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Drax power station is waiting for the approval of fourth unit conversion
The government of the United Kingdom approved coal-to-biomass conversion of Lynemouth power plant, in accordance with the UK's green energy strategy. This power station is to receive state aid by 2027 in order to switch from coal to wood biomass. It will be fully driven by wood pellet in order to generate electricity in amount of 420 megawatt.
Before the government approved this project, an investigation was conducted by the European Commission in order to find out whether this plan is overcompensated. The approval of this project has raised Lynemouth shares by 8.5 immediately.
The fact of Lynemouth conversion project approval increased a likelihood of the same approval for Drax power station. Drax Power consists of six coal-fired units; three of them has been already converted. However, the conversion of the fourth one requires governmental approval. Analysts consider that Drax conversion project is quite similar to the Lynemouth's one. That is why it is believed that the plan of Drax fourth turbine switching will be also approved. One more argument is that the United Kingdom is to close all coal-fired power plants by 2025. Therefore, they should be replaced by biomass-fired ones. In this case, conversion is required.
However, there are some concerns touching Drax project approval. The main one is that Drax power plant is 50 per cent bigger than Lynemouth. For this reason, the European Commission is to carry out whether coal-to-biomass conversion of Drax power plant is to distort competition at world pellet market. It is also estimated that the shares of Drax will fall by 50 to 80 per cent in case the conversion project does not gain approval. The final decision will be taken in 2016
Contact person: Sergei Kozlov
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Views: 985 Added: 12/29/2015 Updated: 12/29/2015
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