Drax Group’s pursuit of ‘prosumers’ is naked opportunism… and that’s a good thing.
The owner/operator of the mighty Drax power station is one of the biggest business energy suppliers in the UK. You might expect to find the company sneezing every time the economy feels the cold, but fast reflexes and an eye to the main chance have enabled it to steer its own course. Now it’s venturing outside its comfort zone to stake an early claim on the emerging ‘prosumer’ class.
Financial pundits like to talk about ‘bellwether stocks’ and the insights they provide. Bellwethers are established companies whose success or failure signals that of their sectors or of the economy as a whole.
Since energy management and use are closely linked to cycles of growth and recession, you might be inclined to seek out bellwethers among the major electricity suppliers.
But the UK energy market is a difficult environment for trendspotting. Its inception in the Thatcher boom was given extra fizz by that era’s North Sea oil and gas bonanza, while the falling demand of the last couple of decades has been offset by the Death of Coal
and the availability of various subsidies. It’s hard to tell where the resulting hodge-podge is headed… but it’s easy enough to spot those players which are likely to survive. The criteria are flexibility and opportunism.
Seventh At The Table
Drax Group was formed at the turn of the century, when monopoly laws led to the divestment of the Drax power station, source of nearly eight percent of UK electricity. Ownership of a primary asset left over from the days of the state-run CEGB aligned the fledgling company more closely with the established ‘Big Six’ than its contemporaries. However, the times were a-changin’, and the fact that Drax was entirely coal-fired might easily have become a millstone round the group’s collective neck.
Fortunately for its new owners, the site had a track record as an early adopter of emissions controls. In a lightning-fast response to the anti-carbon rhetoric of Gordon Brown’s government, Drax Group leveraged that slender advantage into a full-blown carbon-capture strategy. This reached its fullest expression in the 2012 White Rose initiative, which would have seen Drax’s entire CO2 output captured and sent to the Yorkshire coast for sequestration… with funding from the EU and the UK taxpayer, naturally.
A Feint To The Left…
Had the Brown-era carbon capture initiatives not withered on the vine, this story might have finished sooner. As it was, half-hearted support from David Cameron’s government and the drying-up of promised subsidies prompted further twists.
When the group finally decided to shelve White Rose in 2015, it was already hard at work on the massive task of converting Drax from coal to biomass.
The core project was accompanied by two suitably huge biomass pallet supply initiatives in the UK and US… and by two high-profile lawsuits against HM Government, which had dared to question Drax’s eligibility for funding under the Contracts for Difference and Climate Change Levy subsidy schemes. (The group’s management weren’t going to miss a second chance at a contribution from the taxpayer.)
But our tale isn’t done yet.
…And A Swerve To The Right…
Recent, apparently contradictory announcements show that Drax Group is on the move yet again.
Firstly, the company talked about building a number of gas-fired ‘peaker’ stations. A peaker is essentially a jet engine attached to an electric generator. It’s a handy resource if you think you might need large amounts of extra power at short notice… but, as you might expect, it does little for CO2 emissions.
Hard on the heels of that announcement came a second, saying that the group had purchased Opus Energy, a business energy supplier which provides SMEs with power harvested from microgeneration sites. Opus complemented Haven Power, an earlier Drax purchase which serves corporate clients on a similar ‘green energy’ model.
How do those two items fit together? Recent communications show the group embracing the technologies which we know as the ‘smart grid
‘ (distributed generation, Internet of Things-based metering, battery storage…) as it seeks to implement a ‘prosumer’ model, in which energy users are supported in switching ad lib
between the roles of producer and consumer.
Wherever there’s a Drax Group announcement, there’s a subsidy… and, sure enough, a recent press statement alerts potential ‘prosumer’ customers to the ready availability of government funding for microgeneration ventures. But the same communication also references the need for flexible generation to cover winter shortfalls.
In fact, the Drax vision for the UK’s energy future (2017 version) turns out to be a microgeneration-friendly smart grid with biomass and gas-fired generators to cover any shortfall. It’s a familiar pitch… but we’re dazzled by the former fossil-fuel giant’s quick-change act.
Here at Planet 9 Energy, we keep a close eye on the antics of business energy suppliers in the UK and EU, and we help our clients ensure they’re getting the best deals possible. Give us a ring
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