Lower UK power prices saw generator Drax's three coal units out of the market for much of summer 2016, the UK generator said Thursday.
Production for 2016 of 19.6 TWh was 26% lower than 2015's 26.7 TWh, "as lower market power prices resulted in our coal-fired units being out of merit for much of the summer," the generator said.
This was mitigated financially by earnings from flexibility and reliability, and increased revenue from Renewable Obligation Certificates of GBP362 million ($453 million), the company said.
"Our ability to quickly respond to changes in demand, combined with high availability, enabled us to capture real value in the short-term prompt and system balancing markets," it said.
Of Drax's six 660 MW units, three have been converted to fire wood pellets. The biomass units produced 12.7 TWh last year, up from 11.5 TWh in 2015, accounting for 65% of total Drax output.
Revenue from ancillary services increased from GBP33 million in 2015 to GBP47 million last year.
This included a 12-month black start contract signed with National Grid in May 2016, Drax said.
Retail power revenues increased from GBP1.285 billion in 2015 to GBP1.320 billion in 2016, underpinned by growth in sales to 14.6 TWh (2015: 13.8 TWh).
TIPPING POINT
"The electricity market in Britain has now passed a tipping point," said Drax chief executive Dorothy Thompson.
"Britain now has 26 GW of wind and solar installed -- a six-fold increase over the last six years, and biomass has almost doubled its output since 2014 to over 14 TWh," she said.
Coal, which in the past has played a critical role in system stability and security, contributed just 9.3% of Britain's electricity during 2016, down from 42% in 2012, Thompson said.
The future of Drax's coal units remains uncertain, she said, with Drax assuming an end to UK coal generation by 2025. The government published a consultation in November 2016 requesting views on whether conditions should be put in place requiring all coal power stations to close by then.
CAPACITY MARKET EARNINGS
Drax bid in two of its three coal units into December 2016's T-4 Capacity Market auction. Both units secured contracts worth GBP13.6 million per unit per year for 2020/21.
"We elected not to bid for our third coal unit as with the right conditions we remain committed to upgrading further coal units to biomass," the generator said.
Meanwhile Drax will work on development of its four 299 MW open-cycle gas turbine plants "with the firm intention of committing to further investment as soon as the UK capacity market clears at a price that provides a robust underpinning for such investment," it said.
Two could be generating electricity as early as 2020/21, and the others by 2023/24, it said.
Group EBITDA for 2016 was down 17% at GBP140 million. Net debt at December 31, 2016 stood at GBP93 million, down from GBP187 million a year earlier.
