The head of Drax’s UK generation arm, Mike Maudsley, noted the options the company is considering include creating a second turbine cavern at Cruachan, even though it could take up to six years to complete the work concerned.
Drax wants to boost capacity at Cruachan to capitalise on an expected increase in demand for the stand-by power it offers amid the UK’s increasing reliance on renewable energy generation. Cruachan can supply power to the national grid when weather conditions are unsuitable for windfarms or hydro schemes.
However, Mr Maudsley said before committing to the sort of investment that would be required the company would want to be confident that it could generate suitable returns on investment. This would require the Government to provide backing in some form.
The company has been thinking about expanding Cruachan for some time. Its interest does not appear to have waned amid the fallout from the Covid-19 coronavirus
Mr Maudsley noted Drax has held discussions with the department for business
, energy and industrial strategy and the local authority about Cruachan. Work on the expansion of Cruachan could be expected to create significant numbers of jobs in the construction phase.
In the first half results Drax released yesterday the company noted: “Cruachan Power Station continues to perform strongly, delivering critical system support services during a period of increased volatility for the UK electricity network.”
Yorkshire-based Drax acquired Cruachan with a portfolio it bought from ScottishPower in 2018, in a £700 million deal.
The portfolio also includes the Lanark and Galloway hydro-electric facilities on rivers in South West Scotland, a biomass fuel plant near Glasgow and four gas-fired plants in England. Mr Maudsley said all the assets in Scotland have been performing well.
Drax generated £179m underlying profit in the six months to June 30, compared with £138m in the same period last year.
The impact of the coronavirus crisis wiped an estimated £44m off first half profits. Drax said the division which sells energy to businesses experienced significantly reduced demand as a consequence of lockdown and social distancing measures in the UK. Bad debts are expected to increase.
Drax is preparing to stop producing power from coal at the giant plant in Yorkshire from which it takes its name. Four of the six power generation units at the plant have been converted to run on biomass pellets.
It plans to increase its annual dividend by 7.5%, to 17.1p per share, from 15.9p, subject to operational performance and the impact of Covid-19 being in line with expectations. The interim dividend will rise to 6.8p, from 6.4p.