System balancing costs have risen again, in part due to Covid-19, but are forecast to remain high into charging year 2021/22, and, we suggest, beyond. Drax’s flexible generation portfolio positions it well in this market, and we see flexibility as a sustainable growing earnings stream, and a source of value to Drax. BSUoS charges are currently levied 50% generation/50% demand, but a change has been proposed that would see generation exempted, which if adopted, could be effective from April 2023. Downward pressure on wholesale prices is likely, but with a cost offset for transmission connected generation. Protected by a strike price, Drax’s CfD unit could see a £15m+ benefit. Drax continues to hold a number of strategic options, of which BECCS is one. More granularity on CCUS business models is expected next year, but we also look to the Energy White Paper, due before year-end for additional colour. Drax is moving to the FEED stage on its BECCS project next year, but a Final Investment Decision is unlikely before 2023/24. Repositioning the pellet production business as a global supplier post 2027 is an alternative, and strikes us a viable proposition, and one that could easily add >50p/share of value vs. our base case of unsubsidised biomass generation post RO/CfD expiry. We suggest this sets a value bar for BECCS to beat, strengthening Drax’s hand in CfD negotiations. Updated estimates see EBITDA tweaked in FY20E and FY21E, and we now see modest upside from marking open volumes to market. Our target price moves up to 380p. We believe there is further to run in Drax, and reiterate our Buy rating.