Feb 24 Brussels has initiated a preliminary
probe into the possible breach of state aid rules by the UK in
guaranteeing a 75 million pound-loan to Drax Group, operator of
Britain's biggest power station, the Financial Times reported
The newspaper said that Brussels has informally warned the
UK that the country's ways of supporting big renewable energy
projects, including Drax's biomass conversion, may harm
competition as it involves heavy subsidies. ()
Drax was offered a 75 million pound guarantee by the British
government last April for the conversion of its coal-fired power
station to biomass, becoming one of the first projects under the
government's UK Guarantees Scheme.
The UK Guarantees Scheme was launched in December 2012 to
provide 40 billion of guarantees to kick start infrastructure
projects struggling to access finance.
The European Commission is also investigating the loan
guarantee for the Drax scheme, the financial daily said.
The British government is underwriting a 75 million pound
loan that Drax took from investments provider Friends Life to
convert half its Yorkshire station's generating units so the
power producer could burn wood pellets and other fuels derived
from plants, known as biomass.
Environment lobby group Friends of the Earth has lodged a
state aid complaint against the burning of biomass to generate
electricity, arguing it had the potential to produce more
overall greenhouse gas emissions than coal, the newspaper
The FT said the group believed that the UK guarantee might
have favoured Drax by lowering the cost of the Friends Life
loan, and the guarantee was also not formally notified to the
European Commission as it should have been.
According to the FT report, the commission wrote to Friends
of the Earth in late January, saying it had started a
"preliminary investigation" into the complaint, which it had
forwarded to UK authorities for a response.
The newspaper said, citing a commission spokesman, that the
deal was being looked into but at this stage it would be
premature to prejudge whether this could lead to a formal state
"(The scheme) is supporting infrastructure delivery as part
of the government's long-term economic plan. Clear processes are
in place to ensure that any guarantees comply with state aid
rules," a Treasury spokesman told the FT.
A Drax spokesman told the financial daily that it was aware
of the Friends of the Earth complaint, but it was a matter for
the Treasury and the European Commission.