Drax Power Ltd, R (On the Application Of) v Secretary of State for Energy And Climate Change

In a pass/fail public-law assessment, the decision maker must apply the published criterion to the legally relevant information before it. Where an applicant’s evidence is misunderstood, the decision maker cannot reject the application by treating an unexpressed requirement as compulsory or by disregarding material already supplied and adopted by reference.

For an investment-support criterion concerned with delayed electricity generation, the relevant question is not necessarily whether conversion of a generating unit will itself be delayed. It may be whether the converted unit will be unable to generate at its previous capacity because the necessary continuous fuel-supply infrastructure will take materially longer to establish without the support. Exact quantities and dates need not be proved where the consequence follows logically from the evidence.

Drax applied for an Investment Contract under the early Contracts for Difference scheme established by the Energy Act 2013. The application concerned the conversion of Unit 3 from coal co-firing to full biomass generation.

Drax had passed the relevant qualification stages, but the Department of Energy and Climate Change rejected its final Binding Application. It concluded that Drax had not shown a significant risk that the relevant electricity generation would not occur or would be significantly delayed without an Investment Contract. The rejection relied on an alleged change in Drax’s position, the absence of detailed evidence quantifying delayed generation, and failure to explain why conversion under the Renewables Obligation would not avoid the delay.

The issues were whether the decision was unreasonable and whether the process was procedurally unfair.

1. Claim allowed. The decision rejecting the Binding Application was quashed. The matter was remitted to DECC for reconsideration, and a declaration was granted that Drax satisfied the Key Criterion at the Binding Application stage.
2. The Key Criterion, reflected in Schedule 2 to the Energy Act 2013, required consideration of whether, without an Investment Contract, the electricity generation to which the contract related would not occur or would be significantly delayed. For a co-fired unit, that could concern the coal-derived output which the biomass conversion was intended to replace. It did not require proof that the unit would not be converted at all, or that conversion itself would be delayed.
3. The relevant comparison was between the ability of an Investment Contract, a full CfD and the Renewables Obligation to establish the continuous and reliable biomass supply chain needed to maintain the unit’s previous generating capacity. Drax had explained that an Investment Contract or CfD would provide greater market confidence and enable the necessary infrastructure and supply contracts to be established sooner. DECC had accepted the substance of that case at earlier stages.
4. DECC’s first reason misunderstood Drax’s case and treated delay to conversion as decisive. Its third reason incorrectly treated the Binding Application as departing from Drax’s earlier explanation of why the Renewables Obligation was not an equivalent route. The Binding Application expressly adopted the earlier submissions, and the clarification letter confirmed that position.
5. The second reason also failed. DECC treated detailed estimates of the precise quantity and timing of delayed generation as necessary, although the published process imposed no such compulsory threshold. Once it was accepted that the existing fuel supply could not sustain full-capacity generation in the medium to long term and that the required infrastructure would take longer to establish without the relevant support, delay to generation followed logically. The fuel-supply chart was legally relevant material which DECC had to consider.
6. The court applied the demanding Wednesbury standard, but concluded that the decision was unreasonable even on that approach. A properly informed decision maker could not have rejected the application for the reasons given while accepting Drax’s evidence about supply, investment and market confidence. The procedural-fairness ground added nothing material, although clarification would have been required if DECC remained uncertain about legally relevant matters or introduced new criteria.

First-instance judicial review proceedings. The decision was quashed and remitted to DECC for reconsideration.