UK are no more than 14% of the emissions saved from co-firing.

That may be the case, but it is easy to picture a time when campaigners will demand to know where the biomass used at Drax was grown and to what standards, or when journalists go into fields and forests and link Drax’s name to poor labour standards or bad agricultural practices - even if Drax is only burning by-products from these activities. If the company does not come up to scratch, then one day campaigners could be trying to stop trains taking biomass there. It could all be rather similar to today.