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UPDATE 1-Drax's biomass ambition hampered by high price

* Drax wants to fully convert to biomass

* But fuel not yet competitive without subsidy

(Adds detail throughout)

LONDON, June 30 (Reuters) - Britain's biggest power plant, coal-fired Drax DRX.L, will run its new 400 megawatt (MW) biomass unit at no more than two-thirds of its capacity due to high biomass fuel prices caused by a lack of political support.

The 400 megawatt (MW) facility became operational in June but will only be running at 250 to 300 MW, Drax said Wednesday.

“The facility is operational, but we do not expect to use it at full capacity for the time being,” Chief Executive Officer Dorothy Thompson said at a media briefing in London. “It will instead run at 250 to 300 megawatts.”

Drax has called for Britain to increase its support for biomass power generation, arguing that the source was flexible, plentiful and, with government support, could become economical.

The new biomass facility is designed to substitute coal-fired generation in order to reduce carbon emissions at the coal-fired facility which has a total capacity of 4,000 MW, produced at six separate units.

Peter Emery, the company’s Production Director, said that the cost of producing heat from biomass was around two to three times more expensive than generating it from coal.

In order to make money, the price for biomass needs to be equal or lower than the generation cost of coal, including the price of carbon allowances under the European Union’s emissions trading scheme.

Thompson said that biomass carbon savings over coal generation were 75 to 95 percent and CO2 savings over gas generation were 50 to 60 percent.

FULL BIOMASS CONVERSION

Thompson also said that Drax had long-term plans to convert its entire generation into a biomass power plant, but that would only be possible with government support.

The company said that generation capacity relying entirely on biomass would reach around three quarters of its coal output capacity.

Under existing plans, the company is in partnership with Germany’s Siemens Project Ventures to develop three 290 MW biomass power plants at an estimated cost of two billion pounds.

But before such a conversion could take place, Drax said that Britain’s policy framework would have to change.

“The problem is that we are prone to policy changes every few years because in the current framework there are no long-term policy provisions like we have in the offshore wind sector, and that is a huge risk for potential investors,” Thompson said.

Under Britain’s renewable energy support scheme, the Renewables Obligation (RO), the amount of renewable energy that can come from burning biomass instead of coal is capped in a system designed to push big multi-plant utilities to invest in other types of clean energy projects.

Under current rules, operators are only allowed to receive 12.5 percent of their ROCs from biomass Drax.

Drax is attending a parliamentary hearing on Wednesday evening to discuss government support for biomass.

Reporting by Henning Gloystein; additional reporting by Kwok W Wan; editing by William Hardy

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