Drax share price up as it withdraws from £1bn renewable energy project due to "critical reversals" in government support

James Nickerson
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Drax said it must put its shareholders firs
Drax said it must put its shareholders first (Source: Getty)

Drax's share price climbed this morning after the energy giant abandoned a £1bn carbon capture project because of the government's policy u-turn on renewable energy.

Drax had committed to storing carbon dioxide next to its plant in North Yorkshie - the biggest coal-fired power station in the UK - but today said it was halting investment into the White Rose project because it was too risky.

"Critical reversals" in government support for green energy made "a severe impact on our profitability", Peter Emery, the Drax board member chairing the group developing White Rose carbon capture project, told the Financial Times.

“We’ve also got concerns about the government’s future support for the low carbon agenda and that’s left us in a position where we are no longer confident we can persuade our shareholders that this is an attractive investment, given the obvious risks," Emery added.

"The government has to make difficult decisions based on affordability and, in turn, so are we."

Drax's share price was 2.75 per cent up in late morning trading on the news.

Read more: Drax and Intergen slapped with £39m fine from Ofgem

Dorothy Thompson, Drax's chief executive, told the BBC: "The most recent effect has been the government has removed a tax exemption for renewable power that is sold to industrial companies and we're the largest generator of renewable power in the UK and this has suddenly removed a stream of income.

"The day it was announced our share price dropped by a third and that simply reduces the amount of cash we have available for future investments."

Since forming a new majority government, the Conservatives have cut funding for a variety of green energy projects, including the once widely lauded Green Deal and solar renewable subsidies, attracting criticism from the Confederation of British Industry.

Luke Warren, chief executive of the Carbon Capture and Storage Association, said it was a disappointing move.

"The coming months are absolutely critical for CCS in the UK and the government must successfully deliver two projects from the CCS competition in order to achieve its goals of delivering a cost-competitive CCS industry in the 2020s.

"Failure to secure this investment will set back CCS by more than a decade with profound implications for the UK's energy, industrial and climate policies."

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