Could Great Britain go off grid?
Tag: Drax Power Station
Acquisition Bridge Facility refinancing completed
Private placement
The £375 million private placement with infrastructure lenders comprises facilities with maturities between 2024 and 2029(2).
ESG Facility
The £125 million ESG facility matures in 2022. The facility includes a mechanism that adjusts the margin based on Drax’s carbon emissions against an annual benchmark, recognising Drax’s continued commitment to reducing its carbon emissions as part of its overall purpose of enabling a zero-carbon, lower cost energy future.
Together these facilities extend the Group’s debt maturity profile beyond 2027 and reduce the Group’s overall cost of debt to below 4 percent.
Enquiries:
Drax Investor Relations:
Mark Strafford
+44 (0) 1757 612 491
Media:
Drax External Communications:
Matt Willey
+44 (0) 7711 376 087
Website: www.drax.com
Note
(1) Drax Corporate Limited drew £550 million under an acquisition bridge facility on 2 January 2019 used to partially fund the acquisition of ScottishPower Generation Limited for initial net consideration of £687 million. £150 million of the acquisition bridge facility was repaid on 16 May 2019.
(2) £122.5 million in 2024, £122.5 million in 2025, £80 million in 2026 and £50 million in 2029.
Meet the apprentices powering our future
“Different people do things different ways,” says Sam Stocks, an apprentice engineer at Drax Power Station. It’s a sentiment echoed by corporate administration apprentice Chloe Carpenter at Opus Energy. Asked to describe her role, she says, “[It’s] a very different kind of job.”
Chloe and Sam are just two of a number of apprentices at Drax Group who are working across the UK. And while they’re proud to do things differently, they do have something in common – they’re all hands-on, practical people who would rather get stuck in on a project than sit still and hear about it in the classroom.
“I chose an apprenticeship over higher education because I’m more of a doing person,” says Molly Fensome, a corporate administration apprentice. Sam agrees. “I like to be hands-on,” he says. “I don’t like being sat in a classroom.”
They are doing things their way – engineering their own futures while growing personally and professionally. And ensuring the future of our energy supply in the process.
Finding a strong sense of identity
For Sam, working at Drax wasn’t just a sensible career move, it was also following in his family’s footsteps. “My grandad worked in the power station industry all his life. [My family] know exactly what I’m like and they knew what type of place this was to work.”
Drax’s transformation from a coal-powered plant to a modern, sustainable electricity company means Sam’s work is building a power framework for future generations, while also paying homage to his grandad’s career.
Jake Dawson, an electrical engineer apprentice, followed a similar path into the power industry. Being born and bred in the area, Drax Power Station has always been a part of his geography. “Because I’m such a local lad it was perfect for me,” he says.
In his role, Jake can play a key part in the region where he grew up. A recent Oxford Economics report shows that Drax contributes £431 million to Yorkshire and the Humber economy and supports over 3,200 jobs.
A role in a team
Drax is a large organisation, but for Chloe finding role models within her team she can look up to and take guidance from has been easy. “Mentoring sessions are relaxed and you build a special bond with that person,” she says. “You can talk to them about work, outside of work – anything. They’ll always be there for you.”
Corporate administration apprentice Matt Donnelly has had a similar experience, adding that he’s seen his confidence grow, and feels he has made lifelong friends in his role.
Ultimately, it’s not just that they are given the right support, but that apprentices are integrated as a part of the company from day one. “My favourite part of my apprenticeship so far is being part of the team,” says Chloe. “Because you feel like you’re not just an apprentice, but you’re also one of them.”
Being part of something bigger
Sam remembers his first day at Drax Power Station: “It was overwhelming, you don’t actually realise how big it is and realise how many people work here. It’s just normal now, if I go anywhere else, I’m thinking, ‘That’s not as big as at work.’”
It’s not just its size that makes the UK’s biggest single site renewable power station stand out, but the potential for career development there. It’s this that Jake had on his mind when he first made the decision to become an apprentice. He was working in an unskilled job with little opportunity, but he knew he had it in him to find something bigger.
His outlook today as a Drax apprentice is very different. “My aim after the four years is to carry on growing as a person, increasing all my skills that I have, and maybe eventually becoming a supervisor or an engineer, who knows?”
This mindset of striving for better is evident across apprentices. It’s what drove them to join the programme in the first place. “Instead of going somewhere like uni and then possibly coming out without a job, you’ve got a job, and you’re actually learning as you’re doing it,” says Sam. “The skill set that I’ve learnt now – I’ll probably go anywhere in the world with it.”
Find out more about apprenticeships at Drax
How to switch a power station off coal
In 2003, the UK’s biggest coal power station took its first steps away from the fossil fuel which defined electricity generation for more than a century. It was in that year that Drax Power Station began co-firing biomass as a renewable alternative to coal.
It symbolised the beginnings of the power station’s ambitious transformation from fossil-fuel stalwart to the country’s largest single-site renewable electricity generator. This plan presented a massive engineering challenge for Drax, with significant amounts of new knowledge quickly needed.
Fifteen years later, three of its generating units now run entirely on compressed wood pellets, a form of biomass, while coal has been relegated to stepping in only to cover spikes in demand and improve system stability.
Now Drax has converted a fourth unit from coal to biomass. This development represents the passing of a two thirds marker for the power station’s coal-free ambitions and adds 600-plus megawatts (MW) of renewable electricity to Great Britain’s national transmission system.
Building on the past
Drax first converted a coal unit to biomass in 2013, with two more following in 2014 and 2016. This put Drax in an interesting position going into a new conversion: on one hand, it is one of the most experienced generators in the world when it comes to dealing with and upgrading to biomass. On the other, it’s still relatively new to the low carbon fuel compared with its dealings with coal.
Adam Nicholson
“We’ve decades of understanding of how to use coal, but we’ve only been operating with biomass since we started the full conversion trials in 2011,” says Adam Nicholson, Section Head for Process Performance at Drax Power. “We’ve got few running hours under our belts with the new fuel versus the hundreds of man years of coal knowledge and operation all around the country.”
When converting a generating unit, the steam turbine and generator itself remain the same. The difference is all in the material being delivered, stored, crushed and blown into the boiler and burned to heat up water and create steam. And because biomass can be a volatile substance – much more so than coal – this process must be a careful one.
Drax could build on the learnings and equipment it had already developed for biomass such as specially built trains and pulverising mills, but storage proved a bigger issue. The giant biomass domes at Drax that make up the EcoStore are advanced technological structures carefully attuned to storing biomass, but for Unit 4, they were off limits.
Instead Drax engineers had to come up with another solution.
The journey of a pellet through the power station
Normally wood pellets are brought into Drax by train, unloaded and stored in the biomass domes before travelling through the power station to the mills and then boilers. Unit 4, however, sits in the second half of the station – built 12 years after the first. This slight change in location presented a problem.
“There’s no link from the eco store to Unit 4 at all,” explains Nicholson. “You can’t use the storage domes and that whole infrastructure to get anything to Unit 4.”
