Drax warned it will not get preferential treatment after £2 billion project rejected by Government

Grant Shapps, the Energy Secretary, yesterday unveiled eight projects that use carbon capture technology to reduce emissions, with the Yorkshire-based power plant left disappointed not to be selected.

The project would see as many as 10,000 jobs created by implementing its carbon capture for biomass energy project (BECCS) under Drax’s plans to deliver the project by 2030.

The rejection of BECCS from the Government’s list of “Track-1” projects was due to “infrastructure constraints” according to an energy minister, but will see the company speak to officials about how the company can get onto future rounds of funding this year.

The plans submitted to officials last year received the backing of Rishi Sunak during the summer’s Conservative leadership campaign.

Ministers yesterday were warned that the decision not to include Drax or any Humberside projects on its list has cost the region £15 billion in investment.

Following the announcement, Drax released a statement saying that it had entered into “formal bilateral discussions” with the Government “to move the project forward”.

Officials also revealed that the Drax had passed the project assessment for its proposal based on its deliverability.

It comes after the company paused its investment into its BECCS project until it was given “Track-1” status by ministers, amid speculation that the company would look abroad for more generous incentives, such as in the US.

“With the right engagement from Government and swift decision making, Drax stands ready to progress our £2bn investment programme and deliver this critical project for the UK by 2030,” said its CEO Will Gardiner.

However, the Government later warned that there would be no preferential treatment for companies like Drax during negotiations discussions over the two future rounds of funding from the Government’s £20 billion pot announced in the budget.

A Department for Energy Security and Net Zero spokesperson said: “No company can circumvent the process.”

“The Track-1 clusters announced as part of our Powering Up Britain package are not the end of our ambition, and conversations with companies such as Drax focus on future deployment options.

“Any decision to award support is subject to factors such as compliance with eligibility criteria and assessment of value for money.”

Nigel Adams, the MP for Selby, told MPs that the decision would come as a “surprise to many” and a blow to its employees in Yorkshire.

He said that the company would now have to “urgently consider what to do with its UK operations”.

Subsidies for biomass energy producers such as Drax are set to end in 2027, with the Government’s climate watchdog warning that the deadline must not be extended.

However, when asked why the BECCS project had not been green-lit, in addition to any carbon capture projects based around Humberside, Graham Stuart, the energy minister said that the technology was “critically important to this country”.

“The department totally understands that we need to work with Drax on a bridging option between 2027 and 2030 and the Secretary of State has charged our officials with working with Dax on what those options look like,” he added.

Henri Murison, Chief Executive of the Northern Powerhouse Partnership, said: “While we’re pleased that a number of Teesside projects have been selected for Track-1 status, we’re at a loss to see why the Humber has been missed out entirely.

“It means we’ll lose out on £15 billion in private investment - £2 billion from Drax alone - not to mention thousands of high quality jobs.

“The Humber is the biggest industrial emitter in the country and it’s make-or break for the UK’s net zero ambitions.

“This decision raises serious concerns about whether the government is playing political games - divide and rule - instead of doing what is right for the economy and the path to decarbonisation.”

Last month Drax announced that it plans to invest £30 million in the US to take advantage of the generous subsidies from President Joe Biden’s Inflation Reduction Act, which contains $430 billion of incentives for companies to invest in America.

The company’s CEO said it had identified its preferred sites to expand its BECCS project and was assessing further sites.

Earlier this month US senators were scheduled to visit the North Yorkshire plant amid fears in Whitehall that the company will decide to invest in the US rather than in Britain.

“We need to be doing much, much more to respond to the challenge of the US’s Inflation Reduction Act, which poses an existential threat to the UK’s green industries,” said Mr Murison.

“We cannot afford to wait until autumn - this will be too late if we want to compete globally.”