Replacing Coal With Elephant Grass

British utility Drax Group, facing potentially crippling carbon emission payments, is turning to biomass

The power station outside the village of Drax, 150 miles north of London, keeps some 3 million tons of coal in vast black heaps to the west of the plant. But when visitors show up these days, officials at the Drax Group, which owns the facility, are more interested in showing off the fuel on the north side: thousands of bales of elephant grass stacked 30 feet high. While the 3,900-megawatt plant produces some 7 percent of Britain's electricity and is the country's single biggest carbon polluter, Drax Chief Executive Officer Dorothy Thompson envisions a much greener future. "We've become more and more concerned about carbon," she says.

Thompson's plan is to shift away from coal and start burning more grass, tree bark, and similar fuels, known as biomass. After an expansion completed this year, the station can use such fuels for as much as 12.5 percent of its output, making it the world's biggest biomass plant. On a life-cycle basis, biomass emits about one-tenth the greenhouse gas that coal does; burning the plant matter also means it won't decompose and release methane, a greenhouse gas far more potent than carbon dioxide. By 2014, Thompson wants biomass to make up half of Drax's fuel.

The plant lies at the heart of England's "Megawatt Valley," a chain of four coal-fired plants built in the 1960s and '70s alongside a massive Yorkshire coal field. About one-third of British power comes from coal plants, many of which are slated to be shut down over the coming decade. Replacing the country's coal power with nuclear, gas, and wind could cost nearly $300 billion, according to Britain's energy regulator. "You can see why [biomass] is where Drax wants to go," says Anthony White, founder of green energy investor Climate Change Capital. "If you don't come up with some way of reducing emissions, you don't have Drax in the long term."

By 2013, Drax aims to build the first of three 290-megawatt stations that burn wood, straw, and grass. Those power plants would cost nearly $1 billion each and burn a total of 1.4 million tons of biomass per year. Thompson hopes to make a final decision on the new plants by December, depending on how much support the government is willing to offer. Elephant grass and other biomass fuels today cost three times what coal does, so biomass-fueled turbines need subsidies to be profitable.

Although the U.K. government is willing to fund biomass, the support can be as little as 25 percent of what wind-power producers get. Worse, there's no certainty of long-term backing for biomass, while wind plants get a 20-year guarantee of payments at today's levels. "You can't build a new plant today and know what your support is going to be," Thompson says. "That's just too risky."

She may have little choice. If Drax fails to diversify away from coal, by 2013 the company would have to spend some $850 million annually on carbon permits under European Union regulations, Bloomberg New Energy Finance estimates. That's more than double what analysts expect Drax to earn this year. Thompson's biomass initiative is evidence that she recognizes Drax needs to change, but she's quick to say that the coal era is far from over. "The U.K. is going to need [coal] for some time," Thompson says, looking out over the plant. Even without biomass, "we don't feel Drax is on a path to shut down tomorrow."

The bottom line: Facing potentially crippling carbon emission payments, Drax is shifting to biomass fuels.

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