A £750 million coal to biomass project at Eggborough power station in Yorkshire has been thrown into doubt following a government decision not to include it in the list of low carbon projects to receive an ‘early’ green subsidy.
A list of 10 low carbon projects to get subsidies was announced by the Department for Energy and Climate Change on Thursday. Eggborough, which generates 4% of the UK’s electricity, says it may have to close as carbon taxes and new environmental legislation will make the coal fired plant uneconomic and unable to supply to the national grid after 2015.
The company planned a £750 million conversion to run its boilers on biomass, wood pellets, but this is not viable without the subsidy. Company chairman Neil O’Hara said the project would have to be reassessed. Eggborough had hoped to receive a subsidy called an ‘investment contract’ which is designed to bridge a gap between new low carbon subsidies called ‘contracts for difference’ (CFD) which were confirmed in the Energy Act, kick in.
The Energy Act, which confirms government plans to invest £110Bn in new energy infrastructure, received Royal Assent on Wednesday this week. This investment is heavily weighted towards offshore wind farms and nuclear power stations.
Eggborough was one of 16 projects that qualified for this early subsidy, but the government has decided to subdivide that list by technology type and select a limited number of projects from each of those groups. The list of successful projects includes three offshore wind farms being developed by Dong Energy of Denmark and another power station project at Drax, also in Yorkshire, which is converting three of its six power units from coal to biomass.
Eggborough can still qualify for the CFD when the system comes into operation sometime next year, but the company says this might be too late.