Scottish Power will turn its back on fossil fuels in a deal worth over £700m to sell off its gas-fired power plants to coal giant Drax, before pouring billions of pounds into renewable energy.
The Big Six energy company confirmed a Sunday Telegraph report last month which first revealed that Drax hoped to buy a string of gas and hydro power plants in a bid to survive the UK’s shift to cleaner power.
Scottish Power’s chief executive Keith Anderson said the group will undertake a “pivotal shift” by investing £5.2bn in renewable energy and smart grids over the next four years.
“We are leaving carbon generation behind for a renewable future powered by cheaper green energy. We have closed coal, sold gas and built enough wind to power 1.2 million homes,” he said.
Scottish Power's retreat from fossil fuels follows similar steps from major European utilities and energy companies including Germany's E.On, French energy group Engie, and Denmark's Orsted which was previously known as Dong Energy.
The move away from coal, gas and oil has accelerated as renewable energy costs have plummeted.
In total energy companies have invested around £56bn into renewable energy projects since 2010. The mushrooming of wind, solar and hydro power projects across the UK has pushed generation from renewable sources up by almost a fifth between 2016 and 2017 alone.
From Drax, the deal offers a £100m-a-year earnings lifeline as it scrambles to break its addiction to coal and biomass subsidies before the mid-2020s.
A ban on coal-fired power from 2025 will force Drax to shut its two remaining coal generation units. Two years later the lucrative subsidy deal which pays the generator to use biomass will also come to an end.
Will Gardiner, who replaced long-term boss Dorothy Thomson a year ago, said the deal “makes great financial and strategic sense” for Drax at “a critical time in the UK power sector”.
“As the system transitions towards renewable technologies, the demand for flexible, secure energy sources is set to grow,” he added.
Shares in the former FTSE 100 energy giant soared over 6pc to over 385p a share. The company’s market value is half what it was in 2014 when political uncertainty over biomass subsidies took a toll on the group.