Some of the regulatory uncertainty around investing in the UK's largest energy generator Drax (DRX) has been removed, after the European Commission approved state aid funding for the conversion of its third biomass unit. This was an important step for Drax away from coal generation, which the UK government has pledged to make obsolete by 2025.
It had been running as a co-fired unit under the renewables obligations framework, which will close to new generating capacity in March next year following the introduction of the contracts for difference (CFD) regime. The EC has approved UK plans to support the conversion via CFDs, which would pay the power generator a premium on top of the market price for the electricity generated. The unit will receive this support until 2027 and should generate around 3.6 terawatt hours of energy a year. The EC had investigated whether this would lead to "overcompensation and undue distortions of competition" in the biomass market.