Power BECCS Business Model

25 Apr 2025 | Committee report linked

We are not convinced the transitional support agreement between DESNZ and Drax provides good value for money for consumers. Government announced in February 2025 that it had agreed heads of terms for a deal to support Drax that will run from 2027 to 2031. The new support package means Drax will only be supported to operate for a maximum of 27% of the time, meaning that Drax will be operating less than half as often as it currently does. Government estimates that this will save each household ...

We are not convinced the transitional support agreement between DESNZ and Drax provides good value for money for consumers. Government announced in February 2025 that it had agreed heads of terms for a deal to support Drax that will run …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

The deployment of BECCS has been repeatedly delayed, even though it remains a key part of the government’s plans to decarbonise the UK. The Climate Change Committee (CCC) and DESNZ both see BECCS as essential to the UK achieving its decarbonisation goals from Carbon Budget 6 (2033–37) onwards. Government initially planned for the first BECCS plant in the UK to begin operations by 2030. However, this date will not be achieved and government has yet to settle on a new target date. There are no ...

The deployment of BECCS has been repeatedly delayed, even though it remains a key part of the government’s plans to decarbonise the UK. The Climate Change Committee (CCC) and DESNZ both see BECCS as essential to the UK achieving its …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

We also received a high number of written submissions from stakeholders.8 Particular concerns drawn to our attention included: a. the impact of biomass production on biodiversity, forest stocks and the environment more generally. b. the terms of the agreement for transitional support to Drax power station from 2027 to 2031 that government recently announced. c. the role played by smaller biomass power stations in the UK in providing heat and power and how they contribute to waste disposal. d....

We also received a high number of written submissions from stakeholders.8 Particular concerns drawn to our attention included: a. the impact of biomass production on biodiversity, forest stocks and the environment more generally. b. the terms of the agreement for …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

DESNZ is clear that the agreement is intended to improve on current arrangements. Firstly, Drax will play a smaller role in the power system than it currently does. This means that Drax will receive support for a maximum of 27% of the time in each year, less than half of the time it currently does (which DESNZ estimates will save each household around £6 a year). This reduction also accords with CCC advice that unabated biomass should not be supported at high load factors after 2027. Secondly...

DESNZ is clear that the agreement is intended to improve on current arrangements. Firstly, Drax will play a smaller role in the power system than it currently does. This means that Drax will receive support for a maximum of 27% …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

Despite the new terms of the agreement, there are risks that the support will not offer consumers value for money. The agreement was reached through bilateral negotiations with Drax and included no element of competition.56 While the government claims that the new arrangements will reduce consumer subsidies to Drax, it will be paid £113 per megawatt hour (in 2012 prices) for the electricity it generates–far more than will be paid to offshore windfarms and other renewable generators under rece...

Despite the new terms of the agreement, there are risks that the support will not offer consumers value for money. The agreement was reached through bilateral negotiations with Drax and included no element of competition.56 While the government claims that …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

An investigation conducted by Bloomberg in 2022 concluded that Drax may previously have gamed its support to the detriment of consumers. It found that Drax shut down power generation and sold wood pellets on the open market to avoid paying back £639 million of subsidies as wholesale electricity prices spiked. Although DESNZ reassured us that the new arrangements will be more robust, it did not offer any explanation of how it had made sure that there would be no loopholes that allow Drax to co...

An investigation conducted by Bloomberg in 2022 concluded that Drax may previously have gamed its support to the detriment of consumers. It found that Drax shut down power generation and sold wood pellets on the open market to avoid paying …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

There are other factors which cast doubt on whether the government has reached a good deal. The new support agreement with Drax reduces the level of allowed supply chain emissions for the fuel it burns, from 55.6 grams of CO2 per megajoule to 36.6 grams.60 While DESNZ said that this is in line with international best practice, historically Drax has achieved supply chain emissions below this new level so it is not clear if this change will have any effect.61 We also note that the agreement doe...

