Dorothy Thompson: A burning ambition for power

Europe's biggest coal-fired power station is betting the business on turning itself green the chief executive tells Sarah Arnott

Concerned environmentalists the world over may have their eyes fixed on the lofty diplomacy at next week's Copenhagen climate change conference. But in a flat and rather uninspiring corner of Yorkshire, carbon abatement is a more prosaic business.

Drax is an unlikely vanguard of the green agenda. It is Europe's biggest coal-fired power station and Britain's single biggest emitter of carbon. Driving up the dual carriageway from Doncaster, the plant dominates the skyline. Steam billows out of 12 114-metre cooling towers in blooms the size of clouds. The towering chimney, sprawl of warehouses and coal heaps cover 1,854 acres and are visible for miles around. It appears a gift to its critics: a filthy, carbon dioxide-belching symbol of humanity's environmental arrogance.

But Dorothy Thompson – the self-contained but sharply intelligent chief executive – is quick to put the statistics in perspective. "We are the biggest industrial emitter of carbon because of our size: we are twice the size of any other coal plant," she says, politely trying to hide the fact she has faced the same charge a hundred times before. It is a reasonable point. In return for the 140 trains-worth of coal a week, and the 160 million litres of the River Ouse every day, Drax produces up to 7 per cent of all of Britain's electricity. More importantly, it is not the relic critics might assume. "We are the most-efficient coal station in the UK," Ms Thompson says. "Materially so."

Even so, there can be no illusions about Drax's future. "In time power will be decarbonised and stations like Drax will close," Ms Thompson says. But before you rush to sell your shares, there is a caveat. For starters, Ms Thompson has in mind a 25-year time horizon, which is broadly the expected lifespan of the existing infrastructure. She is also overseeing a metamorphosis that, if successful, will see an unrecognisable butterfly emerge from the sooty cocoon.

Everything about Drax is on a gargantuan scale. In the roar of the cavernous main hall, super-heated high pressure steam sends six vast turbines round 3,000 times every minute delivering electricity via three cables, each of which could power the whole of Greater Manchester. It is not only the turbines that will be different in the new Drax – although a £100m improvement programme is already halfway through. Once completed, in 2011, it will cut a million tonnes of carbon from Drax's annual emissions – equivalent to taking 275,000 cars off the road. But even such big numbers are dwarfed by a yearly carbon output of 21 million tonnes.

Instead, Ms Thompson hopes the answer is in the warehouses of oat husks and olive cakes, and the unprepossessing piles of forestry waste heaped drying – despite the drizzle - outside. Drax is already co-firing, using a mixture of coal and biomass. A trial facility is running at about 400,000 tonnes per year and the new 1.5 million-tonne unit starts commissioning this month. By next June, biomass will accounting for 12.5 per cent of Drax's fuel, cutting its carbon emissions by 2.75 million tonnes per year. Biomass will produce up to 500 of the station's 4,000 megawatt output, equivalent to 600 wind turbines.

So far, so revolutionary. But progress is not smooth. The biggest challenge is developing the biomass market. And that points the finger at regulation. Current renewables laws cap the proportion of biomass a coal power station can use – a hangover from the original aim to promote diverse forms of generation. Drax has serious biomass ambitions and is planning three dedicated plants, only one of them on site and each expected to cost around £700m. But by limiting co-firing, the cap is constraining the development of a biomass supply chain, which by turn undermines major investment plans. "The non-Drax plants will not even begin to happen if the cap remains," Ms Thompson says.

The Government knows there is an issue. Drax has been raising the matter for several years, and a Government-commissioned report earlier this year confirmed that new rules would not distort the renewables industry. But nothing has happened. Ms Thompson's irritation is palpable, despite her best efforts. "We have a very serious concern that there is a reluctance to do anything because it would mean changing the rules," she says, choosing her words carefully.

The argument is not only about what is best for Drax. "The cap is limiting investment and will constrain the renewables boom –which is about finding not only the ultimate solution but also a transition path from where we are now," Ms Thompson says. "It doesn't make sense because co-firing is a perfect transition to renewables, and it is also important to have that core demand to drive the young biomass market."

That's not all. The level of subsidies renewable generators receive is currently only set when the facility starts operating, leaving significant uncertainty for early investors. A consultation is under way to consider whether offshore wind farms, because of the long lead times, should have their entitlements fixed when construction contracts are signed. The same exemption needs to be made for dedicated biomass power stations, Ms Thompson says. "At the moment there is no certainty until you start operating, which is an untenable and unacceptable risk," she says. "These stations take 40 months to build so if you want investors – such as my shareholders – to be confident they need to be comfortable with the regulatory risk."

Put simply, recent developments in biomass have moved so fast that the legislation is obsolete. "Biomass has a significant role to play that was not envisioned when the regulations were designed," Ms Thompson says. "Even two years ago people didn't know about the things we burn now."

The reinvention of a carbon-friendly Drax is not the only transformation Ms Thompson has overseen since she took over as chief executive in 2005. The spanking new canteen may offer either black seats or red so that those who work with coal do not cover everything with soot, but the traditional stark divisions between the office workers and the oily rags have been entirely swept away. There is no more "captain's table" for the management, everyone calls the boss "Dorothy", and she is both well-liked and well-respected by her staff.

Perhaps unsurprisingly, Ms Thompson did not grow up dreaming of running a power station. Having trained as an economist, she began in banking and only came to power by chance, via a financing deal in the Philippines. Now – after a career spanning everything from negotiating fuel contracts to standing in a muddy field watching the first piles driven in – she is entirely hooked. "Power is a fascinating sector because of the combination of complex regulation, complex commodity markets and complex but very long life equipment," she says.

That combination is the background for the day-to-day business of running the Drax plant and selling its output. It also shapes the bet on biomass as the company's long-term future. Copenhagen's debates may dominate the headlines, but the real work of turning the UK green is down on the factory floor.

Dorothy Thompson: Road to coal

2005 to present Chief executive officer of the Drax power station

1998 to 2005 Head of the European business of InterGen, the power generation arm of Shell and Bechtel

1993 to 1998 Powergen

1983 to 1993 Worked in banking, specialising in project finance

1983 Graduated from the London School of Economics

Ms Thompson is married with two children and lives in York and London