UK-headed renewable energy major Drax Group plc has revealed ambitious new 2030 targets for wood pellet production, biomass sales, and BECCS. "We aim to double our sustainable biomass production capacity by 2030 – creating opportunities to double our sales to Asia and Europe, where demand for biomass is increasing as countries transition away from coal," Will Gardiner, CEO of Drax Group revealed at the Group's Capital Markets Day held on December 1, 2021.
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Drax believes that the global market for sustainable biomass will grow significantly, creating opportunities for sales to third parties in Asia and Europe, Bioenergy with Carbon Capture and Storage (BECCS), energy generation, and other long-term uses of biomass.
Drax is already a major producer, supplier, and user of biomass, active in all areas of the supply chain with long-term relationships and almost 20 years of experience in biomass operations.
The Group’s innovation in coal-to-biomass engineering, supply chain management, and leadership in negative emissions can be deployed alongside its large, reliable, and sustainable supply chain to support customer decarbonization journeys with long-term partnerships.
Targeting 8 million tonnes per annum by 2030
The delivery of these opportunities is supported by the expansion of the Group’s biomass pellet production capacity.
Drax has made excellent progress during 2021 providing a firm foundation for further growth. We have advanced our BECCS project – a vital part of the East Coast Cluster that was recently selected to be one of the UK’s two priority CCS projects. And we’re now setting out a strategy to take the business forward, enabling Drax to make an even greater contribution to global efforts to reach net zero. We believe Drax can deliver growth and become a global leader in sustainable biomass and negative emissions and a UK leader in dispatchable, renewable generation, said Will Gardiner, CEO, Drax Group.
Following the completion of the Pinnacle Renewable Energy acquisition earlier this year, Drax Group has 13 operational pellet plants located in the United States (US) and Canada with a combined nameplate annual capacity of approximately 4 million tonnes.
A further two plants are currently commissioning and other developments/expansions will increase this to about 5 million tonnes once complete.
Drax is now targeting 8 million tonnes per annum (tpa) of production capacity by 2030, which will require the development of over 3 million tonnes of new biomass pellet production capacity.
To deliver this additional capacity Drax is developing a pipeline of organic projects, principally focused on North America, and expects to take a final investment decision on 0.5-1 million tpa of new capacity in 2022, targeting returns significantly in excess of the Group’s cost of capital.
We aim to double our sustainable biomass production capacity by 2030 – creating opportunities to double our sales to Asia and Europe, where demand for biomass is increasing as countries transition away from coal, Will Gardiner said.
Continue to drive down pellet production costs
Underpinned by this expanded production capacity, Drax aims to double biomass sales to third parties to 4 million tpa by 2030, developing its market presence in Asia and Europe, facilitated by the creation of new business development teams in Tokyo, Japan, and London, UK.
Drax expects to sell all the biomass it produces, based on an appropriate market price, typically with long-term index-linked contracts.
Drax aims to use the combined expertise of Drax and Pinnacle to apply learnings and cost savings across its portfolio and continue to target US$100 per tonne (£50/MWh equivalent) by 2027.
In 2018, the Group’s biomass production cost was US$166/t. At the H1 2021 results, through a combination of fibre sourcing, operational improvements, and capacity expansion including the Pinnacle acquisition, the production cost had reduced to US$141/t.
Develop BECCS outside the UK
Subject to the right regulatory environment, Drax plans to transform Drax Power Station into the world’s biggest carbon capture project using BECCS to permanently remove 8 million tonnes of carbon dioxide (CO2) emissions from the atmosphere each year by 2030.
The project is well developed, the technology is proven and an investment decision could be taken in 2024 with the first BECCS unit operational in 2027 and a second in 2030, subject to the right investment framework.
The Group aims to build on this innovation with a new target to deliver 4 million tonnes of negative CO2 emissions per annum from new-build BECCS outside of the UK by 2030 and is currently developing models for North American and European markets.
As a global leader in negative emissions, we’re going to scale up our ambitions internationally. Drax is now targeting 12 million tonnes of carbon removals each year by 2030 by using bioenergy with carbon capture and storage. This includes the negative emissions we can deliver at Drax Power Station in the UK and through potential new-build BECCS projects in North America and Europe, supporting a new sector of the economy, which will create jobs, clean growth, and exciting export opportunities, said Will Gardiner.