There are other factors which cast doubt on whether the government has reached a good deal. The new support agreement with Drax reduces the level of allowed supply chain emissions for the fuel it burns, from 55.6 grams of CO2 …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

Combining power generation using sustainably sourced biomass with carbon capture and storage (CCUS) has the potential to generate ‘negative emissions’–i.e. it could reduce the overall amount of CO2 in the atmosphere.65 Both the government and the Climate Change Committee (CCC), which advises the government on how best to achieve its decarbonisation goals, believe that BECCS will be essential for the UK 58 Letter from Drax, 17 March 2025 59 Q 42 60 Q 3 61 Q 3 and Drax Power, Response to CCC Bi...

Combining power generation using sustainably sourced biomass with carbon capture and storage (CCUS) has the potential to generate ‘negative emissions’–i.e. it could reduce the overall amount of CO2 in the atmosphere.65 Both the government and the Climate Change Committee (CCC), …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

The government had initially planned for BECCS plant to begin operating at scale in 2030 as part of its broader CCUS programme.68 However, as the first phase of the CCUS programme (known as Track 1) does not include a BECCS plant, this target date will not how be achieved.69 DESNZ has not set a revised target date and it is not clear whether a BECCS plant will be supported in a later phase of the CCUS programme.70

The government had initially planned for BECCS plant to begin operating at scale in 2030 as part of its broader CCUS programme.68 However, as the first phase of the CCUS programme (known as Track 1) does not include a BECCS …

▤ View document · ↗ GOV.UK

25 Apr 2025 | Committee report linked

While much of the debate around biomass has focused on Drax, we received several written submissions outlining the important role played by smaller biomass generators in the UK. There are at present 54 regional biomass power stations that are primarily fuelled by waste wood from household waste recycling plants. These provide enough electricity to power 1.5 million homes.71 The government support for these power stations will begin to phase out from 2027 and it is not clear what support gover...

While much of the debate around biomass has focused on Drax, we received several written submissions outlining the important role played by smaller biomass generators in the UK. There are at present 54 regional biomass power stations that are primarily …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

While the Department is taking steps to incentivise efficient delivery of the CCUS projects, it has not established mechanisms to make sure that taxpayers and consumers will benefit financially should the programme be successful. The Department has developed a range of business models for applying CCUS to a range of sectors. The models form the basis of negotiations between the Department and the private sector 4 and outline how risks will be allocated between the different parties and set th...

While the Department is taking steps to incentivise efficient delivery of the CCUS projects, it has not established mechanisms to make sure that taxpayers and consumers will benefit financially should the programme be successful. The Department has developed a range …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

The Department and HM Treasury lack clarity on how they would take account of project underperformance and advances in scientific understanding as part of their ongoing assessment of the programme’s future. The Department had a clear set of five factors it considered when assessing the value for money of the first two clusters and then the individual projects it selected as part of Track 1 of the programme. The Department and HM Treasury were also clear that projects would be subject to a fur...

The Department and HM Treasury lack clarity on how they would take account of project underperformance and advances in scientific understanding as part of their ongoing assessment of the programme’s future. The Department had a clear set of five factors …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Energy Security and Net Zero (the Department) on its carbon capture, usage and storage programme.1

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Energy Security and Net Zero (the Department) on its carbon capture, usage and storage programme.1 Type: conclusion | Number: 1 | …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

Given the scale of the funding announced for the first five projects and the size of the contingent liabilities that the Department has recognised for its underwriting of the programme, the potential costs to taxpayers and consumers are huge. The Department intends to manage the risks through a series of business models that it has developed for each sector that CCUS 14 Q 12 15 C&AG’s Report, para 1.5 16 Q 12 17 C&AG’s Report, para 14 18 Government reignites industrial heartlands 10 days out ...

Given the scale of the funding announced for the first five projects and the size of the contingent liabilities that the Department has recognised for its underwriting of the programme, the potential costs to taxpayers and consumers are huge. The …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

The Department established business models on which to base its support for each of the projects in the programme’s Track 1.28 These models set out how costs and risks are distributed between the government and the project.29 The Department told us that it had separate business models for transport and storage, and then for different types of emitter, such as power.30 It told us that its approach enabled it to bring in investors which were suitable for different parts of the programme and to ...

