Drax Group raises concerns over future of plants

Construction on the first bio-mass plant is expected to begin at the end of 2010

An electricity-generating company's plans for three bio-mass power plants is in jeopardy because of concerns over government subsidies, the firm says.

Drax Group, which runs the Drax power station near Selby, said uncertainty over government subsidies was affecting investment in the plants.

Peter Emery told BBC Radio York that a four-year government subsidy for the plants was not enough.

Energy Minister Lord Hunt said a group had been set up to discuss the issue.

Mr Emery said the biomass plants were only guaranteed for four years, which was stopping investment.

He added that some offshore wind projects had 20 years of guaranteed government policies to support them.

He said they were continuing to work on the plans for the three plants, which have been earmarked for Hull, Immingham and one other site.

Cost concerns

"We hope to be in a position towards the end of this year to make a decision whether to proceed or not," he added.

"But unless the government changes its policies and gives us the guaranteed regulatory framework over a longer period of time - ideally 20 years - then we will have difficulty raising the finance to build these plants."

Mr Emery added there were also concerns about the overall cost of producing electricity by green fuel.

He said because the economics were "not stacking up" they were only able to fill about 40% of the station's biomass processing unit.

Lord Hunt told BBC Look North about £1bn a year already went towards "incentivising" renewable energy.

"We have to be very careful, we want to incentivise renewables, but we have to ensure value for money for the customer as well," he said.

"I do listen to the issues the company has raised. I have established a group between my department and the company to go through it."