MPs from both Labour and the Conservative Party have warned that Prime Minister Liz Truss’s plans could potentially increase energy bills for households, if the Government ends up providing more support to the Drax power station. Drax near Selby, Yorkshire generated 11 percent of the UK’s renewable power, through biomass in 2020] which was enough for four million homes. However, the plant is among the biggest sources of carbon dioxide and PM10 particulate matter air pollution of all EU power stations and emits more than many coal plants.
As part of Ms Truss’s plans to tackle the energy crisis that sending electricity and gas prices to record levels, the Government is also looking to ask renewable and nuclear power generators to supply electricity below current market rates.
In a significant move to slash bills, she announced that renewable and nuclear energy generators would “move onto Contracts for Difference to end the situation where electricity prices are set by the marginal price of gas.
“This will mean that generators are receiving a fair price, reflecting their cost of production, further bringing down the costs of this intervention.”
Despite the fact that renewable energy sources like offshore wind are nine times cheaper than gas, under many of the older contracts, producers have been selling electricity at market prices, which are at astronomical levels due to the increase in gas costs from Russia’s invasion of Ukraine.
By convincing power generators to sign on to this contract, officials are asking wind, solar and nuclear generators to sell gas at less lucrative prices, in exchange for guaranteed long-term income.
According to the Guardian, Drax could also be eligible for the scheme, and negotiate over units 2 and 3 at its plant, which currently receives payment for burning biomass wood pellets, under the renewable obligation certificate (ROC).
While the power station has not yet confirmed whether it plans to rework its contract, it said that it is “working in partnership with the government to find ways in which we can support the country during the energy crisis this winter”.
However, MPs fear that the Government is in a weak bargaining position, as they need to convince generators to produce at far lower prices than current market levels, meaning that officials could potentially rush into deals that could late prove bad for taxpayers if the spike in wholesale gas quickly subsides.
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According to the think tank Ember’s calculations, between 2012 and 2027, which is when Drax ROC subsidies end, the power station will collect a staggering £11billion in Government handouts.
Given that the new contracts could stretch for an additional 10-15 years, Drax could end up enjoying another decade of support.
Charlotte Nichols, the Labour MP and member of the business, energy and industrial strategy select committee, said: “It is vital that the terms of these renegotiated contracts receive proper parliamentary scrutiny, as it risks locking in higher prices over the longer term and continuing excessive subsidies for technologies we are moving away from as we head towards our net zero targets.
“Such long-term financial decisions cannot simply be made unilaterally as a kneejerk response to our current energy crisis and must be properly debated, with alternatives considered, before any decisions are made that cannot later be unpicked.
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“Particular scrutiny needs to be given to any deal with Drax given the existing levels of Government support.”
The Conservative MP Pauline Latham said: “The Government is right to be looking at ways to bring down energy bills. But they should avoid locking bill payers into expensive new 15-year contracts to subsidise sources of energy with dubious environmental credentials. Instead, we should focus on building new renewables which are nine times cheaper than gas.”
Last month Chancellor Kwasi Kwarteng, who was the Business Secretary at the time, slammed the power station for importing wood pellets from the US, which accounts for 80 percent of its fuel supply.
He told MPs: “There’s no point getting it from Louisiana – that isn’t sustainable … transporting these wood pellets halfway across the world – that doesn’t make any sense to me at all.”