Drax considering CCS on US wood pellet plant

UK power producer Drax is considering an option to build a carbon capture and storage (CCS) facility on an existing pellet plant in Louisiana, US. It aims to take a final investment decision (FID) in the coming two years and commission the site in 2026.

The company expects to remove 100,000 t/yr of CO2 through this investment, "providing an early demonstration of the technology", it said in a press statement ahead of its capital markets day on 23 May. The capital cost of the project is estimated at $150mn. This will help "fulfil the increasing demand for carbon dioxide removals (CDR) in the mid-2020s", chief innovation officer Jason Shipston said.

Drax also has plans for two newbuild bioenergy with CCS (Beccs) power plants, which could capture a combined 6mn t/yr of CO2 by 2030.

Total investment for each plant would be around $2bn, which includes the construction of a power generating unit and the CCS systems. It is aiming to reach an FID on both projects in 2026 and begin commercial operations by 2030, Drax said during the capital markets day. This is later than the start-up dates Drax announced in September, of 2028 and 2029.

The design of the newbuild Beccs plants will enable a wider choice of biomass feedstock to be used, such as wood chips, Drax said. The chosen location is close to sources of sustainable biomass, and carbon dioxide will be removed permanently from the two sites. These factors are expected "to significantly reduce operating costs of the newbuild Beccs units", compared with retrofit units, the firm said.

The two newbuild sites and Drax's Beccs project in the UK will contribute to a combined goal of 14mn t/yr of CO2 removal by 2030. Drax is also evaluating nine other Beccs sites in north America, "creating a pipeline of development opportunities into the 2030s".

Drax has been testing Beccs at its 2.6GW wood pellet-fired power plant in Selby, North Yorkshire since 2018, and plans to invest £2bn ($2.5bn) in the project. The plant would remove 8mn t/yr of CO2 by 2030. The project did not progress to the next stage of the UK government's funding programme for carbon capture developments — the so-called Track 1 phase — but Drax and the government are in bilateral talks and the government is expected to take a decision on the project by the end of the summer.

FIDs for all of Drax's projects would be subject to each achieving its stated milestones, including progress on commercial arrangements and clarity on regulatory and funding mechanisms, Drax said.

Financing US Beccs

Drax aims to combine a number of financing options to fund its Beccs projects in the US, including power purchase agreements, long-term CDR offtake agreements and a direct pay tax incentive under the US' inflation reduction act (IRA). The IRA, which was approved in August 2022, sets financial support for Beccs at $85/short US tonnes ($93.50/metric tonnes) of removed and permanently sequestered CO2 from fuel combustion by any new CCS facility built within the next 10 years.

Drax "believes that the role of high-quality, permanent removals, such as Beccs and direct air CCS, will grow significantly as governments and companies take action to address their own carbon footprints", it said.

The firm earlier this year signed an initial agreement with environmental consultant C-Zero Markets for the sale of 2,000t of carbon removal credits from Drax's first US Beccs project, which puts the credits at $300/t. It also signed an agreement in September with carbon market investment firm Respira to supply the voluntary carbon market with up to 2mn t of CDRs over a five-year period from Drax's US Beccs projects.

Drax has hired 80 employees across the US and Canada and is in the process of establishing a global Beccs headquarters in Houston, Texas. The firm is also assessing options for Beccs on existing non-Drax assets and is continuing to screen other regions, including Europe and Australasia, it said.

Drax aims to become a carbon-negative company by 2030 by being a "global leader in carbon removals and sustainable biomass pellets, and a UK leader in dispatchable renewable generation", it said.

Drax's outlook for 2023 remains unchanged from its trading update in April.

By Hannah Adler