Power generator Drax highlighted a strong performance by its pumped storage and hydro business, which includes its Cruachan plant in Argyll, as it forecast full-year profits slightly above analysts' expectations.

In a trading update the group reported significant demand for renewable energy in recent weeks as winter weather has taken hold and the Russian invasion of Ukraine continues to disrupt gas supplies into Europe. Previously a major producer of coal-fired energy, Drax has converted four units at its Selby power station in North Yorkshire into biomass generators burning compressed wood pellets.

Between January and November the company generated 11 per cent of the UK's renewable energy, rising to a fifth during peak periods. It is also developing bioenergy carbon capture and storage (BECCS) technology that will be added to two of its biomass units at Selby, with the goal of removing eight megatonnes of carbon dioxide per year from the atmosphere.

Drax said underlying earnings for the year to the end of December are likely to be "slightly above" the consensus range of £651 million to £681m, compared to just under £400m the previous year.

"Drax plays a critical role in supporting the UK energy system, generating more renewable power by output than any other company, chief executive Will Gardiner said. "During the difficult winter ahead, we will continue to optimise our biomass operations to ensure that more renewable power is available, when the country needs it most.

READ MORE: Drax keeps the profits flowing as decision on Cruachan looms

"As governments around the world increasingly look to introduce supportive policies for carbon removals, Drax is considering more exciting global opportunities for deployment of BECCS, advancing our ambition to be a leader in this critical technology."

The group noted that its Cruachan hydro station and its one biomass unit operating under a Contract for Differences (CfD) have been excluded from the forthcoming windfall tax on renewable and low-carbon generators, which is due to come into effect on January 1. However, its three biomass units running under the Renewables Obligation scheme, along with its run-of-river hydro operations, will be subject to the Electricity Generator Levy (EGL) of 45% on receipts above the benchmark price of £75 per MWh.

Drax said it has been in discussions with the UK Government on the precise details of the EGL, and anticipates an update "shortly".

The company has submitted a planning application for the expansion of its “hollow mountain” hydro plant at Cruachan on Loch Awe, which can reach full generating capacity in less than 30 seconds and has capacity for 440 megawatts – enough to power more than 90,000 homes.

Drax has said it will spend about £500m on the project, which will involve the addition of a second turbine hall inside the hollowed-out Ben Cruachan. Originally opened in 1965, the facility’s turbines are driven by water that is funnelled from a reservoir in the hills down to Loch Awe.

READ MORE: Argyll hydro plant's value noted by Drax as gas price surges

In Scotland the company also has two run-of-river hydro schemes in South Lanarkshire and Galloway, plus an energy from waste plant in Daldowie.

Commissioned in 1926, the Lanark run-of-river scheme is made up of two hydropower stations in Bonnington and Stonebyres with a total capacity of 17 megawatts. Opened in 1935, Galloway is made up of six stations and eight dams with a total capacity of 109 megawatts.

The fuel facility at Daldowie on the outskirts of Glasgow processes sludge from hundreds of wastewater treatment plants in the west of Scotland, turning them into pellets known as “waste derived fuel”.

In North Yorkshire, the two remaining coal-powered units operated by Drax have at the request of the UK Government remained available to provide a “winter contingency” service to the National Grid. These will only operate “if and when” instructed to do so by National Grid to help avoid any possible blackouts during periods of high demand.

Soaring prices for fossil fuels have made renewable sources much more financially competitive, benefitting the likes of Drax. Shares in the company closed yesterday's trading more than 3% higher, up 19.5p at 646p.