Drax engineers set about designing a new conveyor system that could connect the domes to the mills and boiler that powers Unit 4. After weeks of design, the team had a theoretical plan to connect the two locations with one problem: it was entirely uneconomical.
Rail unloading building 1 and storage silos
“If we were building a new plant it would be relatively easy, because you could plan properly and wouldn’t have existing equipment in the way,” says Nicholson.
“We had to plan around it and make use of the pre-existing plant.”
Within that pre-existing plant though were vital pieces of equipment, some of which had laid dormant since Drax stopped fuelling its boilers with a mixture of coal and biomass and opted instead for full unit conversions.
Drax began cofiring across all six units in 2003, using two different materials – a mix of around 5% biomass and 95% coal. A direct injection facility was added in 2005. It involved blowing crushed wood pellets into coal fuel lines from two of the power station’s 60 mills.
Then, the amount of renewable power Drax was able to generate roughly doubled in the summer of 2010 when a 400 MW co-firing facility became operational.
Back to the present day, it’s fortunate for the Unit 4 conversion that the co-firing facility includes its own rail unloading building (RUB 1) and storage silos. They are located much closer to the unit than the bigger RUB 2 and the massive biomass domes.
This solved the problem of storage but moving the required volumes of biomass through the plant without significant transport construction still posed a challenge.
Rail unloading building 1 and storage silos for Unit 4 [left], EcoStore biomass domes for units 1-3 [right]
The post-coal future
Andy Koss
For now, Drax’s fifth and sixth generating unit remain coal-powered, but are called upon less frequently. With Great Britain set to go completely coal-free by 2025, there are plans to convert these too, but as part of a system of combined cycle gas turbines and giant batteries rather than biomass powered units.
It’s an opportunity for Drax to again leverage its pre-existing plant and provide the grid with a fast acting-source of lower-carbon electricity. As with converting to biomass, it will pose a complex new engineering challenge – one that will prepare Drax to meet the future needs of grid as it continues to change and demand greater flexibility from generators.
“The speed at which the Unit 4 project has been delivered is testament to the engineering expertise, skill and ingenuity we continue to see at Drax. We’re nimble and innovative enough to meet future challenges,” says Andy Koss, Chief Executive, Drax Power.
“We may look very different in 10 or 20 years’ time, but the ethos of that innovation and agility is something that will persist.”
Repowering the remaining coal plant with gas and up to 200 MW of batteries will sit alongside research into areas such as carbon capture, use and storage (CCuS) that is all geared towards expanding Drax Power beyond a single site generator into a portfolio of flexible power production facilities.
Unit 4’s conversion is more than just a step beyond halfway for the power station’s decarbonisation, but a significant step towards becoming entirely coal-free.
Drax: A rail history
Railways in Great Britain today are often seen as unreliable or chaotic, yet they remain a vital part of the lives of the population and the economy of the country.
When rail transport first arrived in earnest in the 19th century, it suddenly allowed goods from around the world, as well as people, to quickly cross the country. It reshaped perceptions of the country’s geography, unlocked the population and accelerated industries.
Over time, however, the role of the railways has diminished, owing largely to the massive rise in car ownership and the shifting of freight onto the road. But that is not to say it has completely lost its importance.
With 6,000 trains passing through Drax Power Station every year, rail is still integral to Drax and the region around it. In fact, since the very first introduction of the railways to the region it has played a major part in shaping the landscape.
A village with two stations
Before the construction of the power station or nationalisation of the railways, Drax village was well-connected, with two different railway lines running through it: the North Eastern Railway (NER) Selby to Goole line, and the Hull and Barnsley Railway’s Doncaster to Hull line.
Each of these lines ran through a different station with NER calling at Drax Hales Station while Hull and Barnsley called at Drax Abbey Station. But, following nationalisation and British Rail’s modernisation plans, Drax Abbey Station, which had closed to passengers in 1931, closed to goods traffic in 1959. Drax Hales Station followed suit in 1964 when it was closed as part of what became known as the Beeching Axe.
“British Rail chairman Richard Beeching famously carried out a review of Britain’s railways in the 60s and as a result closed vast quantities of – what he considered – uneconomical lines,” explains Andrew Christian, FGD & By-products Section Head at Drax Power Station and expert on the area’s history. “At that time oil was cheap, people were increasingly using cars and motorways were being constructed. Nobody really foresaw the rail demand that would be needed in the future to serve the power station.”
Daleks on a merry-go-round
In the 1960s and 70s, with the planning and construction of Drax Power Station underway, there was a new need for railways in bringing coal from the new Selby coalfield. This resulted in the reopening of a closed part of the Hull and Barnsley line for four miles from a reinstated junction at Hensall. Known as Hensall Junction it was renamed Drax Power Station Branch Junction and later shorted to Drax Branch Junction.
A rail system known as a ‘MGR loop’ was installed on the power station grounds, which allows trains to loop around the station and deposit coal – today also wood pellets – without stopping.
The ‘merry-go-round’ trains as they are known, were originally made up of 40, four-wheeled merry-go-round (MGR) hopper wagons. These were much smaller than the wagons that carry biomass from ports to power stations today, and more than 11,000 MGRs where built to serve coal power stations around Great Britain.
Photo by Andrew Brade, Railway Engineer at Drax Power Station
The open-topped wagons were each capable of carrying 33 tonnes of pulverised coal, which was automatically released thanks to a piece of machinery alongside the track colloquially known as ‘Daleks’ thanks to their resemblance to the Dr Who villain.
But as the power station began to change and evolved to fit the modern world, so too did the railway serving it.
Rail at Drax beyond coal
The original Drax rail loop was a single track, with three coal unloading points. By 1993 there was 14.5 km of track with 27 sets of points and crossings allowing trains to switch rails, thanks to the double tracked loop and extra tracks laid to serve traffic taking limestone in and gypsum out from the power station. This was further expanded with the introduction of biomass and a new double track and unloading facility in 2013.
The biomass trains are specially designed to keep compressed wood pellets dry and they are much longer than their MGR predecessors. At 18.2 meters long, their capacity is 30% greater than a coal wagon. It means the 23-wagon trains bringing biomass to the power stations from Tyne, Hull, Immingham and Liverpool’s ports are a quarter of a mile long.
It might be a far cry from the heyday in which the railways crisscrossed the region, but they remain a vital part of the area. And while the area’s original lines are now 50 years dormant, their remnants are still visible in the lasting impact they’ve left on the surrounding landscape.
Many of the embankments and bridges found in and around Drax stem from those first railway lines, while much of the A645 road that was constructed in the early 1990s runs along the track bed of NER’s route to Goole.
Photos by Andrew Brade, Railway Engineer at Drax Power Station
The trains might not stop in Drax Village anymore, but they remain a vital part of the landscape, and how it’s powered.
Northern Powerhouse Minister Jake Berry was in Yorkshire on 5 July 2018 to unveil the first Drax freight wagons with ‘Northern Powerhouse’ branding to deliver biomass to the power station. Read more.
