Updates information on Beccs, US focus and pellet production
UK utility Drax has hedged more of its year-ahead power generation compared with the same time last year, while it has revised down its expected capital investment for this year following a pause on its UK carbon capture project.
Drax had hedged 10.5TWh of 2024 power generation at an average price of £149.10/MWh as of 21 April, compared with 22 April 2022 when its year-ahead hedges — for 2023 — totalled 8.3TWh.
The utility had hedged 12.5TWh of 2023 generation at £158.60/MWh as of 21 April 2023, alongside 3.2TWh of 2025 power sales at £137.30/MWh. This excludes any sales for its contract for difference (CfD) unit, it said.
Lower generation is expected from Drax's biomass-fired units in the renewable obligation certificate (ROC) scheme owing to two major outages this year. The 645MW unit 2 at the plant went off line on 20 April and is scheduled to return on 10 July, with the 645MW unit 4 then due to be off line over 20 July-15 October.
Drax expects capital investment in 2023 to total £520mn-580mn, revised down from £570mn-630mn previously expected. This is as the utility's bioenergy carbon capture and storage (Beccs) project was not included in the UK government's "track 1" process last month.
Drax had been aiming to commission its first Beccs unit in 2027 and a second in 2030. But it will now aim to deploy the technology by 2030 and has paused investment for 2023 as it awaits further clarity from the government on the future of the project.
Discussions are ongoing with the government, which has launched a track 2 CCS process and plans to enable the expansion of track 1 clusters through a process that will be set out later this year. The government has also said that it will publish a biomass strategy by the end of June. Westminster plans to support Beccs through a dual CfD business model, combining a CfD for electricity generation and one for carbon capture.
Drax is also discussing a "bridging mechanism" for biomass-fired generation between the end of current support schemes in 2027 and commissioning of Beccs, it said.
The group has previously said it was considering investing in two newbuild 300MW Beccs power units with 2 TWh/yr of power generation capacity and 2mn t/yr of CO2 capturing capacity each.
Higher pellet production costs
Drax reaffirmed that it expects wood pellet production costs to be higher in 2023 compared with a year earlier mostly because of "inflationary pressures, primarily in transportation and utilities", as the group had said in its financial results for 2022 in February.
Drax's pellet production costs rose by $9/t on the year to $152/t on a fob US basis in 2022 as a result of inflationary pressure on fuel costs and surcharges, which were 35pc and 20pc higher on the year, respectively, and US rail restrictions.
"While continuing to optimise its supply chain to maximise value for the group, Drax remains focused on opportunities to reduce the cost of biomass," it said on Wednesday.
US pellet producer Enviva also said earlier this month that it aimed to reduce production costs by around 10.8pc year on year in 2023 to $132/t.
Drax has pellet production plants in Canada and the US. It said its focus in the US remained "on ensuring the Demopolis plant reaches full capacity and reliable, safe operation". The 360,000 t/yr Demopolis plant in Alabama started commercial operations in April 2022.
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, Leola and Russellville, Arkansas, and the acquisition of another plant in Princeton, British Columbia, in August 2022.

