UK utility Drax's biomass-fired power generation fell by 14pc on the year to 12.7TWh in 2022, while its pellet production increased almost 30pc.
Drax's biomass and hydropower assets made it the UK's largest source of renewable electricity in 2022, generating 11pc of total renewable output. And the company increased its wood pellet production by almost a third on the year to 3.9mn t.
Lower power output at state-backed contracts for difference (CfD) units in the UK, such as Drax's 660MW unit 1, led to a sharp drop in wood pellet-fired output this winter. Generating under the scheme became unprofitable for major utilities, and biomass-fired CfD units paid back to the scheme over most of 2022 and the 2022-23 winter heating season.
Drax generated minimally with coal — and only in January and February — last year compared with 0.4TWh in 2021 and 1.6TWh in 2020. The company ended the commercial use of coal in March 2021, but the planned closure of its two remaining coal-fired units was extended from September 2022 to April 2023 at the UK government's request "as a response to the European energy crisis" following the conflict in Ukraine, the company said in its full year results published today.
The availability of Drax's biomass-fired units fell to 87pc from 88pc a year earlier in 2022. And the utility's renewable obligation certificate generation is likely to be lower this year following planned maintenance on its 645MW units 2 and 3 on 6 April-26 June and 6-20 July, respectively, it said.
Pellet production expansion
Pellet production under Drax's umbrella climbed to 3.9mn t in 2022 from 3.1mn t a year earlier owing to the group adding more than 500,000 t/yr of nameplate capacity, with new plants in Demopolis (Alabama), Leola and Russellville (Arkansas), and the acquisition of another plant in Princeton, British Columbia, in August 2022.
Of this production, 1.8mn t was for Drax's own use — down from 2mn t in 2021 — and 2.2mn t was sold to third parties, an increase of 1mn t from a year earlier.
The company's revenue from pellet sales rose to £795mn from £444mn in 2022. Pellet sales in Asia rose on the year to £275mn from £93mn. Sales in the rest of Europe and the US dropped to £27.6mn and £10.6mn, respectively.
"Over the past 12 months, the cost of biomass in the European spot market has increased significantly, making it more challenging to procure and generate additional power with a margin," Drax chief executive Will Gardiner said. "As a result of higher biomass prices, this created opportunities for the sale of biomass in addition to generation."
Drax made a $300mn final investment decision in 2022 to build a 450,000 t/yr pellet plant and port facility in Aliceville, Alabama, expected to be operational by 2026. The company is targeting 8mn t/yr of pellet production capacity by 2030, half of which will be sold to third parties, it said.
The group's 17 North American pellet mills have a nameplate production capacity of 5mn t/yr.
Drax's pellet production costs increased by $9/t on the year to $152/t on a fob US basis in 2022. Inflationary pressure on fuels costs and surcharges, which rose by 35pc and 20pc on the year, respectively, and US rail restrictions were behind the increase, Drax said.
Drax is targeting a fob US cost of $100/t by 2027 by using new technology and the increased use of low-cost feedstocks such as wood residues, which formed the largest proportion of Drax's wood pellets in 2021, climbing to 63pc from 62pc a year earlier.
| Drax wood pellet fibre sources 2021-22 % | ||
| 2022 | 2021 | |
| Sawmill residues | 63 | 62 |
| Branches, tops and bark | 7 | 3 |
| Thinnings | 16 | 18 |
| Low-grade round wood | 14 | 15 |
| Agricultural residues | 0 | 2 |