The night shift
Things are different at night. As darkness falls the familiar sights and sounds that make up daily life retreat, creating a strange yet familiar world. There’s less activity, but that doesn’t mean there is no activity.
While Great Britain sleeps, phones charge and fridges hum. Electricity is a 24-hour need, and so the stations generating it must be 24-hour operations. But the life of a power station by night is very different to that by day.
“Walking around the power station at night can almost feel like the Mary Celeste,” says Simon Acaster, Drax Power Station’s Generation Manager. “There may be as few as 50 to 60 people on site, which isn’t a lot when you consider the size of the plant and compare it to the day, when there are some 650 people around.”
Drax Power Station by day is a hive of activity. Alongside generation there are maintenance, engineering, trading and contract support. At night, this is all stripped back.
“Work is focused on the core production issues: looking after the asset and maintaining power generation output to meet our contract position, keeping the teams safe and making sure we stay environmentally compliant,” says Mark Rhodes, Shift Manager at Drax.
“It’s a quieter place,” he adds.
Keeping power flowing
Typically, teams at Drax swap over at 8pm and 8am on a cycle of day and night shifts. During the summer months, when one or more of the station’s six, 600+ megawatt (MW) units can be on outage and maintenance is carried out across the station, work often continues around the clock right through the night.
But during a period of normal operation, the night workforce is reduced to basic operations and maintenance teams, material handling teams receiving biomass deliveries – which continue through the night – and security staff.
Demand for electricity typically falls overnight, so Drax shuts down unneeded generation units around 10pm. As morning approaches teams prep them to restart in time for when people wake up and turn on kettles.
“Even when we shut the units down, the turbine is still turning throughout the night,” says Acaster. “All the hydraulic pumps and lube oil systems are still functioning. A lot of plant is in service even when the units are shut down.”
This means there’s still the potential, as during the day, for something to need maintenance or attention at any moment requiring the teams to jump into action.
“We aim to sort any short-term issues through the night,” says Rhodes. “But for any technical issues that can wait, we tackle them when the day team returns and we’re fully staffed. At night it’s more about safely managing the asset.”
The hardest part of a running the power station overnight, however, is not a technical one, it’s a human one.
“There’s no doubt about it, working nights is tiring,” says Acaster. “The biggest challenge is keeping everybody focused and aware of what’s happening.”
He continues: “Unit controllers regularly talk to their plant operators, checking in every hour so we know they’re safe. Supervisors need to be out on plant engaging and talking to employees, checking on what they’re doing and keeping them active and alert.”
The shifting of the night shift
The decarbonisation of Great Britain’s electricity system has changed the way Drax operates during the day, and the same is true of the night.
“Historically, we had six units and they would be baseload, generating 645 MW each,” says Rhodes. “They would operate continuously day and night.” But with the demand profile changing, lower power prices, and other methods of generation coming onto the system, that model is changing.
“Overnight is normally the time of least demand and when the price of power becomes most depressed,” Rhodes continues. “So we take units off and prepare them for the morning, returning when there is value.”
Regularly shutting down and starting the units takes a tougher toll on the equipment than running them continuously, which increases the need for maintenance teams on night shifts. There’s also a need for teams to be on standby to ramp up or down generation.
The increased volatility of the country’s power network, brought on in part by increasing levels of intermittent renewables, means National Grid can often ask Drax to increase or decrease generation at short notice to provide balancing services like inertia, frequency response or reserve power.
“Our units can come down to 300 MW and stay at that level,” says Acaster. “Across three units that gives National Grid 900 MW of spare capacity that can be turned up. It’s like a sleeping giant awaiting start up at any time.”
But unlike other sleeping giants this one is never truly at rest. The demands of the network keep it, and the men and women operating it, humming through the night, 24-hours a day. The power station at night is a quieter place, but it is never a silent one.
Chief Executive’s review
21 March 2018
Market background
The UK is undergoing an energy revolution – a transition to a low-carbon economy requiring new energy solutions for power generation, heating, transport and the wider economy. Through our flexible, lower carbon electricity proposition and business to business (B2B) energy solutions, the Group is positioning itself for growth in this environment. More details can be seen on page 4 of our annual report.
Our strategy
Our purpose is to help change the way energy is generated, supplied and used.
Through addressing UK energy needs, and those of our customers, our strategy is designed to deliver growing earnings and cash flow, alongside significant cash returns for shareholders.
Our ambition is to grow our EBITDA to over £425 million by 2025, with over a third of those earnings coming from Pellet Production and B2B Energy Supply to create a broader, more balanced earnings profile. We intend to pay a sustainable and growing dividend to shareholders. Progression towards these targets is underpinned by safety, sustainability, operational excellence and expertise in our markets.
Summary of 2017
We made significant progress during 2017, but were below our expectations on the challenging scorecard targets we set ourselves in pellet production and biomass availability, the latter reflecting the significant incident we experienced on our biomass rail unloading facilities at the end of 2017, which extended into January 2018. Energy Supply performed well with Opus Energy in line with plan and Haven Power exceeding its targets. Through a combination of this performance and the progress of our strategy we have delivered EBITDA of £229 million, significantly ahead of 2016 (£140 million) and with each of our three businesses contributing positive EBITDA for the first time.
The Group scorecard is reported in full in the Remuneration Report (pp. 81-107 of our annual report) and the KPIs are also shown below. They reflect the diversity of our operations and our need to maintain clear focus on delivering operational excellence.
On a statutory basis we recorded a loss of £151 million, which reflects unrealised losses on derivative contracts, previously announced accounting policy on the accelerated depreciation on coal-specific assets as well as amortisation of newly- acquired intangible assets in Opus Energy. We also calculate underlying earnings, a profit after tax of £2.7 million, which excludes the effect of unrealised gains and losses on derivative contracts and, to assess the performance of the Group without the income statement volatility introduced by non-cash fair value adjustments on our portfolio of forward commodity and currency futures contracts.
During the year we refinanced our existing debt facilities, reducing our debt cost. We also confirmed a new dividend policy which will pay a sustainable and growing dividend (£50 million in respect of 2017), consistent with our commitment to a strong balance sheet and our ambitions for growth. At year end our net debt was £91 million below our 2x net debt to EBITDA target, providing additional headroom. There is more detail on our financial performance in the Group Financial Review on page 46 of our annual report.
In the US, our Pellet Production operations recorded year-on-year growth in output of 35%, with our first two plants now producing at full capacity. During the second half of 2017 we also completed the installation of additional capacity enabling our Morehouse and Amite facilities to handle a greater amount of residue material, supporting efforts to produce good quality pellets at the lowest cost.
As part of our target to expand our biomass self-supply capability we completed the acquisition of LaSalle Bioenergy (LaSalle) adding pellet production capacity. LaSalle commenced commissioning in November 2017 and due to its close proximity to our existing US facilities, once complete, will provide further opportunities for supply chain optimisation.
