Tag: carbon capture

A statement from Will Gardiner, CEO of Drax Group

Will Gardiner, Chief Executive Officer, Drax Group

18 October 2024

Opinion

“The Conservative Party’s decision is reckless and irresponsible. It is deeply disappointing that they now care more about political point scoring than the country’s ongoing energy security and ability to meet net zero.

“In Government, the party acknowledged the key role Drax Power Station, the country’s largest source of renewable power, plays in keeping the lights on for millions of homes and businesses when the wind doesn’t blow and the sun doesn’t shine.

“As Secretary of State for DESNZ, Claire Coutinho’s name is on the planning approval for Drax’s plans for BECCS at the Selby site. The decision letter clearly stated that the project will support the transition to net zero by 2050.

“Her comments will upset Drax Power Station colleagues who work tirelessly to power the UK. It will also lead to concerns across our country-wide supply chain and among other UK based biomass generators.

“Our priority is working in partnership with the Government who is focused on safeguarding the UK’s energy security and delivering net zero.”

 

For 50 years Drax Power Station has been generating power and high quality jobs

13 June 2024

Opinion

By Bruce Heppenstall, Plant Director, Drax Power Station

Drax Power Station has kept Britain’s lights on for 50 years. As well as playing a key role in the country’s energy security, providing enough power for 4 million homes, we have been a long-term source of high-quality well-paid jobs, too.

The site I manage in Selby is one of the largest employers locally and combined with our regional supply chains we contribute £358m per year to the economy of Yorkshire and the Humber. There won’t be a single constituency within the region where we don’t have some form of economic impact.

As the Plant Director, I am proud of this role that we play in supporting regional prosperity. We employ around 1,000 people directly at Drax Power Station and through maintenance, logistics and other activities hundreds of contractor colleagues can also be on site during any one week – increasing over a thousand during a planned outage.

However, our impact doesn’t end at the borders of Yorkshire and the Humber either. We are one of the largest users of rail freight in the UK and our biomass wagons take pellets from the Ports of Tyne, Liverpool, Hull and Immingham. This element of our supply chain also supports 2,500 jobs across the country.

Analysis from Oxford Economics shows that in 2021 the economic activity created by Drax Power Station contributed £735m to the UK economy and supported 7,130 jobs.

For some time, we have also been investing heavily in the workforce of the future. Since 2003, we have trained over 150 apprentices at the power station. We work in partnership with Selby College and the University of Sheffield to give the next generation the skills they need for long-term, rewarding careers in renewable power and delivering net zero.

We know it is important to get young people engaged in green skills early and that is why, through the Drax Foundation, we work closely with local authorities, schools and social enterprises to support STEM education and training on energy efficiency. We’re also behind an initiative to install LED lightbulbs and solar panels in schools to manage their energy costs and get young people interested in our industry.

The future of Drax Power Station will involve us continuing to generate renewable power from biomass but also adding carbon capture and storage and creating the world’s largest BECCS facility. We are planning to invest billions in this critically important carbon removal technology and up to 10,000 jobs could be created and supported during construction.

BECCS is vital because it provides reliable, renewable power to support energy security, while removing millions of tonnes of carbon dioxide from the atmosphere and making a significant contribution towards addressing the climate crisis – no other technology does both.

Drax Power Station has played an important role both regionally and nationally through our contribution to energy security, jobs and economic growth for the last 50 years. And with the successful delivery of our BECCS project, I very much hope that we will continue to do so for the next 50.

But to get there we need to secure the right policy support for BECCS from the next government. That includes rapidly launching the Track-1 expansion and Track-2 project selection processes for CCS and making urgent progress on the development of a business model for greenhouse gas removal technology. With these in place we can get BECCS operational by 2030, removing millions tonnes of carbon dioxide from the atmosphere per year while ensuring that local people can build their careers in skilled jobs at the heart of the green transition, for decades to come in Selby.

Learn more about Drax’s plans for BECCS here.

[Carbon Capture Magazine article] Spiking Energy Demand

7 May 2024

Opinion

This story first appeared in Carbon Capture Magazine.

By Raj Swaminathan, Senior Vice President at Drax.

While there’s little debate that the greenhouse gas emissions that sit at the heart of our planet’s unprecedented warming come from fossil fuel consumption and other human activities, clawing back these carbon outputs is a multi-faceted issue. In addition to efforts to transition to renewable power sources like wind, solar, and biomass, which remain essential to mitigating this crisis, leading scientists agree that reducing emissions is not sufficient; we must go further and faster with carbon removals.

It’s estimated that we’ll need to capture and store as much as 9.5 billion metric tons of CO2 every year by 2050 to reverse legacy emissions enough to achieve international climate targets, according to the IPCC. Today, carbon removal facilities only capture a fraction of the emissions generated across the planet, and we urgently need a spectrum of high-quality solutions to scale our ability to remove carbon from the atmosphere.

At the same time, spiking energy demand – driven largely by the growing needs of data centers, particularly those underpinning artificial intelligence (AI) and blockchain technology, as well as new industrial and manufacturing facilities – also means we need to increase generation capacity rapidly to avoid an energy security crisis. This becomes more difficult to achieve through intermittent sources like wind and solar alone, which can’t be turned up and down when the grid is strained, opening an opportunity for solutions that can provide renewable, baseload power while permanently removing carbon from the atmosphere to fill this vital need.

Bioenergy with CCS – a critical technology for decarbonization

Bioenergy with carbon capture and storage (BECCS) is a carbon removal technology that uses sustainably sourced biomass to generate renewable energy while permanently sequestering the carbon underground. Because BECCS is one of the only renewable sources that can generate baseload power around the clock, seven days a week, it can serve as the backbone of renewable power grids for when the sun isn’t shining, or the wind isn’t blowing – a role fossil fuels often fill today.

