Drax's game of brinkmanship with the government over biomass subsidies has intensified, after the owner of the UK's largest coal-fired power station said it had scrapped plans to build a dedicated biomass plant, but would invest £700m in co-firing biomass-coal technology depending on the outcome of a major subsidy review.

Announcing its preliminary final year results, Drax chief executive Dorothy Thompson, yesterday revealed the company had cancelled plans for a 290MW biomass plant in Selby, North Yorkshire, blaming a lack of financial support from the government for the emerging technology.

The decision followed a threat last summer to shelve its dedicated biomass plans if  a government review of the Renewables Obligation (RO) scheme, which pays large power producers for feeding renewable energy into the grid, failed to increase support for the technology.

Thompson said the Selby project - a collaboration with Siemens Project Ventures - had proved 'highly challenging' because the proposed levels of support for dedicated biomass power, as well as the site's inland location, would make the project uneconomic.

But she said Drax was keen to invest up to £700m in co-firing technology at the site, because the government has proposed to increase support for co-firing depending on the results of the latest consultation on the RO. Co-firing systems burn both coal and biomass simultaneously, delivering a significant reduction in emissions when compared to pure coal plants.

A government review of the RO scheme, launched in October, proposes to reduce support for standalone biomass plants by seven per cent from 2016, but it also proposes creating new bands for enhanced co-firing and biomass conversion projects, which could then receive 1 ROC/MWh.

A spokeswoman for Drax told BusinessGreen it had been delighted with the government's decision to increase support for co-firing, which it has long argued would be a more cost-efficient way of reaching its goal of making the plant majority biomass powered.

The plant can theoretically burn 12.5 per cent biomass, which would cut emissions by 2.5 million tonnes a year. But Drax has refused to burn biomass at full capacity on the grounds that the current subsidy is unviable. Under current support levels it receives just half a renewable obligation certificate (ROC) for every MW of biomass power.

Under the proposed changes to the RO scheme, any plant generating more than 20 per cent of its power from biomass will receive one ROC.

Drax yesterday said it would invest £50m this year increasing its biomass burning capability to 20 per cent by April 2013. But only if the government confirmed the higher subsidy rates in April.

The spokeswoman also maintained Drax would produce fewer carbon emissions using co-firing technology than from a dedicated biomass plant because building a brand new 290MW plant adjacent to the existing coal powered plant would result in additional emissions during construction.

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