Court of appeal deals blow to Drax on subsidy

A decision just two weeks ago by the UK High Court, which requested that the Department of Energy and Climate Change (DECC) reconsider its decision to exclude a unit at Drax power plant from the renewable subsidies scheme, has been reversed by the Court of Appeal.

The Court of Appeal ruled that the government department was within its rights in excluding Drax from having the scheme applied for two of its units. The news saw the company’s shares drop by a tenth.
In April DECC backtracked on a plan to offer enhanced subsidy contracts for two of six power units at the Yorkshire site, which are planned for conversion from coal to biomass.

DECC instead offered the investment contract to just one of the two units, which negatively impacts the company’s efforts for a successful conversion.

The high court appeared to have thwarted that about-turn a fortnight ago when it ruled that DECC should reconsider its decision to exclude the disputed unit from the renewable subsidies scheme.

The latest twist occurred when the Court of Appeal found that DECC was within its rights to reduce the subsidy available to Drax in favour of supporting a competing wind farm project. The Financial Times reports that the company had argued that the project offered less value to the taxpayer in meeting climate change targets.

In a statement, Drax said it was abandoning its legal challenge and would push ahead with the conversion of the disputed unit to biomass feedstock, even though the renewables obligation regime under which it will still receive subsidy was less attractive.

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