As in 2016, we benefited from the flexibility of self-supply. This often overlooked attribute of our supply chain enables us to manage biomass supply across the Power Generation business’ planned outage season and to benefit from attractively priced biomass cargoes in the short-term spot market.
In Power Generation, we experienced a significant incident on our biomass rail unloading facilities, including a small fire on a section of conveyor. We fully investigated the incident and following repairs over the Christmas period have now recommissioned the facility, with enhanced operating procedures. This is a timely reminder of the combustible nature of biomass and the need for strong controls and processes to protect our people and assets.
Our biomass units continued to produce high levels of renewable electricity from sustainable wood pellets for the UK market – Drax produced 15% of the UK’s renewable electricity – enough to power Sheffield, Leeds, Liverpool and Manchester combined. In doing so, we are making a vital contribution to the UK’s ambitious targets for decarbonisation across electricity generation, heating and transport – an 80% reduction by 2050 vs. 1990 levels.
We benefited from the first year of operation of our third biomass unit under the Contract for Difference (CfD) scheme which provides an index-linked price for the power produced until March 2027. The unit underwent a major planned outage between September and November, with a full programme of works successfully completed.
The flexibility, reliability and scale of our renewable generation, alongside an attractive total system cost, means we are strongly placed to play a long-term role in the UK’s energy mix. To that end we continue to see long-term biomass generation as a key enabler, allowing the UK Government to meet its decarbonisation targets and the system operator to manage the grid.
The UK Government recently confirmed support for further biomass generation at Drax Power Station and we now plan to continue our work to develop a low-cost solution for a fourth biomass unit, allowing us to provide even more renewable electricity, whilst supporting system stability at minimum cost to the consumer.
Our heritage is coal, but our future is flexible lower-carbon electricity. We are making progress with the development of four new standalone OCGT plants situated in eastern England and Wales and our work to develop options for coal-to-gas repowering with battery technologies. If these options would be supported by 15-year capacity market contracts, providing a clear investment signal and extending visibility of contract-based earnings out to the late 2030s.
In B2B Energy Supply, we completed the acquisition of Opus Energy, a supplier of electricity and gas to corporates and small businesses. The transaction completed in February 2017 and Opus Energy has continued to operate successfully within the Group, achieving its targets and making an immediate and significant contribution to profitability. Alongside this good performance we have also implemented the operational steps necessary to realise further operational benefits of the acquisition, and we now source all of Opus’ power and gas internally.
Haven Power delivered a strong performance with the sale of large volumes of electricity to industrial customers. Through our customer focus and efficiencies, margins have improved and the business generated a positive EBITDA for the first time.
Together, our B2B Energy Supply business now has over 375,000 customer meters, making it the fifth largest B2B power supplier in the UK.
We are delivering innovative low-carbon power solutions, with 46% of our energy sold from renewable sources. As the power system transforms, we will be working closely with our customers to help them adapt to a world of more decentralised and decarbonised power. We see this as a significant opportunity for the Group in the medium to long term.
In October 2017 we completed the sale of Billington Bioenergy (BBE) to Aggregated Micro Power Holding (AMPH). Consideration for the transaction was £2.3 million, comprised of £1.6 million of shares in AMPH and £0.7 million of cash.
The sale of BBE is aligned with our strategy to focus on B2B energy supply. However, through our shareholding in AMPH, we will retain an interest in the UK heating market, whilst gaining exposure to the development of small-scale distributed energy assets.
Political, regulatory and economic background
We continue to operate in a changing environment. The full impact of the UK’s decision to leave the EU is still unknown.
The immediate impact on the Group was a weakening of Sterling and an associated increase in the cost of biomass, which is generally denominated in other currencies. Through our utilisation of medium-term foreign exchange hedges the Group protected the cash impact of this weakness. In 2017, Sterling has generally strengthened, and we have been able to extend our hedged position out to 2022 at rates close to those that we saw before Brexit.
In terms of UK energy policy, the Government’s main focus has been on what it sees as unfair treatment of domestic consumers on legacy standard variable tariff (SVT) contracts. SVT are not a common feature of the B2B market. At the microbusiness end of this market, which is closer in size to domestic, most of our customers are on fixed price products and are active in renewing contracts.
The UK Government’s response to its consultation on the cessation of coal generation by 2025 has confirmed an end to non-compliant coal generation by October 2025.
We believe our assets, projects and ability to support our customers’ electricity management will support the Government’s ambition to maintain reliability when coal generation ceases.
Running a resilient, reliable grid is not simply about meeting the power demand on the system; there are also system support services which are essential to its effective operation. As the grid decentralises and becomes dependent on smaller, distributed generation, the number of plants able to provide these services is reducing. Biomass generation, our proposed OCGTs and our repowering project would allow us to meet these needs, but this will not come for free. A reliable, flexible, low-carbon energy system will require the right long-term incentives.
In November 2017, the Government confirmed that the UK will maintain a total carbon price (the combined UK Carbon Price Support – CPS – and the European Union Emissions Trading Scheme – EU ETS) at around the current level. CPS has been the single most effective instrument in reducing the level of carbon emissions in generation and we continue to support the pricing of carbon, a view echoed in a report prepared for the UK Government by the leading academic Professor Dieter Helm.
Against this backdrop we continue to make an important contribution to the UK economy. According to a study published by Oxford Economics in 2016, Drax’s total economic impact – including our supply chain and the wages our employees and suppliers’ employees spend in the wider consumer-economy was £1.7 billion, supporting 18,500 jobs across the UK.
Safety, sustainability and people
The health, safety and wellbeing of our employees and contractors is vital to the Group, with safety at the centre of our operational philosophy. We also recognise the growing need to support the wellbeing of our employees and their mental health.
During the year we continued to use Total Recordable Injury Rate (TRIR) as our primary KPI in this area. Performance was positive, at 0.27, but we expect this to improve in the coming year.
The incident at our biomass rail unloading facilities in December did not lead to physical injuries but was nonetheless a significant event and caused disruption into 2018.
We consequently launched an incident investigation to ensure our personal and process safety management procedures are robust.
To promote greater awareness around wellbeing we have embedded this in our new people strategy and expect to focus more energy and resources on this important area during 2018.
Strong corporate governance is at the heart of the Group – acting responsibly, doing the right thing and being transparent. As the Group grows the range of sustainability issues we face is widening and recognising the importance of strong corporate governance, we have published a comprehensive overview of our sustainability progress in 2017 on our website. This also highlights future priorities to broaden our approach to sustainability and improved reporting of environment, social and governance (ESG) performance. We have also completed the process which allows us to participate in the UN Global Compact (UNGC) – an international framework which will guide our approach in the areas of human rights, labour, environment and anti-corruption.
During 2017 we published our first statement on the prevention of slavery and human trafficking in compliance with the UK Modern Slavery Act. We have added modern slavery awareness to our programme of regular training for contract managers and reviewed our counterparty due diligence processes.