At the same time, BECCS captures post-combustion carbon at the stack and pipelines it into geologic storage, permanently securing it underground. These high-quality carbon removals are more straightforward to measure in comparison with other solutions like nature-based removals, making it much simpler to quantify the overall impact achieved.

Compared to other carbon capture technologies, BECCS also has more diversified revenue streams – including renewable power generation, government incentives for carbon storage, and the sale of carbon dioxide removals (CDR) credits to offset emissions for other companies and industries. Because of this diversification, BECCS not only provides a clearer path to profitability but also offers a high-quality CDR at a much lower price point than alternatives like direct air capture (DAC). This results in a more sustainable and scalable path to adoption.

Due to these advantages, BECCS is positioned to do much of the heavy lifting regarding carbon removals, but it doesn’t replace the need for additional carbon capture and renewable energy solutions. Technologies like DAC, while costlier to operate today, will play an important role in helping to reverse legacy emissions as well; in fact, BECCS could even power DAC facilities to ensure they’re running on renewable energy. The same is true for renewable power technologies – we need far more wind and solar capacity in addition to BECCS.

Pioneering BECCS in the US and UK

Drax believes that BECCS will be integral to decarbonizing the power sector and hard-to-abate industries. To this end, Drax has launched a new independent business unit this year that is focused on becoming the global leader in large-scale carbon removals. This business unit will oversee the development and construction of Drax’s new-build BECCS plants in the US and internationally, and it will work with a coalition of strategic partners to focus on an ambitious goal of removing at least 6 Mt of CO2 per year from the atmosphere.

Previously, Drax successfully completed two BECCS pilots at Drax Power Station, the UK’s largest power station that contributes approximately 4 percent of Britain’s generation output and 11 percent of its renewables. The Drax team is now working to outfit Drax Power Station with BECCS technology that will remove an estimated 8 Mtpa of carbon while generating 10 TWh of power. This is slated to be the first carbon-negative power station in the world and is key to achieving Drax’s goal of becoming a carbon-negative company.
Drax is also pursuing an initial target in the U.S. to have two BECCS plants built and operating by the 2030s. These will be the first large-scale, biomass-fueled power stations in North America, generating an estimated total of 4 Twh of power while sequestering approximately 6 Mt of CO2 per year.

BECCS is an essential technology to help achieve global decarbonization targets. While it doesn’t replace the need for additional carbon capture and renewable power generation alternatives, its unique advantages can help reverse carbon pollution from the past while meeting the energy demands of the future.

The EU’s embrace of carbon removals

24 April 2024

Opinion

By Kasia Wilk, Head of Public Affairs and Policy, EU & Asia

The UK may no longer be part of the European Union, but the decisions taken by its institutions still impact British businesses and consumers.

What happens in Brussels matters, even if Britain no longer has a seat at the decision table. You may not notice the link to the EU at first, but often technological changes have their roots in the decisions made by the organisation’s institutions.

Take for instance something as innocuous as your mobile phone charger. In recent years USB-C charging ports have increasingly become the standard across Apple and Android devices. This is no accident, an EU directive to mandate all devices for sale on the continent must have a universal USB-C charge port by the end of this year.

This European decision has made the world’s biggest tech companies reconfigure its global designs and supply chains.

If Brussels can influence how the world charges its mobile phones, you won’t be surprised to learn its decisions on climate change policy carry significant influence too.

Nearly all the UN IPCC’s pathways to net zero by 2050 require a significant scale-up of engineered carbon removals. Their importance has led the EU to begin significant policy development in this area.

The opening months of 2024 has seen developments in the space gather at pace. In February, the EU Commission set out its proposals to reduce emissions by 90% by 2040 compared to levels in 1990. To achieve this, the Commission expects to scale-up industrial carbon removals like BECCS and DACCS alongside land-based techniques such as afforestation to 400 million tonnes of removals annually by 2040.

Released alongside the proposed target was the Industrial Carbon Management Strategy providing a roadmap for the removal and storage of millions of tonnes of CO₂ within the Union in the next three decades. This stressed the need to develop further policy options and support mechanisms for BECCS and DACCS.

With the need for large-scale carbon removals made clear, attention is now turning to how to certify and ensure credibility of removal projects. The EU institutions recently reached an agreement on the Carbon Removal Certification Framework (CRCF) which will likely become a blueprint for global for carbon dioxide removals (CDR) frameworks. This framework will create a critical foundation for scaling the voluntary market for CDRs in the EU, including BECCS.

Carbon removal companies like Drax want transparent and robust rules in the sector. It is vital that only high-quality removals, and removals that would not otherwise have taken place, are credited. The regulator also must prevent the same activity from being certified twice or using the same certificate twice. This is what the EU’s proposals aim to do, and it could be a blueprint for the UK and governments around the world. However, there remains room for improvement as the CRCF framework only covers removals within the EU’s borders, which means the international nature of the voluntary carbon removals market has not been considered.

Demand for CDRs is continuing to grow, with several high-profile international deals already announced. One example is our own memorandum of understanding with Respira which would enable the firm to buy up to 2 million metric tonnes of CDR certificates.

While progress is being made by Brussels, more policy development is needed in financially incentivising carbon removals through enhanced business models. Developments could include integrating carbon removals into compliance markets like the EU’s Emissions Trading Scheme and introducing support schemes such as a Carbon Contracts for Difference. As the sector’s costs decrease through learning and economies of scale, the support frameworks could be tapered in the long-term ensuring value for money for consumers and governments.

While it can feel daunting standing at the foot of the hill staring at the summit, we know that the climate, our communities, and businesses across the continent are worth the sharp ascent.

Around 93% of emissions take place outside of the confines of the EU, but by acting swiftly Europe can lead the world on the development of a vibrant carbon removals industry.

At Drax, our aim is to become a global leader in carbon removals. We are currently progressing plans to deliver two BECCS projects – one in the UK and one in the US – by 2030, with both projects able to permanently remove a combined volume of 7 million tonnes of carbon dioxide from the atmosphere each year.

