It is hard to keep up with the twists in the tale of Drax's attempts to win fixed-price government subsidies to help convert two of its dirty coal-fired units to run on biomass pellets.
Short version: the company thought it was nailed-on favourite to get two so-called contracts for difference, which are designed to encourage investment in renewables by guaranteeing prices on generated electricity for 15 years.
It applied for two units and they were ranked joint first in the provisional ranking of projects last year. In the event, only one made the cut when the Department for Energy and Climate Change (Decc) named eight qualifying projects in April.
Drax appealed and won in the high court. Now it has lost in the court of appeal. Cue an 8% slump in the share price. Is the outcome really that bad?
As Liberum's Peter Atherton says, Drax has bet its corporate strategy on biomass and the economics of conversion depend entirely on government subsidy. So the legal defeat is definitely serious if Decc's enthusiasm for biomass has cooled, for environmental reasons or otherwise.
On the other hand, these interim contracts for difference (as opposed to the planned "enduring" ones that will arrive soon) are not the only form of subsidy.
Support is also available under the renewables obligation. Drax will now consider its options under that scheme. The disadvantage is lack of certainty on price, but maybe the financial risks are worth taking anyway. Clear it ain't – but that's today's energy market.
theguardian.com
Short version: the company thought it was nailed-on favourite to get two so-called contracts for difference, which are designed to encourage investment in renewables by guaranteeing prices on generated electricity for 15 years.
It applied for two units and they were ranked joint first in the provisional ranking of projects last year. In the event, only one made the cut when the Department for Energy and Climate Change (Decc) named eight qualifying projects in April.
Drax appealed and won in the high court. Now it has lost in the court of appeal. Cue an 8% slump in the share price. Is the outcome really that bad?
As Liberum's Peter Atherton says, Drax has bet its corporate strategy on biomass and the economics of conversion depend entirely on government subsidy. So the legal defeat is definitely serious if Decc's enthusiasm for biomass has cooled, for environmental reasons or otherwise.
On the other hand, these interim contracts for difference (as opposed to the planned "enduring" ones that will arrive soon) are not the only form of subsidy.
Support is also available under the renewables obligation. Drax will now consider its options under that scheme. The disadvantage is lack of certainty on price, but maybe the financial risks are worth taking anyway. Clear it ain't – but that's today's energy market.
theguardian.com
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