11 March 2021
Drax Group plc
("Drax" or the "Company"; Symbol: DRX)
Capacity Market Agreements
T-4 auction - provisional results for existing pumped storage and hydro assets
Drax confirms that it has provisionally secured agreements to provide a total of 617MW of capacity (de-rated 582MW) principally from its pumped storage and hydro assets(1). The agreements are for the delivery period October 2024 to September 2025, at a price of £18/kW(2) and are worth around £10 million in that period. These are in addition to existing agreements which extend to September 2024.
T-4 auction - provisional results for new build system support assets
Drax confirms that it has provisionally secured 15-year agreements for three new 299MW (de-rated 284MW) Open Cycle Gas Turbine (OCGT) projects at sites in England and Wales(3). The agreements are for the delivery period October 2024 to September 2039, at a price of £18/kW(2) and are worth around £230 million in that period.
These assets are intended to operate for short periods of time to meet specific system support needs. As the UK transitions towards a net zero economy, it will become increasingly dependent on wind generation and as such, fast response system support technologies such as these OCGTs are increasingly important to the energy system as a means to enable more wind to run more often and more securely.
The total capital cost of these projects is approximately £80-90 million each, with a build time of around two years.
A further OCGT project participated in the auction but exited above the clearing price and did not accept an agreement.
Drax will now evaluate options for all four OCGT projects including their potential sale.
Continued focus on biomass strategy and the development of negative emissions
In December 2019 Drax announced an ambition to become a carbon negative company by 2030 using BioEnergy Carbon Capture and Storage (BECCS) and the Group remains focused on its biomass strategy. In January 2021 Drax completed the sale of its Combined Cycle Gas Generation (CCGT) assets and in March 2021 ends commercial coal generation. Drax believes that its remaining portfolio of sustainable biomass, pumped storage and hydro will be amongst the lowest carbon generation portfolios in Europe.
Enquiries:
Drax Investor Relations: Mark Strafford
+44 (0) 7730 763 949
Media:
Drax External Communications: Ali Lewis
+44 (0) 7712 670 888
Website: www.drax.com
Notes:
(1) Cruachan Pumped Storage, the Galloway hydro scheme (Tongland, Kendoon and Glenlee) and three small legacy gas turbines at Drax Power Station (96MW, de-rated 90MW).
(2) Capacity Market agreements stated in 2019/20 real-terms, with payments indexed to UK CPI.
(3) Progress Power located in mid-Suffolk, Millbrook Power located near Marston Moretaine in Bedfordshire and Hirwaun Power located in Rhondda Cynon Taff.
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