Energy Market Update – 10th August 2015


FEED is a programme of detailed engineering, planning and financial work to finalise and de-risk aspects of the proposal ahead of taking final investment decisions and proceeding to construction.

Drax is the largest power station in Europe with a capacity of 3,960 MW generating 7-8% of supply to the UK. Being responsible for one of the largest emissions outputs as a traditional burner of coal, it decided to import biomass to burn alongside coal. In 2012, further legislation compelled it to switch further to biomass and having converted one unit completely to biomass in 2013, Drax announced that two further units would be completed similarly by 2016.

The level of “green” is debatable in that biomass is imported from overseas, namely Canada. No matter what claims are made, there is a serious environmental aspect in terms of transportation involving its own rail network and rolling stock from eastern ports. If Drax was able to grow and burn the timber on site, that would be different, but it is not. CCS here is absolutely essential to enable the plant to continue to burn coal, but cleanly.

The key drivers, apart from legislation moving rapidly against coal through the Large Combustion Plant directive (LCPD), can be taken in statements from the IEA which estimates that CCS contributes to 14% of cumulative CO2 emissions reduction to 2050. Furthermore, in the shorter term it can take out 90% of CO2 from fossil fuels and so is essential for any serious approach to alleviating the impact of climate change.

On the other side of the argument, the cost implications are vague. It would seem that the initial strike price is projected to be in the region of £161, falling to £114 by 2020 and £94 by 2028. At the same time, the rollout of CCS could create a further 100,000 jobs and an industry worth £6.5bn. However, the reality of this is that whatever the costs are, they will contribute to the cost of protecting the environment, which will be paid solely by consumers either directly through their energy bills or indirectly elsewhere!

The benefits are obvious, but the costs are not. Today we are also looking at a 20-25% environmental surcharge on electricity costs, and this will rise by another 20-25% by 2020, while the actual commodity price will move depending upon supply and demand. Looking further ahead, strike prices will kick into at least double the commodity cost from where it is today, at around £41-44. As I have said before, everyone wants to protect the planet and move towards a low carbon environment lifestyle, but what is the true cost to be borne?

Written By- John Hall

Alfa Energy Group

Alfa Energy Group, an Edison Energy company, is an international energy, sustainability and technology consultant partner with 250 employees over 3 international locations. For over 25 years, Alfa has been servicing its clients’ needs through energy and water management, sustainability, and compliance consulting, and an intuitive ecosystem of user-driven energy, water, and carbon management software platforms. With coveted awards, an international industry-wide recognition, and clever simple solutions, today Alfa is partnering with clients to establish and deliver pivotal net zero strategies. Through smart energy management, the expertise and diligence of its people, transparent processes, and data management, Alfa continues to lead through its recognised gold standard of service delivery.