We want to eventually be able to geologically sequester 20 million tonnes of carbon each year. Successful trials at our North Yorkshire power station in the UK enabled Drax to become the first company in the world to successfully capture carbon dioxide from the combustion of a 100% biomass feedstock.

BECCS will provide durable, high-integrity carbon removal credits and gigatonne scalability, and is the only technology that generates reliable, renewable power while removing carbon from the atmosphere.

With many Member States continuing to rely on fossil fuels to power their grids, biomass and BECCS conversions could be a vital role in making the EU’s ambition climate targets a reality. It is critical that the EU institutions continues to develop policy at pace to ensure businesses can have confidence to invest in carbon removal projects and the credits which come from them.

The EU has a remarkable opportunity to lead the world on this important area of climate policy, and it is one I hope they seize.

Raising the Standard in Carbon Removals

4 October 2023

Opinion

By Angela Hepworth, Commercial Director at Drax

In their Sixth Assessment Report, the Intergovernmental Panel on Climate Change has clearly stated that to limit warming to 1.5C we will need carbon dioxide removals (CDRs) on a gigaton scale. The magnitude of this challenge lays starkly before us, but in equal measure with the size of the task, its importance has never been more evident.

It’s long been accepted that the world must decarbonise by reducing emissions, but the necessity of carbon removals is more newly recognised. CDRs are now acknowledged to be a crucial part of the effort to achieve net zero emissions, both to neutralise hard-to-abate emissions and sectors (like mining, transportation and aviation) and to remove excess historic carbon, or overshoot, already in the atmosphere.

At Drax we are developing Bioenergy with Carbon Capture and Storage (BECCS), which is unique in its ability to deliver renewable power and remove carbon from the atmosphere simultaneously.

Engineered carbon removal technologies like BECCS are crucial to achieving long-term climate goals. BECCS is the most scalable of these technologies that can be deployed rapidly and is affordable compared with other permanent removal solutions.

Credibility, transparency and trust

Historically, the voluntary carbon market has struggled with demonstrating credibility, transparency and trust and this has proven to be a significant weight on the industry’s ability to scale. We have seen reports of low-quality offsets sold as high integrity credits and projects that don’t deliver the carbon benefits claimed, which has diminished investor trust in the market as a whole.

To address these concerns, we are now seeing significant initiatives being put in place to implement the high standards and good governance in carbon removals credits that we need to effectively scale the market to levels required. The Integrity Council for the Voluntary Carbon Markets (ICVCM) is a prime example of this, serving as an independent governance body for the voluntary carbon market.

The ICVCM is working to champion standards across the industry and has set out its Core Carbon Principles (CCPs) – set of principles that all carbon offsets and removals must meet in order to be considered high integrity.

We welcome this initiative and hope it will raise standards across the market.

Similar to what we are seeing in the AI industry at present, in order to build trust in this nascent market and in turn scale it, it is also imperative that industry looks outside of itself and engages with other stakeholders who are impacted or interested in it. We must; develop ethical principles and guidelines for the design, development and deployment of carbon markets; implement transparent and accountable mechanisms for the oversight and governance of them; educate and engage the public and stakeholders on the benefits of CDRs; empower and protect the customers; and foster collaboration and dialogue among the industry, academia, civil society and policymakers.

Why we need standards for BECCS

At Drax we already recognise that addressing quality concerns is the only way that the market will work for everybody – buyers rightly want to have confidence that they are buying a high-integrity removals which are robustly quantified and verified, sellers need to be able to demonstrate the validity of their claims, and government needs a well-functioning market and a baseline from which to regulate it.

Our partnership with Stockholm Exergi and EcoEngineers is doing just that – developing a world-leading methodology to ensure the integrity of BECCS CDRs. The methodology was created to align with the ICVCM’s CCPs and to closely consider how to ensure everyone around the table is getting what they need:

  • Quantification: For the methodology to be successful it requires a thorough approach to quantifying net-negative carbon removals from BECCS. Quantification in the methodology starts with the gross volume of CO2 we capture and store, then subtracts any supply chain emissions, and/or emissions associated with the carbon capture and storage process, as well as any “leakage” impacts (increases in CO2 emissions outside the project boundary). We have intentionally developed this approach to be both robust and conservative so that BECCS CDRs verified under the methodology are a truly net negative product.
  • Guardrails: It is also crucial in any methodology for BECCS that there are robust guardrails in place to ensure biomass used comes from sustainable sources – for example, from forests where the carbon stock is stable or increasing, and excluding biomass sourced from sensitive areas where there’s high levels of biodiversity. Our methodology also provides that any potential social or environmental risks must be evaluated and mitigated for biomass to be used.
  • Verification: We aim to register our credits with one of the major registries, and once a methodology is adopted, we will ensure that our credits are independently verified to confirm that they meet all the requirements set out in the standard, and that there is robust governance in place, for example to ensure credits cannot be double counted.

Taking the methodology forward

Pioneering this work for BECCS standards is an important step toward increasing investment in BECCS CDRs – a climate critical technology – and it needs to be done collaboratively. It has been developed in partnership with Stockholm Exergy and EcoEngineers and we are now working to gather feedback from other stakeholders with the aim of making it comprehensive and representative.

As a part of this we’d like to invite further feedback – from other developers, standards bodies, potential customers and others, and welcome constructive comment on the text.

The methodology has also been submitted to the European Commission to help shape their proposals for the framework for CDRs that they are developing.

It is in the interest of all parties to work towards common standards for CDRs, to avoid current fragmentation of standards that causes confusion for customers, and we appreciate your feedback on this important work as we drive it forward.

Capturing the opportunity

We have an opportunity to change our current climate trajectory, but that will only happen if we take action now. We to need to reduce emissions and rapidly scale the market for high integrity, sustainable CDRs. Putting the required standards and governance into place to build a resilient and trustworthy carbon removals market is a core part of that.