We have continued to maintain our rigorous and robust approach to biomass sustainability, ensuring the wood pellets we use are sustainable, low-carbon and fully compliant with the UK’s mandatory sustainability standards for biomass. The biomass we use to generate electricity provides a 64% carbon emissions saving against gas, inclusive of supply chain emissions. Our biomass lifecycle carbon emissions are 36g CO2 / MJ, less than half the UK Government’s 79g CO2 / MJ limit.
Our people are a key asset of the business. Through 2017 we developed a new people strategy. The strategy focuses on driving performance and developing talent to deliver the Group’s objectives. We have established Group-wide practices, including a career development and behaviour framework focused on performance and personal development.
Research and innovation
A key part of our strategy is to identify opportunities to improve existing operations and create options for long-term growth. To that end we have established a dedicated Research and Innovation (R&I) team led by the Drax engineers who delivered our world-first biomass generation and supply chain solution.
We are actively looking at ways to improve the efficiency of our operations, notably in our biomass supply chain.
Biomass is our largest single cost and as such we are focused on greater supply chain efficiency and the extraction of value from a wide range of low-value residue materials.
In B2B Energy Supply we are using our engineering expertise to help offer our customers value-adding services and products which will improve efficiency and allow them to optimise their energy consumption.
In the following sections we review the performance of our businesses during the year.
Performance review: Pellet Production
Our pellets provide a sustainable, low-carbon fuel source – one that can be safely and efficiently delivered through our global supply chain and used by Drax’s Power Generation business to make renewable electricity for the UK. Our manufacturing operations also promote forest health by incentivising local landowners to actively manage and reinvest in their forests.
Operational review
Safety remains our primary concern and we have delivered year-on-year reduction in the level of recordable incidents.
Output at our Amite and Morehouse pellet plants increased significantly, although was below our target for the year.
We have remained focused on opportunities to improve efficiencies and capture cost savings as part of our drive to produce good quality pellets at the lowest possible cost. We still have more work to do in this area to optimise quality and cost, as our performance was below target for the year.
As part of our plans to optimise and improve operations we added 150k tonnes capacity at our existing plants, bringing total installed capacity to 1.1 million tonnes and increasing the amount of lower cost sawmill residues we are able to process and used in our pellets.
CASE STUDY
Low-cost, high-impact capacity increase
By-products of higher value wood industries, such as sawdust from sawmills, offer a low-cost source of residues for use in our pellet production process and during 2017 we added an additional 150k tonnes of capacity at our pellet plants to allow us to use more of this material. By investing in giant hydraulic platforms known as ‘truck dumps’, operators at Amite and Morehouse can unload a 50-foot truck carrying either sawdust or wood chips and weighing 60 tonnes in less than two minutes, increasing processing capacity, reducing the cost of processing and increasing the use of lower cost residues.
Find out more: www.drax.com/truckdumps and www.drax.com/sustainability/sourcing
At our Baton Rouge port facility greater volumes of production from our facilities drove higher levels of throughput with 17 vessels loaded and dispatched during the year (2016: 11 vessels).
In April, in line with our strategy to increase self-supply, we acquired a 450k tonne wood pellet plant – LaSalle Bioenergy (LaSalle). Commissioning of the plant began in November 2017 and we expect to increase production through 2018. LaSalle is within a 200-mile radius of our existing facilities. By leveraging the locational benefits of these assets we aim to deliver further operational and financial efficiencies.
CASE STUDY
Locational benefits of Gulf cluster
The location of our operations allows us to leverage benefits of multiple assets and locations for operational efficiencies
All sites within 200-mile radius
Operational efficiencies
- Common plant and joint strategic spare parts
- Maximise reliability, minimise capital outlay
- Flexibility through outage cycle
- Human capital
Shared logistics to Baton Rouge
- Rail and road
- Increased port throughput
Complementary fibre sourcing
- Optimisation of supply between plants
Find out more: www.draxbiomass.com
Financial results
There was a significant improvement in 2017, with EBITDA of £5.5 million (2016: £6.3 million negative EBITDA), driven by increasing volumes of wood pellets produced and sold to the Power Generation business. Sales of pellets in the year ending 31 December 2017 totalled £136 million, an increase of 84% over 2016.
Gross margin increased, reflecting higher production volumes. Raw fibre procurement, transportation and processing comprised the majority of cost of sales and as such this remains an important area of focus and an opportunity for the business. Through incremental investment in plant enhancements we expect to see further benefits from efficiencies and greater utilisation of lower cost residues.
Total operating costs have increased, reflecting an increase in operations at Amite, Morehouse and the Port of Baton Rouge, alongside the addition of LaSalle.
We acquired LaSalle for $35 million and have invested an additional $27 million as part of a programme to return the unit to service.
Pellet Production financial performance
| 2017 £m | 2016 £m |
|
|---|---|---|
| Revenue | 135.7 | 73.6 |
| Cost of sales | (96.7) | (55.5) |
| Gross profit | 39.0 | 18.1 |
| Operating costs | (33.5) | (24.4) |
| EBITDA | 5.5 | (6.3) |
Key performance indicators
| Area | KPI | Unit of measure | 2017 | 2016 |
|---|---|---|---|---|
| Operations | Fines at disport | % | 9.6 | 7.6 |
| Operations | Output | ,000 tonnes | 822 | 607 |
| Financial | Variable cost/tonne | $/tonne | 77 | 82 |
Looking ahead
Through 2018 we expect to continue to deliver growth in EBITDA from our existing assets. Our focus is on the commissioning of LaSalle alongside opportunities for optimisation and efficiencies in our processes, to deliver good quality pellets at the lowest cost.
We remain alert to market opportunities to develop further capacity as part of our self-supply strategy.
Performance review: Power Generation
Drax Power Station remains the largest power station in the UK (almost twice the size of the next largest). During the year the station met 6% of the UK’s electricity needs, whilst providing 15% of its renewable electricity, alongside important system support services.
With an increase in intermittent renewables and a reduction in the responsive thermal generation historically provided by coal, the system of the future will require capacity which is reliable, flexible and able to respond quickly to changes in system demand and provide system support services. These long-term needs inform our biomass generation and the development of options for investment in gas – Open Cycle Gas Turbines (OCGTs) and coal-to-gas repowering.
STRATEGY IN PROGRESS
Gas power station development
We are developing options for four new OCGT gas power stations, two of which already have planning permission and could be on the system in the early 2020s, subject to being awarded a capacity agreement.
A high-tech new control room at Drax Power Station will allow engineers to have real time remote control of our OCGT assets via a fibre-optic cable network. Able to fire up from cold and produce power in minutes rather than hours, our OCGTs will help maintain system security as intermittent renewable sources of power increase and older thermal plants close.
