Friday, 24 February 2017

Endgame for Drax?

Drax is a great name for a villain:  and for anyone who gives a toss about the way 'green' subsidies are thrown about, Drax plc can certainly be cast as one of the villains of the piece.  Drax and its fellow industrial-scale wood-chip burners receive nearly £1 billion a year in subsidies for generating electricity that way, and are not required to proffer CO2 emission permits or pay the carbon tax - on the pretext that wood-burning reduces CO2 emissions.

Except, it doesn't - it increases them, even by reference to coal (which is the obvious comparator, since it is coal-fired power generating capacity that is essentially being replaced by biomass-burning).  It's basic physics, plus a little logic.  A perfect example of crass policy-making at its most perverse - whatever view you take on (C)(A)GW.  The way they get away with it, BTW, is under the utterly demented 'carbon accounting rules' which allow them to account only for the CO2 emitted in the manufacture and transportation of the wood-chips - and to ignore the CO2 emitted during actual combustion, which is nowhere recorded.  To repeat, wood-chip burning generates more CO2 than coal burning: and in answer to the riposte that eventually, if you replant the forests, it all balances out, the answer is that 'eventually' is several decades at best, but maybe 100 years or more.  Meantime, all this is happening by the many millions of tonnes of mostly North American forest per annum.

There have been a number of people saying this patiently for quite some time, mostly from the green side; although of course the hatchet-faced subsidy-farmers and their 'green' lobby the REA are all in favour.  Well, after all, a billion is a billion ... 

Yesterday, the fairly universally-respected Chatham House has published what everyone knows to be the truth (here and here).  Even the Beeb has picked up on it (though silence from the Grauniad at the time of writing).  The REA's response is risible.

Why does the government (which, by the way, knows all this too) continue to load up our electricity bills with these subsidies?  Easy.  (a) the UK depends on biomass to meet its 'binding' EU renewables targets; (b) in a world of windfarms and ever decreasing coal, it depends on the reliability of biomass (inter alia) to keep the lights on in winter; (c) Drax and its smaller confreres are up shit creek without the subsidies, which greatly exceed their profits.  I don't know whether Drax - a FTSE 250 company - would go under without the subsidy (and remember, if that is withdrawn then by the same logic Drax should also be paying the carbon tax which would compound their woes).  But withdrawal of the subsidy would certainly impact massively on its fortunes.

I can't see the status quo continuing indefinitely.



hovis said...

The word 'Green' gets the jowls wobbling of many a C@W reader with the excitement reminiscent of a C17th Puritan ranting against the Devil. This however looks like a classic case of a poorly defined domain knowledge and regulatory framework - not much different to elsewhere really.

Should Drax recieve subsidy no, but personally I would argue the focus on CO2 is wrongheaded and only put in place to allow tax and subsidy, rather than for any enironmental reasons. There are a ton of things that are justifiable for environmental good that do cost money (but then nothing is costless*). This isnt one of them.

*Even if not charged

CityUnslicker said...

I recall Drax was bust, twice over. I should know, it was offered to me to buy for a couple of million during its insolvency( Could not touch it as their was no viable way for it under the coal scheme.

Amazingly they came up with this bullshit instead and saved themselves!

Blue Eyes said...

I saw the Beeb article yesterday and had a good chuckle. I wondered how long it would take the Energy Editor to do a post! :-)

The Beeb explains quite nicely why this is such a nonsense, to those of us with pinko liberal arts backgrounds. It might be carbon efficient if we didn't burn more than we replace and have to ship so much around the globe.....

If we couldn't keep replacing as fast as we burnt it in the middle ages before kettles and iPods were invented, how could we possibly do it now?!

Our Lords and masters have apparently been saying that the whole electricity market is a mess because of government intervention. Maybe this is a good opportunity for the PM to make a break with the past/stand up for ordinaryhardworkingpeople/release our entrepreneurial spirits?

Steven_L said...

You could almost be forgiven for thinking 'they' are trying to cause more global warming. Actually, that makes for quite a good conspiracy theory.

Could not touch it as their was no viable way for it under the coal scheme.

Couldn't you just have converted it into a massive warehouse / hangar style nightclub at a couple of million? Easy driving distance from Leeds and Sheffield and no neighbours to annoy? I think you missed a chance to do the public a massive service there CU!

Flagwaver said...

Or a cannabis farm? I hear domestic supplies have been dented recently.

barnacle bill said...

All Drax needed was a rather long conveyor belt from Kellingley and it could have been a goer under coal!

Demetrius said...

This shambles has been coming for a long while. We lived in mid Yorkshire for many years and saw it all unfold around us. We are paying now for all the shoddy deals, quick fix compromises and blunders of the 70's and 80's. In this time I was saying this lot is bust, it is staying bust and if not sorted out will go even more bust.

Blue Eyes said...

Blunders in the days of central planning? Surely not.