Biden subsidies raise fears over future of £2bn UK power plant

Fears have been raised in Whitehall that Drax may divert £2bn of planned investment in carbon capture to the US after President Joe Biden’s massive package of green subsidies.

US senators are due to visit Drax’s power station in Selby, North Yorkshire, next week, to learn about the company’s plans to fit carbon capture technology to its biomass power stations.

It has raised concerns in the Department for Business and Trade that Drax will be lured by new incentives to invest in the US instead of the UK, Bloomberg reported.

Drax has said it plans to invest £2bn in fitting carbon capture equipment to its UK plant as part of a plan that would ultimately support as many as 10,000 jobs.

The company says the equipment will be able to capture 95pc of the carbon dioxide emitted by its biomass-fired power plant and bury it under the North Sea.

It is waiting for approval for a place on a shortlist for UK government support, with a decision due in coming weeks.

Biden’s Inflation Reduction Act offers subsidies and tax credits worth about $370bn [£309bn] for a range of green technologies.

Rishi Sunak, the Prime Minister, is under increasing pressure to respond, with Brussels also preparing its own response.

Drax has said it is studying opportunities for investment in the US, where it produces pellets for biomass plants, which are imported to Britain.

A UK government official told Bloomberg there are concerns about Britain becoming a less attractive place to invest, and losing investment to the US.

Graham Stuart, an energy minister, has said Britain is in talks with the US to limit damage to British supply chains from American policies.

The UK’s own climate watchdog has criticised ministers for a lack of urgency in improving Britain’s competitiveness, saying it is putting net zero goals at risk.