UK's Drax to end coal generation in 2021 with loss of 230 jobs

London — Commercial coal generation at Drax's remaining two 660-MW coal units in Yorkshire, northern England, is to end March 31, 2021, with formal closure in September 2022 after Capacity Market obligations expire, the UK generator said Thursday.

One-off closure costs would be between GBP25 million-GBP35 million ($32 million-$45 million), resulting in a similar yearly reduction in operating costs, Drax said.

"Drax also expects a reduction in jobs of between 200 and 230 from April 2021," it said.

"Stopping using coal is the right decision for our business, our communities and the environment, but it will have an impact on some of our employees, which will be difficult for them and their families," Drax CEO Will Gardiner said.

The decision followed a review of operations and discussions with system operator National Grid, regulator Ofgem and the UK government, Drax said. The government has said all coal generation much end by 2025.

A broader review of operations would now take place, Gardiner said, seeking to reduce biomass costs ahead the end of subsidies in March 2027.

Coal represented 3% of Drax Group's electricity production in 2019, the generator now predominantly a biomass, gas and pump storage hydro producer having converted four units to wood pellets and acquired Scottish Power (Iberdrola) assets in December 2018.

Noting poor economics for coal generation, Drax said it did not take a Capacity Market agreement in the January T-3 auction for delivery beyond September 2022 "given the low clearing price".

Drax has 2.6 GW of converted biomass-fired capacity across four units at its Selby site in north Yorkshire. It plans to convert the two remaining coal units to combined cycle gas generation.