The financial watchdog’s decision to investigate the sustainability claims made by the owners of the Drax power plant came as little surprise to Britain’s energy industry. For years the former coal generator has faced a torrent of criticism for collecting billions of pounds in renewable energy subsidies in exchange for burning wood pellets – shipped thousands of miles from North America – at its vast power station in North Yorkshire.
Drax faces allegations that it may have misled investors and the government over the sustainability of its wood sources. In its investigation, the Financial Conduct Authority will in effect follow in the footsteps of the industry regulator, Ofgem, as well as the National Audit Office and the public accounts committee in scrutinising whether the company’s green claims stack up.
Drax is a relic of Britain’s coal-rich industrial past. Built after the 1960s discovery of the Selby coalfield and opened in 1974, it burned coal for almost 50 years. It expanded to become Britain’s biggest power plant, generating enough electricity to power about 4m homes from almost 4 gigawatts of capacity. But as coal fell out of favour and Britain began turning to renewable power, Drax started converting its coal-burning units to run on biomass in 2013, aided by a stream of subsidies.
The latest controversy circling the government’s support for biomass is expected to raise fresh questions about the decision to extend its subsidies by almost £2bn by the end of the decade. The government has also granted permission for Drax to fit carbon capture technology to its biomass plant, in a project that could cost billpayers an estimated £40bn.
Industry sources have suggested that although there are growing concerns about the sustainability of burning biomass, there are likely to be deeper concerns about the viability of the government’s green energy targets if biomass is ruled unsustainable and struck from the energy system.
In 2024 biomass and bioenergy more broadly made up 15% of the UK’s electricity generation, and was considered a low-carbon alternative to fossil fuels. In that year alone, the FTSE 250 company collected the equivalent of £2m in subsidies every day for its biomass power generation, at a cost of £10 for every household in Britain. In total, the company is estimated to have earned more than £7bn from energy bills since it began converting its coal-burning units to run on biomass.
Whether biomass should be considered a form of renewable energy has sparked debate across Europe. Drax, Britain’s biggest single source of carbon emissions, has argued that burning waste wood offers a steady source of carbon-neutral energy because forests absorb emissions from the atmosphere as new trees regrow.
These claims have been fiercely opposed by green groups and climate scientists who fear that power plants are emitting carbon dioxide faster than it can be absorbed, creating a carbon debt that could accelerate global heating. They have also questioned the sustainability credentials of Drax’s wood sources.
The concerns came to a head in late 2022 when a BBC documentary revealed that a company owned by Drax was not relying solely on waste wood for its biomass pellets. It showed that a Canadian subsidiary was involved in the logging of natural woodland to produce biomass pellets, despite the company’s claim to avoid any damage to “carbon-locking” forests.
In the aftermath of the documentary, one of the company’s top lobbyists, Rowaa Ahmar, claimed to have warned senior executives that the company was “misleading the public, government and its regulator” about its sustainability credentials.
Ahmar made the allegations as part of an employment tribunal in which she claimed to have been unfairly dismissed for blowing the whistle on the company’s handling of the crisis. Drax denied her claims and reached a settlement with Ahmar a week after the case opened.
The company later paid a £25m fine after a subsequent investigation by Ofgem found that it had inadequate data for the sustainability of the wood it imported to burn in 2021 and 2022. It ordered a full, independent audit of its supply chain for 2023.
“This is another controversy for biomass,” said Frankie Mayo, an analyst at Ember, after the news that the FCA would carry out an investigation into the company. The climate thinktank has found that Drax is the country’s biggest emitter of carbon dioxide despite earning £869m in public subsidies last year for generating electricity from its wood-burning power plant.
“It’s right that the UK’s largest emitter faces additional scrutiny,” Mayo added. “Power from Drax is more expensive than from gas, it’s more polluting than coal, and more dependent on imports than oil. The idea of sustainable biomass at this scale has been pushed beyond believability for most people. Future plans for biomass power reflect this: the government has decided to cut Drax’s massive subsidies in half from 2027.”
The government did not respond to questions about whether it would move ahead with plans to extend subsidies for Drax. The company said it would cooperate with the FCA as part of its investigation.
The best public interest journalism relies on first-hand accounts from people in the know.
If you have something to share on this subject you can contact the Business team confidentially using the following methods.
Secure Messaging in the Guardian app
The Guardian app has a tool to send tips about stories. Messages are end to end encrypted and concealed within the routine activity that every Guardian mobile app performs. This prevents an observer from knowing that you are communicating with us at all, let alone what is being said.
If you don't already have the Guardian app, download it (iOS/Android) and go to the menu. Scroll down and click on Secure Messaging. When asked who you wish to contact please select the Guardian Business team.
SecureDrop, instant messengers, email, telephone and post
If you can safely use the tor network without being observed or monitored you can send messages and documents to the Guardian via our SecureDrop platform.
Finally, our guide at theguardian.com/tips lists several ways to contact us securely, and discusses the pros and cons of each.
