Source · Select Committees · Public Accounts Committee
Recommendation 3
3
Rejected
Include clauses in Drax's transitional support agreement to prompt BECCS transition.
Conclusion
We are not convinced the transitional support agreement between DESNZ and Drax provides good value for money for consumers. Government announced in February 2025 that it had agreed heads of terms for a deal to support Drax that will run from 2027 to 2031. The new support package means Drax will only be supported to operate for a maximum of 27% of the time, meaning that Drax will be operating less than half as often as it currently does. Government estimates that this will save each household around £6 a year. However, there was no element of competition in reaching this agreement and Drax will receive a higher unit price, albeit for a more flexible type of power, than some renewable power generators that won their contracts through competitive auctions. There have been suggestions that the current contractual arrangements may have allowed Drax to avoid making repayments to the government. The new agreement also requires Drax to source 100% of its fuel from sustainable sources (an increase on the current requirement of 70% which applies to all generators). The government has missed an opportunity to incentivise continued investment in BECCS in its transitional deal with Drax, which includes no mention of BECCS. Indeed, there have been recent press reports that Drax is withdrawing funding from carbon capture. 5 recommendation DESNZ should also consider how it can include clauses into the transitional support agreement to prompt Drax to begin transitioning to BECCS.
Government Response Summary
The government disagrees with the recommendation, stating the proposed Drax contract prioritized secure, low-cost electricity supply over BECCS transition. It argues that including BECCS contractual requirements would expose the government to unacceptable legal and cost risks before a full assessment is finalized.
Government Response
Rejected
HM Government
Rejected
The government disagrees with the Committee’s recommendation. It is important to recognise that the proposed contract with Drax was not intended to set the path to the adoption of power BECCS for large-scale generation. Rather, the priority was to secure electricity supply at the lowest cost to tax- and billpayers by ensuring that we could deliver dispatchable biomass generation to the UK grid without the additional cost of procuring this via the Capacity Market auction. The proposed contract retains optionality for a future power BECCS transition. Retaining this optionality was a secondary objective to security of supply. The Contract for Difference (CfD) framework cannot bind generators to investment decisions beyond the 2027-31 contract term without effectively binding the government to a policy decision on power BECCS; the full assessment to support this decision hasn’t yet been undertaken. Moreover, the inclusion of contractual requirements around the transition to power BECCS would have exposed the government to an unacceptable level of legal risk, and taxpayers to unacceptable cost risks until any full assessment of power BECCS has been finalised.