We hope that this methodology has a part to play in that work and that it will bring us one step closer to manifesting the potential of BECCS done well at scale.

Read the Methodology

Read the Executive Summary

Methodology Enquiries

To discuss or provide feedback on the Methodology please contact [email protected]. 

Can the EU lead certification of carbon removals globally?

20 September 2023

Opinion

By Kasia Wilk, Head of Public Affairs and Policy for Europe and Asia, Drax 

Key takeaways: 

  • Certification of carbon removals provides a mechanism to verify and ensure the credibility of carbon removal projects and their outcomes 
  • EU’s proposed certification mechanism is first of its kind but does not fully reflect the international dimension of carbon markets: it is unclear how removals outside of the EU and certificates issued outside of the EU will be treated. 
  • Understanding the use case of the certified units is equally important to the success of the regulation. Voluntary markets and corporate claims are essential to support the scale up of the industry. If the EU recognises and handles this challenge it could lead the world in carbon removals certification. 
  • EU climate policies should prioritise support for carbon removal solutions that are technically ready, economically feasible, permanent and have additional co-benefits. 
  • Bioenergy with Carbon Capture and Storage (BECCS) is unique in its ability to deliver renewable power and remove carbon from the atmosphere simultaneously.   
  • Sustainability of biomass is heavily regulated by the Renewable Energy Directive (RED). It is one of the strictest set of sustainability criteria for forest biomass in the world.  

Why do we need carbon removals?  

This summer was the warmest month ever recorded, the impact of climate change is being felt here and now. Tackling the causes of global warming is now more pressing than ever. We are currently on track for a 14% rise in greenhouse gas emissions by 2030. This could lead to temperatures increasing by more than double the Paris Climate Agreement’s 1.5 degrees target and bringing about even more extreme weather. Urgent action is needed now to revert this catastrophic trend. It’s increasingly clear that carbon dioxide removal (CDR) will be essential to reach Net Zero by 2050 as these technologies balance out those emissions that are difficult to avoid as well as help companies remove their historic emissions. They do so by capturing carbon dioxide (CO2) that is already in the atmosphere and removing it and storing it permanently. According to the Sixth Assessment Report of the UN’s IPCC, nearly all pathways to Net Zero by 2050 will require a significant scale-up of carbon removals. Carbon removal technologies are developing at pace and can make a significant contribution to tackling climate change. Nevertheless, to get the sector to where it needs to be by mid-century requires the right policies and investment to support deployment. 

The EU has already taken a number of steps to support the development of carbon removals. The CCS Directive establishes a regulatory framework for the geological storage of CO2 and the proposal for a Carbon Removal Certification Framework (CRCF) will support the development of a voluntary carbon market which is a cornerstone for the development of CDR. 

However, to support the scaling up of the sector it is essential to (1) assess the scale of removals required, (2) define binding EU targets and (3) develop roadmaps for the scale up of carbon removals in Europe. It is also important to coordinate Member State commitments, ensuring their plans for deployment can be realised through greater cooperation. 

The importance of certification 

Certification of carbon removals is essential for driving technological development and deployment. It provides a mechanism to verify and ensure the credibility of carbon removal projects and their outcomes. We need transparent and robust rules and procedures to ensure that only high-quality removals and removals that would not otherwise have taken place are credited, and to prevent the same activity from being certified twice or using the same certificate twice. This is what the EU proposal for a regulation establishing a Union certification framework for carbon removals aims to do. 

The proposed certification mechanism is a world-first and positions the EU as the leader in the field, addressing the need for removals in climate policy and providing a stringent, transparent regulatory oversight on certification. It has the potential to set high-quality criteria, create much needed standards for growing the carbon removal market and address many of the shortcomings that hamper its growth today. 

Yet, the scope of the EU certification proposal does not go far enough. It is currently limited to removals within the EU and it is unclear how removals outside of the EU and certificates issued outside of the EU will be treated, despite the important international dimension of climate policy. 

The European Commission has said that international carbon markets can play a key role in reducing global greenhouse gas emissions cost-effectively. Although specifics are still under development, the Paris Agreement provides a robust and ambitious basis for the use of international markets and reinforces international targets, transparency and the accountability. Recognising the importance of international carbon markets, Article 6 of the agreement: 

  • allows parties to use international trading of emission allowances to help achieve emissions reduction targets 
  • establishes a framework for common robust accounting rules, and 
  • creates a new, more ambitious market mechanism.

The lack of international consideration in the Commission’s proposals for certifying carbon removals could be challenging in the long run – particularly in light of the foreseen end uses of certified removal units, including their international exchange through voluntary carbon markets.  

To mitigate this, the Commission should consider two additional scenarios as part of the discussions on the scope of this voluntary certification framework: 

  • Credits generated outside the EU – EU businesses will still be able to use voluntary markets to purchase credits from projects in other jurisdictions, outside of the EU.  These could not be subject to the same high standards, unless they are being given the option to comply with the voluntary framework. 
  • Linking compliance markets – While integration of carbon removals with the Emissions Trading Scheme (ETS) framework will be assessed by the European Commission over the next few years, this proposal should take account of future potential linking of compliance markets.  Should removals be fungible in those linked ETS markets, it will be within the EU’s interest to ensure removals outside the EU are subject to the requirements and standards of the EU CRCF. 

How to assess and compare the existing CDRs methods? 

All carbon removal technologies will have a role to play in tackling climate change. However, they all differ in terms of process, permanence and technological readiness. To reach its Net Zero targets, EU climate policies should prioritise support for carbon removal solutions that are technically ready, economically feasible and permanent. They should take into account additional co-benefits for local communities, power systems and the environment, as well as the potential to be deployed at scale to ensure these technologies can make maximum contribution to the achievement of EU climate goals. 

BECCS is one of the best examples of this. When compared to other technologies, BECCS is unique in its ability to deliver renewable power and remove carbon from the atmosphere simultaneously whilst generating thousands of jobs across its value chain. 

