Drax signs new dispatchable power deal with UK government

(Sharecast News) - Electricity company Drax has signed a new agreement with the government for the supply of dispatchable power from Drax Power Station for four more years post 2027. The agreement covers all four biomass units at the Selby facility, the UK's largest renewable power station, over the period from April 2027 to March 2031.

There were no significant changes to an earlier contract agreed with the Low Carbon Contracts Company in February 2025, though the contract for difference deal came a reduced strike price of £109.90/MWh, reflecting movements in exchange rates which are expected to reduce the overall cost of biomass.

Drax will sell around 6TWh of power each year against a "season ahead reference price", then maximise generation at times of high demand and reduce generation at times of low demand.

Savings are estimated to total £3.1bn over the four-year term, according to Baringa estimates. However, this is expected to have no material impact on the company's profit expectations.

"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," said Drax chief executive Will Gardiner.

"The agreement will support the rollout of intermittent renewable generation across the UK and provides options to ensure Drax Power Station continues to play a long-term role in the regional economy and UK energy system."

Drax shares were up 2.8% at 732p by 0832 GMT.