The UK Should Invest in Real Clean Energy, Not Dirty Biomass

Today there are more signs that Drax, the UK's largest utility--and largest burner of biomass--is struggling, mostly because the future of government subsidies propping up the company is now up in the air. That could be good news for the climate and for US forests, which serve as the sourcing ground for the wood pellets burned in Drax's power plants. But an end to dirty biomass subsidies should clear the path for more, not less, investment in the truly clean energy technologies like wind and solar that the UK needs. Without this investment, the UK risks prolonging the life of its coal plants and seeing the country fall behind the clean energy economies of its neighbors.

The Financial Times reported today that Drax's pre-tax profit plunged by two thirds in 2015 forcing the company to more than halve its dividend. This is no blip. The FT goes on to report that Drax's shares have fallen 68% in the last two years and quotes the company as saying the "pain" will continue in 2016.

A major reason cited for the profit plunge was growing uncertainty about government subsidies for the company's conversion of its coal-fired power plants to burning biomass--subsidies the company is wholly dependent on. [An analysis by the Daily Mail showed that in 2014, subsidies accounting for a whopping 75% of the company's gross profit].

As I discussed here, there are other signs that uncertainty for Drax and the biomass industry is growing as well.

Drax is a top purchaser of wood pellets sourced from the forests of the US South. The consequences of Drax's biomass conversions have been equally devastating for the climate and these forest ecosystems. Burning wood to generate electricity spews more carbon pollution into the environment than coal, so Drax's conversion of coal to biomass just prolongs the life of old inefficient plants by burning a dirtier fuel. And it is driving destructive sourcing practices in some of our most valuable and biodiverse forests, including the ecologically-rich bottomland hardwood forests of the southeastern United States.

Dirty bioenergy is not a 21st century solution to our energy needs and the UK government is right to cut biomass subsidies to Drax and others. Addressing climate change requires smart government policies that invest in leveling the playing field for truly clean energy technologies, not extending the life of coal plants and wasting scarce public resources by locking in decades of subsidies for the polluting fuels of the past.

Unfortunately, the UK's recent move to strip all renewables of the climate change tax levy exemption has hurt the overall effort to transition to a clean energy economy. As it shifts away from its dependence on coal, it's critical that the UK government continue to support real renewables like solar and wind, which are increasingly becoming cost-effective. UK policymakers need only take a cue from their northern European neighbors like Denmark, which met more than 60% of its electricity needs from renewables in 2015, with more than 40% coming from wind power alone.