Regulatory changes have had an impact on investor confidence in the UK energy sector.
That’s according to Andrew Koss, CEO of Drax Power.
Speaking at the House of Commons yesterday he said the firm looked at its financial projections in December 2013 and had the funds to invest “in both the White Rose project and also hoped to do further conversions at Drax”.
The White Rose Carbon Capture and Storage (CCS) project is made up of Drax, Alstom and BOC. It aims to capture up to 90% of carbon emissions from a new coal-fired power station and store them safely beneath the North Sea.
Mr Koss added: “We have six units, we’ve converted three of those from coal to biomass and we were hoping there would be further support to do more.”
However it “had to think about where [it was] going to invest and where [it] felt was the best risk/reward return following a number of regulatory changes in the commodity market”.
He went on: “Unfortunately that meant we couldn’t proceed with the White Rose project and our equity participation in that and what we’re looking to do is further decarbonisation of Drax.”
It follows the government’s decision to scrap the Climate Change Levy exemption for renewable electricity. Drax then began legal proceedings against the government for not providing enough notice when it made the announcement.
When the Energy and Climate Change Committee asked what kind of “risk/reward return” the firm looked for when assessing whether to invest or not, Mr Koss said “one that reflects political risk”.
“If there are regulatory changes then clearly that will have an impact on the cost of capital for our investors”, he added.
In order to increase confidence for the UK energy markets he suggested long term projections on the Levy Control Framework, a cap on the amount of support renewable projects receive as well as longer term projections on the carbon price floor.
Mr Koss also said he was “surprised and disappointed” the government recently axed the £1 billion CCS competition and the firm had been “happy to support the project”.