It is also very well regulated. Sustainability of biomass is already covered by the Renewable Energy Directive (RED). The sustainability criteria for biomass in RED were updated in 2023 and has been formally adopted by the European Parliament. It is one of the strictest set of sustainability criteria for forest biomass in the world. It applies equally to domestic and imported biomass and protects against over-sourcing. It also safeguards biodiversity, ensures forest regeneration and sets strict limits on all supply chain emissions, including transportation. The 2023 revision of the RED (REDIII) specifically took account of the projected growth in biomass demand to 2050, including for BECCS, and amended the sustainability criteria appropriately.  

BECCS projects will see carbon capture equipment installed in plants that will also produce power, heat or fuels. In many cases the technology will be retrofitted to existing plants. Regulatory consistency here will be paramount.  

The detailed methodologies that will be developed under the certification framework will need to reflect the vast array of existing regulations, such as RED, to support deployment of these technologies, stimulate investment – and ascertain EU climate leadership – supporting domestic technologies/ or technologies in the region. 

What are the end uses of certified removals? 

Understanding the use case of the certified units is essential to the success of the regulation. The Commission proposal alludes to different end-uses, such as the compilation of national and corporate greenhouse gas inventories, the proof of climate-related corporate claims, or the exchange of verified carbon removal units through voluntary carbon markets. 

However, ongoing debates in the European Parliament – including on related files such as the Green Claims Directive – seem to threaten some uses. Banning claims based on offsetting would reduce incentives for companies to take supplementary action outside their value chains and deter the necessary investment going into the sector.  

Whilst emissions reductions should remain the absolute priority, carbon removals are essential to meet net zero targets and to address residual emissions and potentially historical emissions. The sector needs to start scaling up now for the EU to reach its climate targets in the coming decades. We cannot afford to wait until 2040 for a compliance market to begin scaling up carbon removals as it will be too late.  This is why voluntary markets and claims are critical.  

Companies should be incentivized to make some claims now provided they are on track with their GHG emissions reduction targets. At the same time, the EU should ensure consistency with other pieces of legislation such as the Corporate Sustainability Reporting Directive (CSRD) which also covers the use of carbon credits. 

Coming back to the international dimension, it will be important in that context to clarify how removals from outside the EU are to be treated on the EU market given the extraterritorial dimension of certain pieces of EU legislation and global nature of supply chains. 

Progressing Global BECCS opportunities

23 May 2023

Financial News

RNS Number : 2686A
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Ambition for the development of over 20Mt of carbon removals – 14Mt pa by 2030

  • New-build BECCS – two sites selected in US – targeting c.6Mt pa by 2030
  • Evaluating nine additional sites in US for greenfield and brownfield BECCS
  • Option for CCS on a pellet plant – targeting FID in 2024/25, commissioning in 2026
  • Targeting 8Mt pa at Drax Power Station by 2030
  • Establishing HQ for Global BECCS in Houston, Texas

Progress on Global BECCS commercial arrangements

  • MoU with Respira for sale of up to 2Mt of Carbon Dioxide Removal (CDR) certificates
  • Other MoUs agreed for sale of CDRs – c.$300/t on small volumes
  • MoUs agreed with leading forestry and Transportation and Storage (T&S) companies

Attractive portfolio of investment opportunities

  • £7bn of strategic growth opportunities between 2024 and 2030
    • 14Mt pa of carbon removals from BECCS, pellet production and pumped storage hydro
  • Targeting returns significantly in excess of the Group’s cost of capital

2023 outlook

  • Expectations for Adjusted EBITDA(1) remain in line with analysts’ consensus estimates(2)

Drax Group CEO, Will Gardiner said:

Will Gardiner, Drax Group CEO

“The world’s leading climate scientists at the UN’s IPCC are clear – the planet cannot solve the climate crisis without the combination of reliable, renewable electricity and carbon removal technologies.

“Drax is a growing and sustainable, international business providing flexible, renewable energy and carbon removals solutions, via BECCS, which put us at the heart of global efforts to deliver net zero and energy security.

“Our plans to invest billions in critical renewable energy and carbon removal technologies will help to tackle the climate crisis and could create thousands of jobs whilst generating secure, renewable power. This investment is underpinned by our strong operational performance.”

Capital Markets Day

Drax is today hosting a Capital Markets Day for investors and analysts.

Will Gardiner and members of his leadership team will update on the Group’s strategy, market opportunities and development projects, including the progress Drax is making in the development of BECCS in North America and the opportunities this represents for the Group.

Purpose and ambition

The Group’s purpose is to enable a zero carbon, lower cost energy future and its ambition is to be a carbon negative company by 2030. The Group aims to realise its purpose and ambition through three strategic pillars, which are closely aligned with global energy policies that increasingly recognise the role that biomass can play in the fight against climate change.

The Group’s three strategic pillars remain (1) to be a global leader in carbon removals, (2) to be a global leader in sustainable biomass pellets, and (3) to be a UK leader in dispatchable, renewable generation.

Global need for carbon removals

Research by the Intergovernmental Panel on Climate Change (IPCC)(3), the world’s leading authority on climate science, states that CDR methods, including BECCS, are needed to mitigate residual emissions and keep the world on a pathway to limit global warming to 1.5oC.

All of the illustrative mitigation pathways assessed in the IPCC’s latest report use significant volumes of carbon removals, including BECCS, as a key tool for mitigating climate change. The IPCC believes that globally up to 9.5 billion tonnes of CDRs via BECCS will be required per year by 2050.

In the USA, the supportive investment environment created by the Inflation Reduction Act is stimulating action and robust pricing for CDRs.

BECCS – North America

Over the past two years, Drax has been progressing a number of work streams to develop its options for BECCS, with a primary focus on North America.