Investment case
- Option to develop 1.2GW of new OCGT gas
- Investment decisions subject to 15-year capacity agreement
- Multiple revenue streams, with high visibility from capacity contract
- Low capital and operating cost
- Attractive return on capital
- Broader generation asset base and location
Find out more: www.drax.com/about-us/#our-projects
Regulatory framework
In October the Government published its Clean Growth Plan, setting out its plans for delivery of its legally binding target to reduce 2050 carbon emissions by 80% versus 1990 levels across electricity generation, heating and transport. This reinforces the Drax proposition – flexible, reliable, low-carbon electricity.
In November the Government updated its intentions regarding the future trajectory of UK Carbon Price Support (CPS), indicating that the total cost of carbon tax in the UK (the total of CPS and the EU Emissions Trading Scheme) would continue at around the current level (the tax is currently set at £18/tonne) whilst coal remains on the system.
We believe that CPS has been the single most effective instrument in reducing carbon emissions from generation and that having an appropriate price for carbon emissions is the right way to provide a market signal to further reduce emissions in support of the UK’s long-term decarbonisation targets.
The UK Government has now confirmed an end to non-compliant coal generation by 2025. We support this move subject to an appropriate alternative technology being in place. With this in mind we have continued to develop options for our remaining coal assets to convert to biomass or gas, to provide the reliable, flexible capacity which we believe will be required to manage the increasingly volatile energy system of the future.
Most recently with confirmation of Government support for further biomass generation at Drax Power Station we plan to continue our work to develop a low-cost solution for a fourth biomass unit, accelerating the removal of coal-fired generation from the UK electricity system, whilst supporting security of supply.
Generation capacity and system support
2017 saw the first full year of operation of our biomass unit under the Contract for Difference (CfD) mechanism, which provides index-linked revenues for renewable electricity out to 2027.
Our other biomass units are supported by the Renewable Obligation Certificate (ROC) mechanism which, similar to the CfD, is also index-linked to 2027. This acts as a premium above the price of power we sell from these units. We sell power forward to the extent there is liquidity in the power markets which, combined with our fuel hedging strategy, provides long-term earnings and revenue visibility.
Lower gas prices, higher carbon costs and the continued penetration of intermittent renewables have kept wholesale electricity prices subdued.
With increasing levels of intermittent renewables we are continuing to see opportunities to extract value from flexibility – short-term power and balancing market activity, the provision of Ancillary Services and the value achieved from out-of-specification fuels. To capture value in this market we continue to focus resource on optimising availability and flexibility of both coal and biomass units. This whole process requires a high level of teamwork between the operational and commercial teams across the Group to capture and protect value.
Over the period 2017 to 2022 we expect to earn £90 million from a series of one-year capacity market contracts for our coal units, demonstrating that they still have a role to play. The first of these contracts commenced in October 2017, adding £3 million to EBITDA.
Lastly, we continue to source attractively priced fuel cargoes – out-of-specification coals and distressed cargoes, which help keep costs down for the business and consumers. We do this for both coal and biomass. This is a good example of how our commercial and operational teams work together to identify opportunities to create value for the business, as these fuels typically require more complex handling processes.
You can follow the market and see prices at electricinsights.co.uk
STRATEGY IN PROGRESS
Repowering away from coal
Options for Drax Power Station to operate into the late 2030s and beyond moved up a gear in 2017 with the development of an option to repower two coal units to gas. Drax gave notice of the nationally significant infrastructure project to the Planning Inspectorate in September 2017. One of the units could be eligible for the capacity market auction planned for December 2019.
Local community consultations began in November 2017 and continued in February 2018 on options including up to 3.6GW of new gas generation capacity, a gas pipeline and 200MW of battery storage in line with Government plans to end non-compliant coal generation by 2025 and Drax Group’s strategy of playing a vital role in the future energy system.
Find out more: repower.drax.com
Operational review
Overall, we delivered a good performance during 2017 and maintained a strong safety performance.
We completed a major planned outage on the unit supported by the CfD contract. This unit provides stable and reliable baseload renewable electricity to the network and long-term earnings visibility for the Group. The safe and efficient completion of these complex works is a credit to those involved and reflects our continued focus on opportunities for improvement and efficiencies.
The entire organisation has responded to a number of challenging unplanned events. Most notably, in December we experienced a fire on a section of conveyor at our biomass rail unloading facility and consequently an unplanned outage from late December 2017 to mid-January 2018. Following investigation and recommissioning, the facility has returned to service with enhanced operating procedures. Although this issue did not relate to the operation of the biomass-generating units, the resulting restriction on fuel deliveries by rail required the optimisation of generation across our biomass units, resulting in lower EBITDA and full year biomass availability than our target for the year.
Financial results
Financial performance has significantly improved, with EBITDA of £238 million (2016: £174 million), principally due to the CfD mechanism.
Value from flexibility was below our target for the year, principally reflecting a lower level of Ancillary Service payments versus 2016.
Our operational performance drives the results. The financial impact of the unplanned outage on the rail unloading facility was mitigated by optimisation of our available biomass and the use of additional generation capacity retained for self-insurance purposes. However, this incident is a reminder of the need to invest appropriately to maintain a high level of operational availability and flexibility.
At the operating cost level, we have reduced costs reflecting the efficient single outage and our focus on the implementation of lean management techniques.
Power Generation financial performance
| 2017 £m | 2016 £m |
|
|---|---|---|
| Revenue | 2,719.6 | 2,490.9 |
| Cost of power purchases | (891.2) | (904.4) |
| Grid charges | (62.9) | (69.4) |
| Fuel and other costs | (1,367.1) | (1,180.1) |
| Cost of sales | (2,321.2) | (2,153.9) |
| Gross profit | 398.4 | 337.0 |
| Operating costs | (160.9) | (163.2) |
| EBITDA | 237.5 | 173.8 |
Key performance indicators
| Area | KPI | Unit of measure | 2017 | 2016 |
|---|---|---|---|---|
| Operations | Biomass unit technical availability | % | Below target | Below target |
| Operations | Value from flexibility | £m | 88 | N/A |
Looking ahead
We aim to optimise returns from our core assets, through reliable, flexible, low-carbon energy solutions which provide a long-term solution to the UK’s energy needs. Alongside this, value in the generation market will be created from an ability to execute agile decisions and capture value from volatile short-term power markets.
We will also continue to explore opportunities for lower carbon generation, to exploit our strengths and create opportunities for the long term. To that end we will continue to develop options for gas and pursue efficiencies through our biomass supply chain.
Performance review: B2B Energy Supply
Our B2B Energy Supply business – comprised of Opus Energy and Haven Power – is the fifth largest B2B power supplier in the UK. As the power system transforms, we will be working closely with our customers to help them adapt to a world of more decentralised and decarbonised power. The key factors influencing our business are regulation, competition and our operational performance.
Regulation and competition
The UK Government’s main focus has been on what it sees as unfair treatment of domestic consumers on legacy standard variable tariff (SVT) contracts. The Government will take forward legislation which will provide the regulator Ofgem with the authority to cap these domestic tariffs. SVTs are not a feature of our business. Our focus remains on the B2B market. At the microbusiness end of the market, which is closer in proximity to domestic, most of our customers are on fixed price products and are actively rather than passively renewing their power supply contracts.
