Drax, the company that operates the UK's biggest power station, has said it plans to build three biomass power stations as UK power companies try to get greener in response to new regulations and ambitious environmental targets.
Drax operates the coal-fired power station of the same name in Yorkshire, which generates 4,000 megawatts of electricity, or 7 per cent of the UK's supply. The company plans to build three biomass-fuelled plants, each capable of producing 300 megawatts of power.
Drax is teaming up with the German engineering firm Siemens to build the plants. Construction is planned to start in 2010 and they are due to start coming onstream from 2014. The project, 60 per cent-owned by Drax, will cost about £2bn, and will provide "attractive returns", the company said.
One of the power plants will be in Hull, another in Immingham, Yorkshire, and the site of the third has yet to be decided, but may be next to Drax's existing power station, said a spokesman for Drax.
Drax power station has already started to use biomass technology, and the company wants to take advantage of the lower costs of procuring such materials – which include straw, forestry residue, sunflower seed and peanut husks, much of which has to be shipped from around the world – on a bigger scale. The new power stations will use Siemens' turbine technology.
The move comes as the UK tries to clean up its act in power generation. Britain is one of the biggest polluters and consumers of fossil fuels worldwide, and is trying to cut its carbon emissions by 80 per cent by 2050, by promoting technologies such as wind power. The UK is aiming for 10 per cent of electricity to be generated from renewable resources by 2010, and the European Union has set a target of producing 20 per cent of energy from renewables by 2020.
The high stakes in investing in renewable or carbon-efficient generation sources was also evidenced last month when EDF, France's biggest power generator and owner of the UK power supplier EDF Energy, agreed to buy the UK's British Energy for £12.5bn. British Energy is the UK's biggest generator of nuclear power – another carbon-efficient way of producing electricity, and one that is expected to be increasingly used in the UK's new power stations.
Separately, shares in Drax, which also issued a trading statement yesterday, fell by more than 5 per cent as falling oil and gas prices and macroeconomic pressures were seen by brokers as putting pressure on the power plant's margins.
Analysts said the company will face further margin pressures as the pound continues its decline against the dollar and euro, in which it buys much of its coal and carbon respectively.