Drax has continued to develop plans for a new-build BECCS power unit capable of producing c.2TWh of renewable electricity from sustainable biomass and capturing c.3Mt of carbon per year. Two initial sites in the US South have been selected and are progressing to option, although the precise details remain commercially sensitive. The two sites combined could enable the capture of c.6Mt of carbon per year by 2030.

Total investment would be in the region of $2 billion per plant with a target FID in 2026 and commercial operation by 2030. The capital cost reflects the construction of new-build power generation as well as carbon capture and storage (CCS) systems.

The design of new-build BECCS enables a wider choice of biomass materials, including non-pelletised material, such as woodchips. Drax aims to locate new plants in regions which are closer to sources of sustainable biomass and T&S systems to permanently store CO2. This is expected to significantly reduce the operating cost of new-build BECCS compared to retrofit, as well as carbon emissions in the supply chain.

The Group is continuing to evaluate nine further sites in North America, creating a pipeline of development opportunities into the 2030s.

Commercial arrangements

The commercial model for US BECCS includes Power Purchase Agreements, long-term CDR offtake agreements and a direct pay tax incentive under the Inflation Reduction Act of $85/tonne.

Drax believes that the role of high-quality, permanent removals, such as BECCS and Direct Air Capture, will grow significantly as governments and companies take action to address their own carbon footprints. In September 2022, Drax announced a Memorandum of Understanding (MoU) for one of the world’s biggest carbon removals deal with Respira, a carbon broker. Under the terms of the MoU, Respira will be able to purchase up to 2Mt of CDRs over a five-year period from Drax’s North American BECCS projects.

Drax has also agreed MoUs with C-Zero, a carbon broker, for the sale of CDRs at c.$300/tonne.

Resourcing

To support the development of its BECCS projects in North America, Drax has hired 80 employees across the US and Canada and is in the process of establishing a Global BECCS headquarters in Houston, Texas, which will provide access to the highly skilled workforce needed to support the growth of this part of the Group.

Other developments

In addition to new-build BECCS, Drax is currently developing an option for a project to add a carbon capture process to an existing pellet plant in Louisiana. The project would have the capacity to capture over 100k tonnes of CO2 per year from the pelleting process, providing an early demonstration of the technology and creating CDRs which can help to stimulate this nascent market. The project, which has a capital cost in the region of $150 million, is targeting FID in 2024/25 and commissioning in 2026.

The Group is also assessing options for BECCS on existing non-Drax assets and is continuing to screen other regions, including Europe and Australasia.

Capital allocation

The Group has previously outlined a fully funded plan to invest c.£3 billion in two BECCS units at Drax Power Station, pellet production and pumped storage hydro.

Today, the Group expands on this plan to include two new-build BECCS plants and CCS on a pellet plant, increasing the total potential investment to c.£7 billion between 2024 and 2030.

Any final investment decisions will be subject to the achievement of project milestones, including further progress on commercial arrangements as well as clarity on regulatory and funding mechanisms.

Reflecting strong expected cash generation from existing assets and new investments, Drax can fully fund the £7bn of opportunities and return to net debt to Adjusted EBITDA below 2x by the end of 2031. Drax will also continue to assess a wider range of funding options, including project finance.

The Group remains committed to its capital allocation policy, which was established in 2017, and has delivered average annual dividend per share growth of around 11%.

The Group has commenced a £150 million share buyback programme, which is expected to complete by the end of 2023. The programme is not expected to have any impact on the Group’s medium and long-term growth plans and, beyond the current buyback programme, will continue to assess its capital requirements in line with the current policy, including the return of excess capital to shareholders.

Outlook

The Group’s outlook for 2023, as set out in its recent Trading Update, remains unchanged and provides a strong platform for long-term investment and returns to shareholders.

Drax continues to expect full year Adjusted EBITDA(1) for 2023 to be in line with analysts’ consensus estimates(2), subject to continued good operational performance.

Webcast and presentation material

The event will be webcast from 2pm (UK) and the material made available on the Group’s website at that time. Joining instructions for the webcast and presentation are included in the links below.

https://secure.emincote.com/client/drax/drax025
https://www.drax.com/investors/announcements-events-reports/presentations/

Notes:
[1] Earnings before interest, tax, depreciation, amortisation, excluding the impact of exceptional items and certain remeasurements. Excludes the Electricity Generator Levy, which is currently presented as a tax and reflected in EPS.
[2] As of 18 May 2023, analyst consensus for 2023 Adjusted EBITDA was £1,162 million, with a range of £1,100 – 1,200 million. The details of this company collected consensus are displayed on the Group’s website. Excludes the Electricity Generator Levy, which is currently presented as a tax and reflected in EPS.
[3] IPCC Sixth Assessment Report, Working Group III (2022).
https://www.drax.com/wp-content/uploads/2023/05/Company-Collected-Consensus-May-2023.pdf

Enquiries:

Drax Investor Relations: Mark Strafford
+44 (0) 7730 763 949

Media:

Drax External Communications: Chris Mostyn
+44 (0) 7548 838 896

Carbon markets will be essential in reaching net zero – we must ensure they support high standards

9 November 2022

Carbon capture

Angela Hepworth, Commercial Director, Drax

In brief:

  • The voluntary carbon market will be essential in deploying engineered carbon removals technologies like Bioenergy with carbon capture and storage (BECCS), and direct air carbon capture and storage (DACS) at scale.
  • The Integrity Council for the Voluntary Carbon Market is developing a set of Core Carbon Principles (CCPs).
  • Drax support proposed principles if they’re applied in ways appropriate for engineered carbon removals.
  • Standards around additionality and the permanence of carbon removals may apply very differently to nature-based and engineered removals, something that needs to be addressed explicitly.

There’s growing recognition, in governments and environmental organisations, of the urgent need to develop high-integrity engineered carbon removals at scale if the world has any chance of meeting our collective Paris-aligned climate goals.

