UK energy strategy casts doubt on Drax’s carbon capture project
The energy company Drax will immediately enter talks with the government after a landmark energy strategy cast doubt over its £2bn carbon capture project and plunged the company’s share price into turmoil.
The government’s wide-ranging plan to secure Britain’s energy supplies inadvertently raised questions over the future of one of the country’s biggest electricity generators after appearing to rule out the project to capture carbon emissions at the Drax biomass plant in North Yorkshire from the race for subsidies.
The company suffered one of the biggest falls on the FTSE 250 as shares tumbled 12% on Thursday morning.
However, Drax assured investors that it would enter formal bilateral talks with the government immediately to “move the project forward”.
Drax chief executive, Will Gardiner, told investors that the government planned to expand the “Track 1” process later this year, and that its project would be eligible.
Funding for the carbon capture project is considered crucial in securing future revenues for Drax beyond 2027 when its existing subsidy for burning wood pellets in its power plant will come to an end. However, a delay in joining the Track 1 process could still leave a funding gap until 2030.
The energy security and net zero minister Graham Stuart said in parliament on Thursday that the government “totally understands that we need to work with Drax on a bridging option between 2027 and 2030 and the secretary of state has charged our officials working with Drax on what those options look like”.
The share price losses were quickly wiped out, and the stock rose 6% after the assurances.
The strategy named eight carbon capture projects in the first track of a government subsidy scheme which could begin trapping and
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