Drax Group has signed a new contract with the U.K. government to continue operating its biomass power station from April 2027 to March 2031, securing a key source of dispatchable power for the country.
The agreement is a Contract for Difference, which guarantees Drax a strike price of 109.90 British Pounds per megawatt-hour for power generated from its four biomass units, the company said Wednesday.
Under the terms, Drax will sell about 6 terawatt-hours of power annually at the guaranteed price and can sell any additional generation on the open market.
"We are pleased to have agreed this new contract with the UK Government, which will support UK energy security into the 2030s and deliver a net saving for consumers compared to alternative sources of dispatchable generation," Chief Executive Will Gardiner said in a statement.
According to the company, independent analysis estimates the contract could save consumers up to 3.1 billion British Pounds over its four-year term.
The deal includes enhanced sustainability requirements for its biomass fuel, a sensitive issue for the power generator.
The new contract comes as Drax faces an investigation from the U.K.'s Financial Conduct Authority into certain historical statements it made regarding the sourcing of its biomass.
The probe covers the period from January 2022 to March 2024 and the compliance of its annual reports, the company has previously disclosed.
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