UK electricity company Drax has announced a commitment of up to $12.5 billion in the US over the next decade to construct power plants, capitalizing on the country’s lucrative subsidies and anticipated surge in energy demand. Drax, known for operating the UK’s largest power station in northern England, will execute these projects through its Houston-based subsidiary Elimini, which was launched on Tuesday.
The investment could bolster the US economy, which is anticipating an energy supply crunch driven by the growing needs of data centers that support artificial intelligence demands. The planned power plants will generate electricity by burning biomass, such as wood, and then capturing the resulting emissions using a method known as bioenergy with carbon capture and storage (BECCS). This process is considered “carbon negative” in some accounting frameworks because the biomass used absorbs carbon during its growth.
Will Gardiner, Drax’s Chief Executive, stated, “We’re exporting British capability now. The UK is an interesting and exciting market, but we need to do more than that.” Drax is also planning to install carbon capture equipment at its power station in Yorkshire, contingent on government support.
Under the Elimini brand, Drax is evaluating more than 20 potential sites in North America. The aim is to construct up to five plants in the US over the next decade, with a combined capacity of approximately 750MW of electricity, enough to power over 600,000 homes. Each US plant is projected to remove about 1.5 million tonnes of carbon dioxide annually, making them eligible for over $100 million in tax breaks each year under President Joe Biden’s Inflation Reduction Act.
However, some analysts suggest that Drax’s plans may face challenges, as carbon removal technologies are currently expensive and not yet scalable. Drax’s move into the US market aligns with a broader trend of European investors channeling billions into the US to leverage the clean energy subsidies offered by the IRA.
The increasing demand for electricity driven by data centers for AI, electrification, and industrial onshoring could strain reliability and affordability. Consultancy ICF estimates that electricity demand could rise by an average of 9 percent by 2028.
Laurie Fitzmaurice, President of Elimini, emphasized the need for low-carbon electricity sources like BECCS to provide reliable energy and mitigate the intermittency issues associated with wind and solar power. Fitzmaurice remarked, “There’s a tremendous amount of load growth happening. We need a decarbonised energy system that has that base of dispatchable renewable energy.”
Elimini also plans to sell carbon dioxide removal credits from its global projects. It announced six offtake deals totaling 28,000 tonnes of credits but did not disclose prices, though past contracts averaged $300 per tonne.
Brenna Casey, a carbon capture analyst at BloombergNEF, stated that BECCS is a “compelling option” for carbon removal due to its dual revenue streams from selling power and credits. However, she noted that high selling prices and limited sustainable biomass supplies remain significant constraints.
Drax’s investment in BECCS has faced scrutiny from environmentalists concerned about the sustainability of burning organic matter such as forests. The International Energy Agency estimates that BECCS plants need to remove 185 million tonnes of carbon dioxide annually by 2030 to meet net-zero targets by mid-century, significantly above the 60 million tonnes currently committed.
Additional reporting was provided by Rachel Millard in London.
