Drax has secured a fresh subsidy deal with the UK government that locks in revenue through 2031. The new four-year contract for difference (CfD), starting April 2027, covers all four biomass units at Drax Power Station. It guarantees a strike price of £109.90 per MWh (2012 prices) with an annual output cap of around 6 TWh, effectively shifting the plant’s role to flexible generation rather than continuous baseload supply. Any production above the 6 TWh cap must be sold at market prices.
This new structure alters the investment profile. With lower permitted output and shorter contract duration, Drax is being positioned as a backup power provider, stepping in during tight supply periods. The premium strike price reflects this flexible role, offering payment certainty while reducing overall output.
The deal also enforces stricter sustainability rules. Drax must now source 100% of its biomass from independently verified sustainable sources. Previous thresholds allowed for some non-certified material, but that is no longer the case. The company faces tighter scrutiny over its supply chain, with added reporting and auditing requirements.
Drax Group plc (LON:DRX), trading as Drax, is a power generation business. The principal downstream enterprises are based in the UK and include Drax Power Limited, which runs the biomass fuelled Drax power station, near Selby in North Yorkshire.
