Brussels, 05/01/2016 (Agence Europe) - On Wednesday 5 January, the European Commission announced that it had opened an in-depth investigation into British plans to support the conversion to biomass of part of the coal-fired Drax power station.
In a press release, the Commission stresses that it fully supports the efforts made by the states of the EU to increase the use of renewable energies, but adds that EU rules on State aid are designed to ensure that the cost of aid is limited for consumers and that this aid does not give individual operators an undue advantage.
In April 2015, the United Kingdom notified the Commission of its intention to subsidise the conversion of one unit of the coal-fired Drax power station into a unit running solely on biomass. The unit in question would then have the capacity to generate 645 MW of electricity from renewable sources, produced exclusively from wood pellets.
The measure lays down a certain price, the strike price, for the electricity produced. If the average wholesale price of electricity falls below the strike price, the operator of the Drax power station will receive a top-up amount in addition to the proceeds from selling the electricity on the market. According to the United Kingdom's estimates, the power station will operate until 2027 and will provide around 3.6 TWh of electricity a year. It is expected to consume around 2.4 million tonnes of wood pellets a year, which will be imported mainly from the United States and South America.
The Commission will continue its investigation to ensure that the public funds used are limited to what is strictly necessary and that the measure does not lead to overcompensation. In its preliminary analysis, the Commission took the view that the estimations of the economic results of the power station were arguably too cautious. The positive evolution of the operating parameters could have a substantial impact on the yield of the project. At this stage, the Commission therefore has concerns that the effective yield will be greater than the parties' forecasts, leading to overcompensation.
The Commission will also examine whether the positive effects of the project in terms of achieving the EU's energy and environmental targets outweigh the potential competition distortions on the biomass market. At this stage, it takes the view that the quantity of wood necessary is considerable, given the volume of the world wood pellets market, and that demand resulting from the Drax conversion project could bring about substantial competition distortions on the biomass market. (Original version in French by Elodie Lamer)