ANNOUNCEMENT 15 May 2015
On 11 February 2016, the European Commission approved an investment contract for the conversion of the Drax power plant by the British government. The total budget for the conversion is GBP 1.1 billion for the years 2017-2027.
NUMBER OF INTERVENTIONS
European Commission case summary (SA.38760)
European Commission letter to the UK, 29.05.2017
According to the UK, "The notified aid concerns operating aid for the electricity generated in one unit (Unit #1) of the coal fired Drax power plant converted to enable it to operate entirely on biomass. The power plant is situated in Selby, North Yorkshire in North East England and it is owned and operated by Drax Power Limited (the beneficiary), a wholly owned subsidiary of Drax Holding Limited. [...] The total budget for the notified project is estimated at GBP 1.3 billion [annual budget of GBP130 million] and the United Kingdom confirmed that no aid will be paid to the beneficiary before the commissioning date. [...] Regardless of the commissioning date, aid payments will end on 31 March 2027. [...] The aid for the electricity generated by the notified project will be granted in the form of a variable premium (known as a contract for difference or CfD), calculated as the difference between a pre-fixed price (the strike price) and an estimate of the market price for electricity (the reference price)." (para. 7, 13 and 15 letter from the EC to the UK, Brussels 29.05.2017)
Based on the findings of the European Commission, "As set out in the Opening Decision, the beneficiary (Drax Power Limited) will receive operating aid in the form of a variable premium from a government-owned CfD counterparty for the electricity generated by the converted unit. The measure favours the generation of electricity from renewable energy sources (in this case biomass) by the selected beneficiary. Electricity is widely traded between Member States. The notified measure may therefore distort competition on the electricity market and affect trade between the Member States. In addition, the plant will also compete for biomass fuel in the raw material market as, due to a lack of sufficient local forestry resources, the majority of the wood pellets required to fuel the Drax unit will be imported from abroad [...]." (para. 73 letter from the EC to the UK, Brussels 29.05.2017)
In the GTA database the determination of whether a policy instrument discriminates against foreign commercial interests turns on whether it creates or alters the relative treatment of domestic firms versus foreign commercial interests. On this metric, the state aid proposed here is discriminatory because the state aid is not available to competing firms outside of the implementing jurisdiction.