Drax to build 100MW data centre at Yorkshire power station to meet surging AI energy demand

Drax Power Station Transforms to Meet AI Energy Demand

Drax has unveiled ambitious plans to build a data centre at its Selby site in North Yorkshire, marking a shift from traditional energy generation to supporting the infrastructure needs of artificial intelligence 1

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. The FTSE 250 company announced that the initial 100MW facility could be operational by 2027, with potential expansion beyond 1 gigawatt after 2031 to address rapidly increasing British power demand driven by AI 3

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The data centre will leverage land, cooling systems, and transformers that once powered coal generation before Drax converted its generators to burn imported wood pellets 2

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. This repurposing of existing infrastructure offers a practical solution to one of the tech industry's most pressing challenges: securing sites with immediate, high-capacity grid connections. A planning application is currently being prepared for the initial phase 3

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Strategic Timing Amid Government Subsidy Changes

The announcement comes at a critical juncture for Drax, weeks after the UK government signaled it would curb the amount of electricity it would subsidize from 2026 2

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. The government stated that subsidies offered to Drax "simply did not deliver a good enough deal for bill payers and enabled Drax to make unacceptably large profits" 2

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. The company's trading update revealed it currently receives subsidies of more than £2 million per day drawn from energy bills to support biomass burning 2

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Will Gardiner, Drax CEO, explained the approach: "We would effectively provide the land and the power connection and the power working with a data centre developer" 3

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. This strategy allows the company to diversify revenue streams while maintaining its core energy infrastructure operations. The move forms part of Drax's broader plans to allocate up to £2 billion towards investment in flexible and renewable energy 1

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AI-Driven Data Centers Reshape Energy Infrastructure

The increasing demand for AI capability is driving a fundamental transformation across Europe's energy landscape. Companies are actively seeking to repurpose legacy power generation sites into AI-driven data centers, attracted by robust infrastructure and immediate grid connections essential for energy-intensive operations 3

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. This trend reflects a convergence between the old industrial economy and the new digital economy.

Russ Mould, investment director at AJ Bell, noted that Drax was capitalizing on AI opportunities: "Once fuelled by the coal which was central to the industrial revolution, upgraded infrastructure will be utilised to run a data centre as part of the latest phase of technological advancement" 1

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. The approach helps technology companies bypass long waiting times associated with connecting to the power grid, a bottleneck that has slowed data centre expansion across the UK.

Financial Performance and Future Outlook

Drax's shares climbed over 2% following the announcement, which coincided with a trading update indicating earnings would be "around the top end of consensus estimates" for 2025 after a strong second half performance 1

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. The company's performance was boosted by its flexible generation, pellet production, and biomass operations 1

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Drax aims to generate £3 billion in free cash flow between 2025 and 2031, with over £1 billion dedicated to shareholder returns and up to £2 billion for funding growth investments 3

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. JPMorgan analysts suggested this represents "a more optimistic timeline than investors would otherwise expect" 3

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. The company is also shutting down its Williams Lake pellet plant in Canada and temporarily halting its Longview project, reflecting expectations not to invest in additional pellet production capacity in the near future 3

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. This pivot toward data centre development signals Drax's strategy to diversify beyond biomass amid ongoing scrutiny of its sustainability claims and changing government support.