The B2B market remains competitive with 65 different suppliers across the market. Our Haven Power and Opus Energy businesses offer customer-centric power, gas and services. We offer simplicity and flexibility across our products and actively engage with customers to help them manage their energy requirements and reduce carbon emissions.
STRATEGY IN PROGRESS
An innovative energy supplier
90% of the electricity that Opus Energy supplied last year came from clean, renewable sources, at no extra cost to their predominantly small and medium-sized business customers. For those customers who want it, 100% renewable energy contracts are also available.
This was exactly what All Saints Church in Ascot was looking for to power their business.
Assistant Church Warden, Chris Gunton, commented:
“We wanted to move to a greener energy supplier, without paying a premium, so approached an energy broker for guidance. They advised us that Opus Energy were a reliable company with a good reputation, and when we asked for a quote they were the most competitive.”
It was a similar story for the Salisbury Museum, in Wiltshire. Nicola Kilgour-Croft, Finance Manager, said:
“We were looking for an energy supplier that offered great value, combined with the right length of contract and good ethics. Opus Energy ticked all these boxes for us.”
Alongside supplying customers, Opus Energy has Power Purchase Agreements with over 2,300 independent UK renewable energy generators. These could be anything from a single wind turbine owned by a village community, to Europe’s greenest zoo, Hamerton Zoo Park.
Commented Andrew Swales, Director of Hamerton Zoo:
“Working with Opus Energy has given us competitive prices, considerably better documentation and a highly efficient service. We’d happily recommend them.”
Operational review
We have remained focused on delivering an excellent standard of customer service, which is central to our proposition.
February 2017 saw the completion of the acquisition of Opus Energy, which has made good progress integrating into the Group supported by a dedicated team, who have been working on systems, people and commercial projects to ensure our processes work effectively together.
In March we completed the purchase of a new office facility in Northampton, enabling the consolidation of four Opus Energy offices into one and the centralisation of the operational teams.
Sales volumes at Opus Energy were lower than target, reflecting our focus on margin which has remained strong and customer renewal rates were towards the high end of expectation. This reflects the continued commitment to a strong level of customer service and in recognition of this Opus Energy was awarded Utility Provider to Small Businesses of the Year 2017 at the British Business Awards.
At Haven Power we have continued to focus on value-adding flexible products and services particularly to Industrial & Commercial customers whose needs extend beyond commodity supply.
This is demonstrated through our ability to help customers manage and optimise their power consumption profiles through collaboration with our carefully selected partners. Through better systems and services, customer targeting and a keener focus on cost to serve we are driving efficiencies and improved margin at Haven Power.
Following the acquisition of Opus Energy the major Enterprise Resource Platform (ERP) system upgrade was re-planned which has led to a revised timeline from Q2 2018 onwards.
We continue to actively manage credit risk by assessing the financial strength of customers and applying rigorous credit management processes, with a strong focus continuing to be placed on billing and cash collection.
Health and safety remains an area of focus for the business and we continue to target a reduction in the level of recordable incidents.
Financial results
Financial performance has significantly improved, with EBITDA of £29 million in line with our guidance (2016: £4 million negative). This was principally due to the acquisition of Opus Energy, which added 10 months of EBITDA, but also improved financial performance from Haven Power, which was ahead of plan.
Third Party Costs (TPCs) include grid charges, the cost of meeting our obligations under the Renewable Obligation (RO) and small-scale Feed-in-Tariff schemes. Grid charges include distribution, transmission and system balancing costs. TPCs have continued to increase and now account for 50% of revenue.
Total operating costs have risen with the acquisition of Opus Energy. We remain confident that over time the benefits of common platforms and knowledge sharing will lead to efficiencies.
B2B Energy Supply financial performance
| 2017 £m | 2016 £m |
|
|---|---|---|
| Revenue | 1,999.0 | 1,326.4 |
| Cost of power purchases | (883.7) | (688.9) |
| Grid charges | (435.8) | (310.4) |
| Other retail costs | (562.1) | (303.6) |
| Cost of sales | (1,881.6) | (1,302.9) |
| Gross profit | 117.4 | 23.5 |
| Operating costs | (88.0) | (27.8) |
| EBITDA | 29.4 | (4.3) |
Key performance indicators
| Area | KPI | Unit of measure | 2017 | 2016 |
|---|---|---|---|---|
| Operations | Implementation of new ERP (Haven Power) | Date | Q2 2018 | N/A |
| Operations | Sales volume (Opus Energy) | TWh | 5.7 | N/A |
| Operations | Renewal rate (Opus Energy) | % | Above Target | N/A |
Looking ahead
In 2018 we will focus on Opus Energy on-boarding, systems development and the roll out of smart meters.
We continue to see opportunities for EBITDA growth in the B2B markets, which we will deliver through our customer-focused supply proposition.
Outlook
Our focus in 2018 remains on the delivery of our strategy and long-term ambitions for earnings growth, underpinned by safety, sustainability, operational excellence and expertise in our markets. We also recognise that being the most efficient operator in each of our markets is a key factor in our success.
Our objective in Pellet Production remains the commissioning of LaSalle, the production of good quality pellets at the lowest cost, cross-supply chain optimisation and identifying attractive options to increase self-supply.
Our biomass proposition is strong – reliable, flexible, low-carbon renewable electricity and system support which, combined with an effective fuel hedging strategy, will provide long-term earnings visibility. We remain focused on ways to increase supply chain efficiency and make biomass competitive beyond 2027. As part of this we remain focused on the optimisation of our assets in the US Gulf and reduction in pellet cost. To support this focus we are moving our US headquarters from Atlanta to Monroe, Louisiana, which benefits from a much closer proximity to these assets.
In Power Generation, we continue to explore ways to optimise our existing operations, whilst meeting the needs of the changing UK electricity system.
We remain supportive of the UK Government’s decarbonisation targets and will continue our work to deliver four OCGTs and a low-cost biomass unit conversion utilising existing infrastructure at Drax Power Station, alongside developing the option to repowering the remaining coal units to gas.
In B2B Energy Supply, we will continue to grow our B2B offering, with significant opportunities to grow market share. At the same time, we will invest in supporting infrastructure to ensure we can continue to grow, offer market-leading digital propositions and smart metering services.
2018 priorities
Pellet Production
- Commissioning of LaSalle Bioenergy
- Development of options for optimisation and efficiencies
- Consistent production and quality of pellets
- Continued cost reduction and improvement in EBITDA
Power Generation
- Reliable biomass generation
- Development of fourth biomass unit
- System support services
- Development of OCGT options
- Development of coal-to-gas repowering option
- Continued cost reduction and growth in EBITDA
B2B Energy Supply
- Development of value-added services
- Continued cost reduction and growth in EBITDA
- Investment in systems to support growth and Smart compliance
We have made good progress on the delivery of our strategy and will continue to build on this as we progress our targets for 2025, whilst playing an important role in our markets and helping to change the way energy is generated, supplied and used.