The Department established business models on which to base its support for each of the projects in the programme’s Track 1.28 These models set out how costs and risks are distributed between the government and the project.29 The Department told …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

Looking to the future, the Department told us it wants to move the balance of risk away from the government as the market for CCUS evolves.33 The Department’s current assessment is that, because projects are first–of–a– kind, there is an inherent risk [of failure] which the market will not take on and therefore its support is appropriate.34 The Department wants to move away from projects financially backed by the government.35 It wants to establish what it describes as a self–sustaining “…com...

Looking to the future, the Department told us it wants to move the balance of risk away from the government as the market for CCUS evolves.33 The Department’s current assessment is that, because projects are first–of–a– kind, there is an …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

We asked the Department whether its business models allow for the government to take a share of any profit a project makes if the programme is successful.37 But the Department could not provide a compelling answer.38 Now that the Department has signed its first two contracts for carbon capture and storage, this will produce an “incredibly better investment” scenario for the private sector in the second tranche, which should encourage the Department to think about, for example, profit shares a...

We asked the Department whether its business models allow for the government to take a share of any profit a project makes if the programme is successful.37 But the Department could not provide a compelling answer.38 Now that the Department …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

The Department told us it expects around three quarters of the allocation of financial support of almost £22 billion will be from levies on consumers (such as those using power generated by the Net Zero Teesside project).46 The remaining 25% will come from the Exchequer.47 However, the Department does not yet know the precise balance of funding between the consumer and taxpayer as this will depend on the final terms of the contracts it signs with projects.48 And uncertainty remains around the...

The Department told us it expects around three quarters of the allocation of financial support of almost £22 billion will be from levies on consumers (such as those using power generated by the Net Zero Teesside project).46 The remaining 25% …

▤ View document · ↗ GOV.UK

7 Feb 2025 | Committee report linked

The original 2030 targets for the CCUS programme, which the government has now told us are unachievable, included a goal for the UK to achieve 5 mtpa of engineered greenhouse gas removals. The bulk of this was expected to be achieved by applying CCUS technology to a biomass energy plant (a process known as BECCS).72 There are no BECCS projects included in Track 1, but the Department told us that it remained under consideration for its future plans.73 Ofgem administers the existing government ...

The original 2030 targets for the CCUS programme, which the government has now told us are unachievable, included a goal for the UK to achieve 5 mtpa of engineered greenhouse gas removals. The bulk of this was expected to be …

▤ View document · ↗ GOV.UK

26 May 2024 | Committee report linked

Although DESNZ clarified that gas networks will be needed for some considerable time, it accepted that it needed to increase its work to look at future decommissioning. The NAO found that DESNZ’s work on the costs and feasibility of gas network decommissioning was in the initial stages, and its understanding was therefore limited. DESNZ indicated that it had a consultation underway with Ofgem to identify the early issues around decommissioning the gas network.71 Our previous reports have demo...

Although DESNZ clarified that gas networks will be needed for some considerable time, it accepted that it needed to increase its work to look at future decommissioning. The NAO found that DESNZ’s work on the costs and feasibility of gas …

▤ View document · ↗ GOV.UK

21 Jun 2023 | Committee report linked

The Department has not yet set out how it expects decarbonising the power sector will impact energy bill payers and taxpayers. While government recognises that initially it will rely heavily on private investment to fund the clean energy transition, the costs to build, maintain and operate the power system are typically passed onto consumer bills. The Climate Change Committee has estimated that future capital expenditure costs will increase running up to 2035 and then decrease along with oper...

The Department has not yet set out how it expects decarbonising the power sector will impact energy bill payers and taxpayers. While government recognises that initially it will rely heavily on private investment to fund the clean energy transition, the …

▤ View document · ↗ GOV.UK

28 Apr 2023 | Committee report linked

An overarching delivery plan for the decarbonisation of power, with clear milestones and contingencies, will help the Government bring a complex set of interrelated tasks together. At the moment, decisions are taken on specific technologies or issues in silos without a roadmap for the whole system. This has led to sequencing problems and a failure to take ownership of whole system costs. This was illustrated by National Grid ESO confirming significant constraint payments, largely stemming fro...

