Slaughter and May is advising Drax Power Limited (“Drax”) on a new contract-for-difference (“CfD”) for transitional revenue support for Drax Power Station. On 10 February 2025, Drax announced the entry into heads of terms with the UK Government in respect of the provision of revenue support to biomass operations at Drax Power Station.
The support is proposed to be implemented by way of a CfD applicable to all four biomass units at Drax Power Station, which will be based on the renewables CfD. However, it will contain key deviations from the renewables CfD. In particular, the CfD for Drax is proposed to include a cap on supported generation, minimum capacity and generation obligations on Drax and a gainshare mechanism in respect of profits made by Drax. In addition, the heads of terms contemplate a tightening of the required biomass sustainability criteria.
The entry into the heads of terms follows the launch by the UK Government in early 2024 of a consultation on a mechanism for large-scale biomass generators transitioning from their existing renewable schemes in 2027 to bioenergy carbon capture and storage (BECCS).