Drax Group Enters Tolling Agreement for 250MW Battery Storage, Expanding FlexGen Portfolio

Drax Group plc (LON: DRX) has announced a 10-year tolling agreement with West Burton C Limited (Fidra Energy) for 250MW (500MWh) of Battery Energy Storage Systems (BESS) capacity, marking a significant step in Drax's expansion into flexible generation technologies.

This agreement allows Drax to control and dispatch 250MW of BESS without upfront capital expenditure, as Fidra Energy will handle construction, maintenance, and availability. Drax will make annual payments indexed to the UK CPI, securing operational control and dispatch rights while retaining all revenues, excluding Capacity Market revenues.

The project, targeting a Commercial Operation Date (COD) in 2028, is expected to generate returns substantially exceeding Drax's Weighted Average Cost of Capital (WACC). The agreement is subject to Fidra making a final investment decision by Q3 2026 and commencing commercial operations by H2 2029.

This tolling agreement complements Drax's existing investments in BESS, aligning with its FlexGen strategy to add short-duration, fast-response capabilities. The agreement enhances Drax's portfolio, which includes physical ownership of BESS assets and asset optimization capabilities acquired through Flexitricity.

This move is strategically aligned with the UK's energy objectives, focusing on energy security and decarbonization, positioning Drax to benefit from the growing demand for flexible grid solutions.

The company states that the agreement creates a capital-light opportunity to bolster the Group’s FlexGen portfolio with additional BESS capacity, alongside its existing owned assets.

Drax's expansion in BESS includes the October 2025 agreement to acquire three BESS projects from Apatura Limited, totaling 260MW upon commissioning. The January 2026 acquisition of Flexitricity provides an optimization platform for the Group's FlexGen business, enhancing its BESS capabilities.

Drax Group Chief Executive Officer, Will Gardiner, said: “Flexible Generation technologies like battery storage will support a secure, affordable and clean energy system for British homes and businesses. Our first BESS tolling agreement is an important step in our ambition for a gigawatt scale pipeline of battery storage opportunities, alongside our recent acquisitions of Flexitricity and three battery storage developments.”