Robust first quarter operations for Drax

Drax Power Station

North Yorkshire power station operator, Drax Group, has reported a strong performance for the first three months of 2024 in an update today.

The group expects its 2024 full year adjusted EBITDA to be in line with consensus estimates, subject to continued good operational performance.

Drax burns wood pellets at its biomass power plant and says its pellet production business has started the year well despite a challenging market.

It says it sees the current global biomass market as representing “a favourable balance of risks and opportunities for the group.”

The business adds it is positive on the outlook for biomass demand and expects this to grow, as sustainable woody biomass is increasingly used for bioenergy with carbon capture and storage (BECCS), as well as for next-generation sustainable aviation fuels.

Drax adds that its pumped storage and hydro business is also doing well, providing flexible and renewable power generation and a wide range of system support services.

The company notes the retirement of dispatchable thermal assets and increased reliance on intermittent renewables in the UK, as well as a long-term increase in demand, will drive a growing need for dispatchable power and system support services, creating long-term enduring earnings opportunities for these assets.

Construction of three new Open Cycle Gas Turbines with combined capacity of around 900MW continues at Drax, with commissioning expected to take place from September 2024.

In January 2024, the UK Government launched a consultation on a bridging mechanism to support large-scale biomass generators transitioning from their existing renewable schemes to BECCS.

The consultation concluded in February 2024 and Drax says it is waiting for the Government’s response, which is expected shortly.

CEO, Will Gardiner said: “We continue to deliver a strong system support and generation performance, providing dispatchable, renewable power for millions of homes and businesses.

“We are excited about the opportunity to deliver BECCS at Drax Power Station, the country’s largest source of 24/7 renewable power by output.

“With a bridging mechanism and the right support from Government, our BECCS plans could help the UK meet its net zero targets and continue to support the country’s long-term energy security, while creating thousands of new jobs across the region.

“BECCS can also help deliver the global energy transition and, through our new global BECCS business, we are continuing to develop options for projects in North America.

“These could provide long-term, large-scale carbon removals and attractive opportunities for growth as part of a potential trillion-dollar global carbon removals market.”