Court sides with Drax in challenge to DECC subsidy decision

By Erin Voegele | July 14, 2014

On July 14, Drax Group plc announced the U.K.’s High Court has declared that the company’s second unit biomass conversion was indeed eligible for an investment contract under the Final Investment Decision Enabling mechanism. In April, Drax announced it would challenge a decision made by the U.K. Department of Energy and Climate Change to award an investment contract to only one of two planned Drax unit conversions.

According to a regulatory filing made by Drax, “the court has ordered that the decision of the [DECC] to deem the second unit conversion ineligible must be quashed and the matter remitted to DECC for reconsideration in light of this judgment.” The filing goes on to state that the DECC has been granted leave to appeal and any award of an investment contract for the second unit conversion would be subject to European Union State Aid clearance.

Last year, the DECC announced that the government had sent out draft investment contracts to 16 renewable energy projects that had progressed to the next stage of the FID Enabling process. That original list of 16 projects featured six biomass projects, including the Teesside plant, the Lynemouth conversion, the conversion of two Drax units (Drax Unit #1 and Drax Unit #3), and the conversion of three units at Eggborough Power Ltd. In December, the DECC narrowed that list to 10 projects found to be provisionally affordable under budget caps released earlier that month. The three Eggborough unit conversions were among the six projects cut. An announcement made by the DECC in April further altered the list of projects, including the elimination of the Drax Unit #3 conversion.

On April 23, Drax announced its intent to legally challenge the DECC’s decision. While the court’s ruling is a victory for Drax, it is possible the DECC could appeal the decision.