The plant will also withdraw as a partner of Capture Power Ltd – the group which developed the CCS project.
“This is for us a sad decision but ultimately investment is about choices and we are in a very different financial situation today than we were two years ago when we chose to invest in the project”, Drax Chief Executive Dorothy Thompson told the BBC radio.
The station was among 12 projects applying for a share of the EU’s €4.5 billion fund to support the White Rose Carbon Capture and Storage project(CCS), which strips carbon dioxide from burning coal and secures it underground, to reduce emissions from the plant.
When the project has ended, Drax will not invest further but will make the site, which it owns, and the power plant infrastructure available for the project to be built.
The company said that due to lack of profits it had to put the business and shareholders first.
The Drax coal-fired plant in North Yorkshire said it was “too risky” because of cuts in state subsidies for eco power schemes.
He added that while the company still believes the project has “great potential” but it had decided to “focus our resources on the areas which we can deliver best value, particularly working with government to explore the potential for converting a fourth generating unit to run on sustainable biomass”.
Energy ministers are understood to be committed to developing the technology in this country.
Unite national officer for energy, Kevin Coyne said: “This is a disaster”.
Capture Power said it was still committed to delivering the CCS project and a final investment decision would depend on the outcome of an engineering and design study. Private sector money is not necessarily the panacea for big nationally important schemes. It said that investors and consumers in the United Kingdom have been left “confused” by “a wave of policies reducing or removing various forms of support for renewable energy projects”.
“The government’s green agenda appears to be in tatters and we have moved a long way from when David Cameron was hugging a huskie and boasted that his government would be the greenest ever”.
Deputy general secretary Garry Graham said: “Drax’s decision is the result of fragmented and incoherent government policy which is having a chilling effect on investors’ confidence”.
Liberal Democrats were the driving force behind green energy projects under the Coalition government but since the Conservatives won the election in May, support for wind and solar power has been scaled back and the Green Deal home energy saving programme has ended.