An overarching delivery plan for the decarbonisation of power, with clear milestones and contingencies, will help the Government bring a complex set of interrelated tasks together. At the moment, decisions are taken on specific technologies or issues in silos without …

▤ View document · ↗ GOV.UK

28 Apr 2023 | Committee report linked

The Government’s aim for 70 GW of solar capacity to be installed by 2035 is welcome. Achieving this goal will require the UK to ramp up the pace at which new solar capacity is deployed. We therefore welcome the Government’s announcement of a solar roadmap and the establishment of a dedicated government/industry taskforce. We strongly welcome the Government’s clarification that it is not planning to change the classification of agricultural land in ways which would constrain the expansion of t...

The Government’s aim for 70 GW of solar capacity to be installed by 2035 is welcome. Achieving this goal will require the UK to ramp up the pace at which new solar capacity is deployed. We therefore welcome the Government’s …

▤ View document · ↗ GOV.UK

28 Apr 2023 | Committee report linked

We agree that the Government should seek to maximise the renewable opportunities afforded by the UK’s geography, including the potential benefits of tidal energy. Unlike offshore wind, tidal stream projects have not benefited from stable subsidies to bring their costs down. The Government’s recent decision to reduce the tidal steam ringfence from £20 million to £10 million in the upcoming round of Contracts for Difference scheme may damage the UK’s first-mover advantage in marine energy and i...

We agree that the Government should seek to maximise the renewable opportunities afforded by the UK’s geography, including the potential benefits of tidal energy. Unlike offshore wind, tidal stream projects have not benefited from stable subsidies to bring their costs …

▤ View document · ↗ GOV.UK

28 Apr 2023 | Committee report linked

The British Energy Security Strategy set an ambition for the UK to deploy 24 GW of civil nuclear power by 2050. This significantly raised the level of the Government’s ambition on nuclear power, above estimates suggested by the Climate Change Committee and others. But to be an effective part of a low-carbon, secure and affordable electricity mix, the cost of nuclear power must come down. Nuclear projects in the UK and elsewhere have been beset with delays and overspends.

The British Energy Security Strategy set an ambition for the UK to deploy 24 GW of civil nuclear power by 2050. This significantly raised the level of the Government’s ambition on nuclear power, above estimates suggested by the Climate Change …

▤ View document · ↗ GOV.UK

28 Apr 2023 | Committee report linked

Bioenergy with carbon capture and storage has yet to be commercially deployed in the UK. We have concerns about whether biomass feedstocks can be scaled up sustainably to meet domestic and global demand and whether BECCS facilities will provide value for money. To ensure sufficient oversight of sustainability standards, the UK needs to develop domestic supplies of feedstocks. We do not oppose the use of BECCS for power in principle, but future taxpayer support for BECCS must be contingent on:...

Bioenergy with carbon capture and storage has yet to be commercially deployed in the UK. We have concerns about whether biomass feedstocks can be scaled up sustainably to meet domestic and global demand and whether BECCS facilities will provide value …

▤ View document · ↗ GOV.UK

28 Apr 2023 | Committee report linked

We urge the Government to ensure that there is a robust contingency plan in place if BECCS proves unviable, either in terms of its sustainability or efficiency. We urge the Government not to rely upon unproven technologies at the expense of other simpler and cheaper approaches, which could be taken now, such as deploying measures to Decarbonisation of the power sector 105 reduce energy demand.

We urge the Government to ensure that there is a robust contingency plan in place if BECCS proves unviable, either in terms of its sustainability or efficiency. We urge the Government not to rely upon unproven technologies at the expense …

▤ View document · ↗ GOV.UK

5 Jan 2023 | Committee report linked

The converted Drax power station provides 12% of the UK’s renewable power from the burning of wood pellets. This source of power is reliable and flexible and supports more intermittent renewables, such as wind and solar. However, we note that concerns have been raised about its sustainability and short-term climate impact of burning wood pellets. We are currently examining these concerns as part of a separate inquiry.

The converted Drax power station provides 12% of the UK’s renewable power from the burning of wood pellets. This source of power is reliable and flexible and supports more intermittent renewables, such as wind and solar. However, we note that …

▤ View document · ↗ GOV.UK