The European Commission has recently concluded that the contract-for-difference (CfD)—a contract between a low-carbon electricity generator and the CFD Counterparty, the Low Carbon Contracts Company—received by Drax for the conversion of its coal power plant to biomass was in line with state aid rules.
 
http://europa.eu/rapid/press-release_IP-16-4462_en.htm
 
The Commission’s recent decision follows an in-depth state aid investigation that started in early 2016, which focused on whether the aid received by Drax was limited to the minimum necessary such that the plant would not be excessively profitable, and whether the fuel requirements of the biomass plant would result in significant distortions to competition. Oxera was the lead economic adviser to Drax during the course of this investigation.
 
Led by Nicole Robins, Oxera’s State aid team assisted Drax with the economic and financial analysis required to demonstrate that the CfD for Drax’s biomass plant would comply state aid rules under the Energy and Environmental Aid Guidelines.
 
Oxera’s work focused on developing the evidence and arguments that the aid in the form of a CfD was unlikely to result in Drax’s plant being excessively profitable. In particular, the analysis helped to demonstrate that the key cost parameters were robust and unlikely to evolve such that the plant would become excessively profitable.
 
Furthermore, working closely with Drax’s team of advisers, Oxera developed the economic evidence to overcome the initial concerns raised by the Commission that the fuel requirements of the biomass power plant could lead to distortions to competition in EU markets.
 
The decision from the European Commission allows Drax to proceed with the biomass power plant, and sets precedent for other state aid investigations involving biomass conversions.