Read the Drax Group plc annual report and accounts 2017
Fourth biomass unit conversion
RNS Number : 1114C
Drax Group PLC
Drax welcomes the UK Government response to the consultation on cost control for further biomass conversions under the Renewable Obligation scheme, which will enable Drax to convert a fourth unit to biomass.
The response proposes that, rather than imposing a cap on ROC(1) support for any future biomass unit conversions, a cap would be applied at the power station level across all ROC(1) units. This would protect existing converted units and limit the amount of incremental ROCs attributable to additional unit conversions to 125,000 per annum.
The response would enable Drax to optimise its power generation from biomass across its three ROC units under the cap, whilst supporting the Government’s objective of controlling costs under the Renewable Obligation scheme.
Drax will now continue its work to deliver the low cost conversion of a fourth biomass unit, accelerating the removal of coal-fired generation from the UK electricity system, whilst supporting security of supply.
Drax plans to complete the work on this unit as part of a major planned outage in the second half of 2018, before returning to service in late 2018. The capital cost is significantly below the level of previous conversions, re-purposing the existing co-firing facility on site to deliver biomass to the unit.
The unit will likely operate with lower availability than the three existing converted units, but the intention is for it to run at periods of higher demand, which are often those of higher carbon intensity, allowing optimisation of ROC(1) generation across three ROC(1) accredited units. The CfD(2) unit remains unaffected.
Will Gardiner, Chief Executive of Drax Group, commented:
“We welcome the Government’s support for further sustainable biomass generation at Drax, which will allow us to accelerate the removal of coal from the electricity system, replacing it with flexible low carbon renewable electricity.”
“We look forward to implementing a cost-effective solution for our fourth biomass unit at Drax.”
Enquiries:
Investor Relations:
Mark Strafford
+44 (0) 1757 612 491
Media:
Ali Lewis
+44 (0) 1757 612 165
Website: www.drax.com
Notes
- Renewable Obligation Certificate
- Contract for Difference
END
Refurbishing a 300-tonne generator core within the heart of a power station
At the centre of Drax Power Station, in a corner of the cavernous turbine hall, is a white box. The inside of this box is spotlessly clean. Not only are its white walls free of dirt, they are free of even dust. But there is one outlier inside this sterile environment: a 300-tonne chunk of industrial equipment.
This equipment is a generator core – the central component for converting the mechanical energy to electrical power.
The core is driven by the steam turbine. Ninety tonnes of generator rotor spinning at 3,000 rpm with just millimetres of clearance from the core produce 660 megawatts (MW) of electricity. That’s enough – 645 MW when exported from Drax into the National Grid – to power a city the size of Sheffield.
The generator is a serious piece of industrial machinery. And despite the pristine conditions, this white box is the site of serious engineering.
A process normally done by large-scale manufacturers in dedicated factories, ‘rewinding’ a generator core – as the process is called – is a major operation.
No other UK facility is capable of doing this complex job. So it’s here, in a white box, in the middle of an operational power station in North Yorkshire, that a team of engineers is undertaking work that will secure the generator’s use for decades. This is the Drax rewinding facility.
How a generator works
A generator consists of two main components, a spinning rotor and a stationary stator. The rotor, which is directly connected to the main turbine and spins 50 times every second, sits inside the stator. Both the stator and the rotor contain a large number of copper coils known as windings. These windings are what carry the electrical current.
The rotor acts like a very strong electromagnet, which, when a voltage is applied, produces a strong magnetic field. Because the rotor sits inside the stator, this magnetic field intersects the copper windings of the stator and induces a voltage in these windings, allowing current to flow. This voltage is then brought out of the stator and passed through a step-up transformer, where it is increased to a level suitable for transmission through the National Grid.
The stator core is made from many elements with hundreds of thousands of laminations, 84 water-cooled insulated copper bars, each 11 metres long and weighing 200kg forming the windings, various insulating materials, blocks, packing, wedges and condition monitoring equipment.
Generator stators can operate for decades without fault.
DIY at Drax
In 2016, a team of engineers at Drax embarked on a project to construct a facility to rewind the stator on site. This required cross-company collaborative working to design and construct this huge purpose built facility.
Contamination can cause operational problems, so the team built a sterile, white room within the turbine hall – one of just two places within the power station with foundations strong enough to support the incredible 450 tonnes required for the rewind facility. Designed to hold the stator core and the conductor bars, air is forced out of the room to limit the possibility of contamination to the core during the rewind.
“When the unit is in service it becomes magnetic, so any metallic particles left in the space will be attracted to the core,” explains Drax electrical engineer Thomas Walker. “Once magnetised, any metal particles could be drawn in, burrowing into the insulation and core lamination.”
This is the kind of event that an electricity generator wants to avoid – but when it happens, be prepared to fix it.
Roll with it
When Drax’s stators were manufactured in the 1980s, completing their construction relied on manual handling techniques. Modern day facilities, however, rotate the core to minimise human contact.
It took just six months for a partnership involving Drax, Siemens and ENSER to manufacture what could be the largest stator rollers in the world and within that time, ship them from the US to North Yorkshire.
With the rollers installed, the next step was to move in the core. Two of the turbine hall’s cranes, each capable of lifting 150 tonnes, were combined to lift it, hoisting the core onto the mechanical ‘roller’ within the rewind facility.
Once in place, the roller rotates the core, allowing for the copper conductor bars to be safely removed and inserted. Despite this mechanical help, the removing and replacing of each one is still at its heart a human job.
“We still need 10 men to physically move the conductor bars with lifting aids, which makes it not an easy process,” says Walker. Using this method, the bars weighing 200kg each can be safely and precisely fitted into the core.
Opting for in-house
Rewinding a stator is a complex process. However, when the time, logistics and costs of shipping the core to Siemens – the German-based manufacturers – was factored in, the decision to do the work at Drax Power Station was an easy one.
“A 300-tonne core is not easy to transport and the Highways Agency do not like things like that on the roads. They’d want us to use waterways” says Drax lead engineer Mark Rowbottom. “Logistically it just wasn’t worth it. It’s too much money to move and ship that weight to Germany. So, we looked at what we could do onsite.”
More than just an economical and logistical decision and with the UK’s diminishing manufacturing facilities, Drax is now equipped to support generator rewinds for many years to come. Building and operating the rewind facility was a project that leveraged the engineering abilities of Drax employees. They are increasingly doing engineering traditionally outsourced to equipment manufacturers.
“The experience we have gained and the close working relationship we have established with Siemens enables us to support the generator for the remaining life of the station,” says Rowbottom.
“To see the core in that many pieces and stripped down to this level is very rare,” says Walker, who began working at the plant as an apprentice. Of the 84 conductor bars, half have been fitted, and the team is scheduled to complete the stator rewind in early 2018. “I never thought I’d do anything like this but am proud to say that I’ve done it.”
