Business

Drax chief warns over Government's gas plans

Dorothy Thompson, Drax
Image caption Dorothy Thompson says building more gas plants will not be easy

Consumers could be exposed to soaring energy prices under new Government plans, says Dorothy Thompson, boss of coal-fired power generator Drax.

She also believes that plans to phase out coal fired power plants and replace them by stations run on gas would leave the UK dependent on imported gas.

The plans were part of a major policy speech on Wednesday by the Energy Secretary Amber Rudd.

Coal currently accounts for around 30% of UK power generation.

But in her speech, Amber Rudd said that one of the most cost effective ways of reducing harmful emissions was to replace coal-fired power plants with gas.

However, the Drax chief executive warned that this could leave the UK with the wrong energy mix.

"Coal and gas today produce over half of our electricity. If you replace all the coal stations with gas you would then be dependent on imported gas for over half our electricity," Mrs Thompson said. "I think that's probably the wrong balance."

And she said that being too reliant upon gas could hit household energy bills too.

"We would be so exposed if the gas price soared. Suddenly, the end-consumers' bill would soar and we would have nothing to balance it out with," she said.

Biomass plans

Shares in Drax closed down more than 4% on Wednesday after Amber Rudd's speech, wiping tens of millions of pounds the company's value.

Drax's huge power plant, in North Yorkshire, is the UK's biggest coal-fired power generator.

But almost half its output is now from biomass - burning eco friendly wood pellets.

"If you want to replace coal and you want to replace it quickly… the best way to do it and the most affordable way to do it, is to use biomass," said Mrs Thompson.

The company is converting the third of its six units to run on biomass. To do more it will need to win subsidies in three renewables' auctions planned by the government in this parliament.

Failure to win contracts could force the closure of those units over the next decade.

While Amber Rudd's speech made no specific reference of supporting biomass, Mrs Thompson believes biomass can compete in energy generation.

"We are confident that if the government correctly structures the auctions, as they are now planning to do, that we will win," she said.

'A challenge'

Mrs Thompson welcomed the Energy Secretary's move to bring clarity to where energy policy is going. "In my industry, which is about long term investment, clarity is important," she said.

But she warned that getting a new generation of gas plants built would not be easy.

She said: "There are an awful lot of gas plants that are going to be required because we have not only got coal closures, we have also got gas closures so it is quite a challenge they are facing.

"They recognise that if there are going to be new gas stations, they are going to need special support contracts because the economics don't work today and have not worked for quite a long time."

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