Drax, Siemens plan £2B biomass venture

North Yorkshire, England's Drax Group (LON: DRX), the owner of western Europe's largest coal-fired power station, announced a £2 billion ($3.2 billion USD) renewable energy investment plan with Munich-based Siemens (NYSE: SI).

The pair plan to build three 300-megawatt biomass plants powered by energy crops and agriculture waste in the UK.

Siemens will own 40 percent of the plants and supply the turbine technology. Drax plans to operate the plants. Drax and Siemens expect to finalize construction contracts in the next 12 to 18 months.

Construction of the first plant is expected to begin in late 2010 at Immingham in North Lincolnshire. The plant is expected to open in 2014.

A second plant is planned for Hull. The companies have not selected a third site but are considering land near Drax's coal plant in North Yorkshire.

Drax said the move was intended to diversify business and take advantage of government subsidies. Drax CEO Dorothy Thompson said the company expected the energy generation sector to provide "attractive returns."

"Our venture into dedicated biomass-fired generation underpins our commitment to reducing the carbon footprint of electricity generation from the continued, but necessary, reliance on fossil fuels," she said in a news release.

In May, Drax began efforts to reduce the environmental impact of its 4,000 MW coal-fired plant (see Drax hires Alstom to build biomass plant). The 400 MW biomass project plans to process various biomass materials for direct injection into the power station's boilers. The project is expected to start construction by the end of 2009.

In November, London developer Prenergy Power announced plans for the £400 million Port Talbot project, a 350-MW facility fueled by wood chips that would be one of the largest biomass plants in the world (see UK approves world's biggest biomass plant).