Coal news and updates

Drax Group Plc’s three coal-fired power units could be thrown a lifeline by the challenge of keeping the lights on and the grid balanced in Britain, even as renewable energy and cheap natural gas squeeze margins for the dying fuel.

The electricity producer had planned to convert its remaining coal units to burn biomass, making all of the giant power station run on the renewable fuel. The conversion has stalled amid uncertainty over subsidies that in 2015 brought in 450 million pounds ($657.5 million) a year. Instead, Drax sees future revenue for the generators coming from helping to balance the grid, Andy Koss, the station’s chief executive officer, said in an interview.

Keeping the 4,900 mile-long network of wires and cables in balance during peaks and troughs in demand is getting harder for National Grid Plc as unpredictable renewable energy gains importance and utilities from Scottish Power Ltd. to SSE Plc close old coal-fired stations. While the U.K. government plans to exit coal completely by 2025, fossil-fueled units are becoming more valuable to the grid in providing backup capacity.

“Running a coal plant is becoming more of a challenge and you have to look more widely at the opportunities that are out there, or you start to look at mothball or closure,” Koss said in his office at the plant in northeast England. While Drax’s coal units are still profitable at peak times and in the balancing market, running hours are drying up and the company will need other ways to cover its costs, he said.

Source: Bloomberg