Bioenergy with carbon capture and storage (BECCS), and direct air carbon capture and storage (DACS) are two technologies on the cusp of deployment at scale that can remove carbon from the atmosphere and store it permanently and safely. The technology is proven, developers are bringing forward projects, and the most forward-thinking companies are actively seeking to buy removal credits from BECCS and DACS developers.

Yet there’s a risk that the frameworks being developed in the voluntary carbon market could stifle rather than support the development of engineered carbon removals.

Drax is a world-leader in the deployment of bioenergy solutions. Our goal is to produce 12 million tonnes of high-integrity, permanent CO2 removals by 2030 from its BECCS projects in the U.K. and the U.S. We support the development of rigorous standards for CO2 removals that give purchasers confidence in the integrity of the CO2 removals they’re buying. Such standards are also important in providing a clear framework for project developers to work to.

However, the market and its standards have largely developed around carbon reduction and avoidance credits, rather than removals. To create a market that can enable engineered carbon removals at scale, re-thinking is needed to create standards that are fit for purpose to tackle the climate emergency.

Core Carbon Principles

The Integrity Council for the Voluntary Carbon Market is in the process of developing a set of Core Carbon Principles (CCPs) and Assessment Framework (AF) intended to set new threshold standards for high-quality carbon credits.

At Drax, we welcome and support the principles proposed by the Integrity Council. However, it’s crucial they’re applied in ways that are appropriate for engineered carbon removals, and support rather than prevent their development.

Many CCPs are directly applicable to engineered carbon removals and can offer important standards for projects developing removals technologies. Among the most important principles include those stating:

  • Removals must be robustly quantified, with appropriate conservatism in any assumptions made.
  • Key information must be provided in the public domain to enable appropriate scrutiny of the carbon removal activity, while safeguarding commercially sensitive information.
  • Removal credits should be subject to robust, independent third-party validation and verification.
  • Credits should be held in a registry which deals appropriately with removal credits.
  • Registries must be subject to appropriate governance, to ensure their integrity without becoming disproportionately bureaucratic or burdensome.
  • Removals must adhere to high standards of sustainability, taking account of impacts on nature, the climate and society.
  • There should be no double counting of carbon removals between corporates, or between countries. Bearing in mind that both corporates and countries may count the same removals in parallel, and that the Article 6 mechanism means countries can decide whether trades between corporates should or shouldn’t trigger corresponding adjustments to countries’ carbon inventories.

However, as pioneers in the field, we believe that two of the Core Carbon Principles need to be adapted to the specific characteristics of engineered carbon removals.

Supporting additionality and development incentives

The CCPs state: “The greenhouse gas (GHG) emission reductions or removals from the mitigation activity shall be additional, i.e., they would not have occurred in the absence of the incentive created by carbon credit revenues.”

Engineered carbon removal credits such as BECCS and DACS are by their nature additional. They are developed for the specific purpose of removing CO2 from the atmosphere and putting it back in the geosphere. They also rely on revenue from carbon markets – largely the voluntary market at present, but potentially compliance markets such as the U.K. and E.U. ETS in the future.

However, most early projects are likely to have some form of Government support (e.g., 45Q in the U.S., or Contracts for Difference in the U.K.) from outside carbon credit revenues. But that support isn’t intended to be sufficient on its own for their deployment – project developers will be expected to sell credits in compliance or voluntary markets.

Engineered carbon removals have high up-front capital costs, and it’s clear that revenue from voluntary or compliance markets will be essential to make them viable.

Additionality assessments should be risk-based. If it’s clear that a technology-type is additional, a technology-level assessment should be sufficient. This should be supplemented with full transparency on any government support provided to projects.

Compensating against non-permanent storage

On the topic of permanence that CCPs state: “The GHG emission reductions or removals from the mitigation activity shall be permanent, or if they have a risk of reversal, any reversals shall be fully compensated.”  A key benefit of engineered carbon removals with geological storage is that they effectively provide permanent carbon removal. Any risk of reversal over tens of thousands of years is extremely small.

The risk of reversal for nature-based credits, by contrast, is much greater. Schemes for managing reversal risk in the voluntary carbon market that have been developed for nature-based credits, are not necessarily appropriate for engineered removals.

Requirements for project developers to set aside a significant proportion of credits generated in a buffer pool, potentially as much as 10%, are disproportionate to the real risk of reversal from a well-manged geological store. They also fail to take account of the stringent regulatory requirements for geological storage that already exist or are being put in place.

Any ongoing requirements for monitoring should be consistent with existing regulatory requirements placed on storage owners and operators. Similarly, where jurisdictions have robust regulatory arrangements for dealing with CO2 storage risk, which place liabilities on storage owners, operators, or governments, the arrangements in the voluntary carbon market should mirror these arrangements rather than cutting across them, and no additional liabilities should be put on project developers.

At Drax, we believe the CCPs provide a suitable framework to ensure the integrity of engineered carbon removals. If applied pragmatically, they can give purchasers of engineered carbon removal credits confidence in the integrity of the product they’re buying and provide a clear framework for project developers. They can ensure that standards support, rather than stifle the development of high integrity carbon removal projects such as BECCS and DACS, which are essential to achieving our global climate goals.

Carbon removals is a global need. The U.S. is making it possible

Will Gardiner, Chief Executive Officer, Drax Group

20 October 2022

Carbon capture

Key takeaways:

  • Removing carbon from the atmosphere is urgent if we are to meet global climate targets
  • The U.S.’s commitment to supporting carbon removal technologies creates an opportunity for new bioenergy with carbon capture and storage (BECCS) power stations
  • The market for carbon credits is gaining increasing credibility and verification, making it a source of financing for ambitious decarbonization projects
  • Carbon markets are needed now to make investment into vital removals projects possible in the U.S. and globally

After a summer of soaring temperatures across the Northern Hemisphere, the global nature of climate change is more obvious than ever. Forest fires around the world in 2021 resulted in double the loss of tree cover than in 2001, while today more than 2.3 billion people face water stress from drought. It’s clear that the action we take to help tackle the global climate emergency must be international too.

