By Paul Homewood
Ed Miliband has extended subsidies for Drax’s tree burners for another four years, to 2031.
The report in the Telegraph is little more than a puff piece for Drax and DESNZ. In particular, they refer to an analysis by Baringa, which claims the agreement will result in savings of up to £3.1bn over the four years. What Drax called “independent analysis” was actually commissioned by them, for the purpose of lobbying the government. And you certainly can’t expect your bills to come down by that amount.
The Telegraph failed to give its readers the actual details of the new agreement, which is readily available on the government website here. The existing ROC subsidies, covering 1.9 GW, of capacity expire in 2027, hence the need for a new deal. The current CfD contract for Unit 1, another 0.6 GW, does not run out until 2031, but will be rolled up into the new CfD agreement, along with the other units.
The new strike price will be £113/MWh at 2012 prices, equivalent to £158/MWh at current prices:
https://questions-statements.parliament.uk/written-statements/detail/2025-02-10/hcws424
In comparison, the existing CfD is priced at £138.16/MWh, so clearly the new deal will increase subsidies.
Furthermore, the ROC units receive a subsidy of £65/MWh. In other words, the new price of £158/MWh will leave Drax better off, as long as market wholesale prices don’t go above £93/MWh, well above its price for most of last year.
So clearly Drax will receive higher subsidies per unit of generation. DESNZ do point out that only 27% of Drax’s output will be eligible for the new strike price, but it is questionable whether Drax would have got much above 27% anyway, given the increase in wind and solar power planned.
Moreover that output from Drax, approximately 6 TWh a year, could be supplied much more cheaply by gas power. The subsidy heading Drax’s way will probably top £2 billion over the period.
The whole affair, of course, shows how desperate Miliband is. He knows we are already close to blackouts and that his crazy policies will soon make things worse. As a consequence, he is now prepared to chuck away £2 billion of our money to subsidise the burning of yet more virgin forest in North America.
This Telegraph reader summed it up nicely:
