Completing the first BECCS project in the UK – with Will Gardiner, CEO of Drax Group

Thanks, Alex. It's great to be here for the podcast. I'm looking forward to it. I've had quite a varied career. I started my career in finance, I've worked in technology companies, I've worked in an internet company. At the end of 2015, the job that I had was gone because the company I was working for had been bought, so I was looking for my next challenge. I really wanted to get involved in something to do with climate change because for me, the simple thought is when you go to work every day, you always have interesting problems to solve and good people to work with and enjoy my colleagues, but actually having something beyond that, a real purpose to what I was doing, was something I hadn't really had before. I really wanted that, so joining Drax was a way to do that, and I've absolutely found that to be true.

I would give it a reasonably good grade. I guess it's somewhere in the range of six to seven. I've actually been to four COPs now, which is hard to believe. The first one I was always on the fringes as a sort of corporate participant. Each one has a different tone and does something different. Paris obviously set a whole new set of targets, a new overarching umbrella target that we all wanted to get to as two degrees or less of climate change. Then the smaller ones in between might be focused on coal, for example. I was in Katowice, we did that. I was in Madrid, and we made a commitment to becoming carbon negative in Madrid. My big takeaway from the COP in Glasgow was that there was a lot more corporate involvement than you would have seen before. It was interesting because as an aside, that probably led to more protests than you would have seen before too, because a lot of people were not comfortable with that. But for me, the more that the corporate world and frankly the heavy industrial world gets involved in the climate change fight, the better, because ultimately a lot of the companies, I think Drax is one of these, have skills in terms of heavy engineering to actually get involved in some of these problems and have capital that we can bring to bear. I believe that the vast majority of these companies are serious about committing to do something about climate change, so I was actually quite pleased with the outcome. Just a couple of specific things: at every COP since Paris and before that, getting off coal has been high on the agenda, and as you know, Drax has done that and we are very close to being permanently off coal completely. One of the things that's surprised me in the past is that we haven't had more people coming to us and saying, 'How have you done that? How does one do a conversion to biomass?' Actually, before, after, during sort of COP this time around, we've had lots more people talking to us about that. So I think people are getting more serious about moving beyond coal. The second thing is the whole idea of carbon removal, the 'net' in net zero, permanently taking CO2 out of the atmosphere. I think that moved way up the agenda at COP. I had meetings with John Kerry, the US envoy on climate change, to talk about carbon removals, and there was real interest in it. I think that's a real positive.

My view is that it is a critical piece in the puzzle. It will enable us to move much faster. In addition to having compliance markets like the EU, the UK, and China increasingly, where there are carbon taxes that are actually forcing people to reduce their CO2 emissions, voluntary markets, I think, will make that happen faster and at a lower cost. So I think they are massively important. However, they have a bit of a bad history. There are a lot of not-so-legitimate projects that have been done, and there's a lot of question as to whether certain types of removal credits or reduction credits are legitimate. So there's a lot of work to be done to actually make them more real, to make them more legitimate. We're part of something called the Taskforce for Scaling Voluntary Carbon Markets, where all of these issues, the boring issues but important what I call 'plumbing', are being addressed: are these things being certified properly, are they being validated, who's doing that, can you audit them, is there real additionality involved? A lot of work has to be done there. I also think that as these markets grow, there needs to be an increased distinction between something that avoids or reduces emissions and something that actually removes them. Ultimately, in my view, permanent geological storage is going to become the gold standard for what people want in a carbon market, and that will be an important development over the next few years.

It's a tricky topic because there's a lot of moral hazard involved and very strong emotional views. SBTI, who is sort of setting the definition of what a net-zero strategy looks like, are saying that people need to have reduced their emissions by at least 90% before they'll be able to count actual removals as part of their strategy. My own view is that feels quite high as a bar. I think we should probably be a bit more flexible. I absolutely agree that we need to reduce emissions first before we remove, but what people are increasingly recognizing is that the time to wait before we start removing is gone. There's not enough time left before 2050 for us to wait before we start doing proper removals. Our first BECCS project, for example, can be up and running in 2027. The UK has the world's most aggressive target for greenhouse gas removals, 5 million tons by 2030. Our project is critical for that to happen, and we can't move any faster than we're moving. So in some ways, the question of reduce versus remove is a bit of a moot point because as fast as we run, we're only going to be able to remove so much. We just need to start moving as fast as possible.

We have quite a long history as a company investigating carbon capture. We were part of a project in the UK called White Rose, which was about 10 years ago. It was very close to being kicked off but ultimately the funding was dropped by the UK government in 2015. This round really starts about three years ago, maybe 2018. Claire Perry, who was the energy minister in the UK at that point, reinvigorated British efforts to put in place carbon capture and storage. She created the carbon capture industrial cluster idea, with companies working together with governments to put in place the infrastructure. The cluster we're part of, the East Coast Cluster, has been chosen as one of the priority clusters. We have two years before we start building, so start building in 2024, then about three years to get everything ready. Broadly, it'll be a ten-year timeframe between when we really started on paper thinking about it and actually getting it done.

I think it has taken longer. We are also developing plans to do BECCS in the US now. Our first project there, we probably started last year and expect to be up and running by 2027, so that's maybe a six-year timeframe, not ten. As we get more experience doing this, we'll have a design that is almost plug-and-play. The regulatory frameworks will be in place, and we expect different places to have auctions for these things. The EU, for example, recently introduced legislation to allow BECCS companies to get tax credits, a carbon allowance for every ton they remove. If that kind of system is in place, the whole thing can move faster.

If I zoom in on Drax specifically, 2021 was both a massively successful year for us but also massively difficult. I'll start with why it was difficult. It was the second year of COVID, which was a challenge for everybody. The impact of COVID on people's mental health and physical health has been quite wearing. Our people have been challenged by it. Running power stations and pellet plants when the pandemic is raging around them, and also people working from home, that's difficult. The COVID environment was hard. We also faced difficult weather: hurricanes in the southeast of the US, massive wildfires in British Columbia combined with flooding. So the weather conditions were quite difficult. But we achieved a lot as well. We've done well financially, we've kept everybody safe and well. We've been called on to help keep the UK energy system running at times. Strategically, we bought Pinnacle, another pellet company, in 2021, making us a global leader in both making and using sustainable biomass. That, along with the advances we've made with BECCS, has given us a new strategic focus: being a global leader in wood pellets, negative emissions, and dispatchable renewable power in the UK. All of that came into focus in 2021 in a great way.

I'm super excited about continuing with the projects we're doing. We expect a firm commitment from the UK government for BECCS at Drax in 2022. It'll be a major milestone year for us in terms of our coal generation. We're not doing any coal commercially now, only running when required by the system operator, and we will close the coal units completely at the end of September. That's a major milestone. We've reduced our carbon emissions from power generation by more than 90% over the last decade. Now with the last 10%, we're getting some really interesting projects to remove and reduce those emissions. We're planning to open an office in Japan, which is exciting because of the opportunities for biomass power generation to expand globally. That will be our first Asian office. Lots of exciting things happening in 2022.

When Claire Perry restarted the program about three years ago, there was a lot of skepticism from industry because carbon capture had been tried before and the government hadn't come through on commitments. Roll forward three years, there's massive excitement around carbon capture in the UK. There are dozens of projects bidding into the process. The government's big challenge is they don't have the resources to analyze everything people want to do. My exhortation to the government is: keep pushing, keep doing it. Business is excited, millions if not tens of millions of pounds are being spent by industry planning carbon capture in the UK. What we need is government support for carbon capture. It's a great opportunity for the UK to be a leader in next-generation green technologies, just as it is a leader in offshore wind. The innovative structure of carbon industrial clusters creates next-generation jobs as well as decarbonization. At the risk of wading into politics, I think the fact that the Levelling Up White Paper didn't make a bigger thing of how next-generation energy technologies will be a huge source of investment in less prosperous areas of the UK is a missed opportunity for the government to make clear what they're doing. So my message is: keep pushing, keep growing, and we're ready for it.

In 2020 and 2021, we spent a lot of time and effort creating the Coalition for Negative Emissions to make the case for why carbon removals were needed. The message to governments was: wake up, this is super important to get to net zero. That message has landed. Now we're saying: now that you recognize the need, start putting the policies in place to make it happen. I was encouraged by the EU legislation to give carbon credits for CO2 taken out of the atmosphere and permanently stored. That's a massively positive step. In the US, there's a regulation called 45Q, a $45 subsidy for every ton of CO2 taken out of the atmosphere. As part of the Build Back Better bill, which hopefully will become law, that will go up to at least $85 a ton, maybe $135 a ton. These types of government support for next-generation technologies that allow for carbon removal are getting to the point where we're actually putting substantive, positive policies in place that will make these projects real.

I saw a statistic yesterday that it's going to cost something like $142 billion a year for several decades to decarbonize the steel industry. We're moving from a period of asking 'how can we do this?' or 'can we do this?' to 'what do we need to do to make it happen?' It's hundreds of trillions of dollars of capital that needs to be reallocated. If I were speaking to policymakers at a macro level, I'd say: how do we make it easier for that capital reallocation? The global renewable energy system needs to grow multiple times over. Just getting permits to do offshore wind is so difficult. How can we make all of those things easier so this capital can get reallocated to the things that need to be done?

Going back to 2015 when I joined the climate change battle in earnest, the two-degree target set at Paris was very ambitious and notional. There wasn't really any idea of how that would be done from a science, technology, or finance point of view. I'm a member of the Energy Transitions Commission, which has done great work in defining specifically what needs to be done. One of the great achievements of the last five years is setting out the roadmap to keep 1.5 alive, which I think we still can, although it will be hard. The cornerstone of that is green electricity. Everywhere you look, decarbonizing the energy sector makes a huge difference. Then the route to decarbonizing everything else—electric vehicles for transport, hydrogen for heavy industry and maybe aviation, heat pumps for home heating in the UK—all require green electricity. The challenge gets bigger and bigger. The investment needed is the next big challenge. We know how to do it; wind and solar are the lowest-cost form of energy anywhere now. It's a question of how do we make it happen.

My first opinion is that we have to get there, because the cost of not getting there is huge. The real question is not 'will we get there?', but 'what do we have to keep doing to keep the dream alive?' We all need to focus on taking decisions now to keep policies moving and companies making investments to keep it possible. If we focus on the question of whether it will happen, it's easy to get disillusioned. That would be the wrong outcome. Also, there's so much detail in this work. As we set scope one, scope two, and scope three emissions targets, it will fundamentally change everything we do as a company—how we make budgeting and investment decisions. We just need to get on with all that work.

First, there are emissions in the supply chain. To compare with coal, broadly a megawatt hour of electricity from coal gives one ton of CO2. For biomass, we still have emissions from the power station, but they are biogenic CO2, fundamentally different and renewable. There is about 100 kilograms of CO2 in our supply chain, about 10%. We're not ignoring that, but it's a small number compared to coal emissions. Second, we need to make it clearer what impacts we have in the forest. We use residuals from harvesting and sawmills. No one is cutting down a tree just to make wood pellets; people harvest trees for lumber for housing or furniture, which is a good thing because we need more things made of wood and fewer of steel and cement. We use the residuals in a way that makes harvesting and replanting more economic for forest owners. The overall economic outcome is that the forests where we source from are growing. For example, the amount of standing carbon in the trees around each pellet plant is going up year on year, higher than ten years ago. In the southeast of the US, there's more than double the standing carbon in the ground than in the 1950s, because of a healthy, well-regulated forestry system. We're part of that system, trying to support it.

There are multiple ways to reduce emissions in our supply chain over the short and medium term. For example, people are experimenting with wind power on ocean-going vessels, which can reduce emissions by 30%. We're looking at shortening the supply chain, for instance, sourcing more material in the UK from working with the NFU on energy crops, carefully considering implications for agriculture. In the long term, the question is what fuel will replace fossil fuels for shipping. People talk about ammonia, hydrogen. There's a lot of work going on, and we're in dialogue with our shipping partners about the right answers.

Thanks, Alex. Very good. I enjoyed it.