We believe that carbon dioxide (CO2) removals will be crucial in addressing this global challenge. Experts and governments agree that in addition to economy-wide decarbonization, removing carbon from the atmosphere is critical to meeting the goal of net zero CO2 emissions by mid-century. The IPCC says 10 billion tons per year of removals will be needed in 2050 for the world to get to net zero. That’s a huge step up from the 40 million tons captured globally in 2021, but also a significant investment opportunity.

Our ambition is to remove 4 million tons of CO2 through bioenergy with carbon capture and storage (BECCS) outside the UK per year, while generating renewable, baseload electricity and supporting healthy, sustainable forests.

The likely contender for our first location? The United States. We already operate in communities across the U.S. South, employing more than 1,200 people in our sustainable biomass pellet production. Now we are preparing to build a new BECCS power station in the region.

It’s clear to us that the U.S. is an ideal market for BECCS with its long-running sustainable forest industry and range of suitable sites for permanent CO2 storage. We see the country’s efforts to retire coal by 2030 and commitment to innovation as an opportunity to build one of the largest carbon removal projects in the U.S. Our first plant could be capable of permanently removing 2 million tons of carbon from the atmosphere a year, while also generating 2-terawatt hours of 24/7 renewable power.

The U.S.’s newly legislated commitment to tackling climate change through the Inflation Reduction Act, as well as the Department of Energy’s National Renewable Energy Lab recent scenario planning for ‘100% clean electricity system’ are establishing it as the leading market to deploy new environmental technologies. And a new frontier for permanent, high-quality emissions removals.

The need for high quality, permanent emissions removals

A net zero future is only possible through the wide-spread implementation of high-integrity, carbon removals. BECCS offers this by combining low carbon, renewable biomass power generation with carbon capture technology and secure, permanent carbon sequestration.

BECCS works by generating renewable electricity using biomass sourced from sustainably managed forests that absorb CO2 as they grow. CO2 released in the generation process is captured and stored, permanently and safely, in geological rock formations. The overall process removes more CO2 from the atmosphere than it emits, resulting in negative emissions.

This allows us to offer decarbonizing industries high-quality carbon removals credits. Given the scale of CO2that must be removed from the atmosphere and the importance for countries and companies around the world to reach net zero, I believe this market for verified CO2 removal credits is a trillion-dollar opportunity.

Voluntary carbon markets have historically suffered from a lack of sustained and reliable investment due to fluctuating market prices and varying quality of the carbon credits they contain. However, increased oversight from investors, NGOs and independent bodies is encouraging credibility and integrity, prompting sustained adoption by businesses.

Will Gardiner, Drax Group CEO

We’ve demonstrated the growing appetite for carbon removals by signing the worlds largest carbon removals deal to date at New York Climate week. The agreement with Respira, an impact-driven carbon finance business, will allow it to purchase 400,000 metric tons of CO2 removals (CDRs) a year from our North American operations. This would enable other corporations and financial institutions to achieve their own CO2 emissions reduction targets, by purchasing CDRs from Respira.

Deals like these make voluntary carbon markets a more effective means of reducing net CO2 emissions by securing commitments and driving investment in projects that deliver independently verified, high-quality emissions reductions. As the global economy works towards its net zero targets, CO2 removals will be crucial in reducing the still dangerously high levels of carbon in our atmosphere today.

BECCS stands to be a powerful tool in a net zero future as the only technology capable of delivering both high quality, permanent carbon removals, while also delivering baseload renewable power. The ability to generate power with negative emissions will be crucial for increasingly electrified economies, as they move away from fossil fuels.

The potential for the U.S.  

Driven by a dynamic mix of markets, investors and engaged consumers, some of the most prominent U.S. companies are pledging to reach net zero, investing in 24/7 renewable power and other means to do so.

Technology companies like Alphabet, Apple, and Microsoft have laid out ambitious plans to decarbonize operations, supply chains, and even remove historic emissions. Other organizations, like the First Movers Coalition, include U.S. companies from a range of sectors committing corporate purchasing power to solving difficult decarbonization challenges.

This industry readiness is increasingly backed up by legislative policy action. The recent Inflation Reduction Act substantially increases the availability of the 45Q tax credit for carbon capture and storage projects, increasing their value from $50 a ton of carbon removals to $85 per ton, helping to further support the business case needed to deploy technologies like BECCS.

We believe the U.S. is on the right track to create a market in which BECCS can thrive. The Department of Energy’s National Renewable Energy Lab recent ‘100% clean electricity system’ report includes BECCS in three of the four possible scenarios explored. It forecasts the US will need between 7-14GW of installed BECCS capacity by 2035 to achieve an electricity system with net zero CO2 emissions. That equates to removals of approximately 55-120 Mt CO2 per year by 2035.

The U.S.’s established forestry commercial industry, with its credible commitment to sustainable management offers ample low-grade wood and wood industry residues to power BECCS. The country’s long-running exploration of CO2 capture and transport, and history of industrial innovations means there are the skills, supply chains, and regulatory environment to undertake ambitious new infrastructure projects.

LaSalle Forest

BECCS is a proven technology and one that can scale up sooner than any other technology. But action is needed now to make these markets that can deliver large scale carbon removals projects a reality.

Action is needed now

For responsible businesses with the desire to go further, faster, or for sectors still developing viable decarbonization routes, carbon removals from BECCS deliver real, verifiable, and permanent progress towards net zero and beyond, to net negative.

It’s encouraging to see the U.S. pass legislation that can facilitate investment into carbon removal technologies and develop the carbon credit market.

However, carbon markets must have standards that are credible both in the business community, and in the environmental and civil society. Collaboration between governments, corporations, and NGOs will be critical to ensure we create systems that can tackle the climate emergency.

We can’t afford to contemplate theoretical net zero futures. Buying and selling high-quality permanent removals is the action we need today. Now is the time to capture the opportunity and be part of the solution together.