Drax fined £25m for lying about wood pellets – watchdog says ‘no excuses’

Drax, the owner of Britain’s largest power station, has been fined £25m for failing to report accurate data on the wood pellets it burns to generate electricity.

Regulator Ofgem said there was “no excuse” for admitting it had failed to meet requirements.

The company has controversially received billions of pounds in state subsidies for renewable energy despite emitting millions of tonnes of greenhouse gases from its “biomass” plant.

Campaigners want the government to stop giving taxpayer money to Drax, but RBC analysts say the closure of the investigation paves the way for Drax to receive further subsidies beyond 2027.

The £25m fine is likely to be absorbed without any risk to its target of making an underlying profit of £995m for the year, they said.

The shares fell 0.4 percent, or 2.5 pence, to 653 pence but are up a third in 2024.

Drax burns wood pellets at its North Yorkshire power station, formerly a coal-fired facility, and qualifies for renewable energy subsidies on the basis that the process is carbon neutral.

The argument is that the carbon dioxide absorbed by growing trees cancels out the emissions they produce when they are cut down and burned.

Ofgem launched a 15-month investigation after Drax was accused of using wood from unsustainable sources and alleged it was sourcing wood from rare forests in Canada.

Drax was assessed for breaches of “annual profile reporting requirements relating to the renewable energy obligation scheme” and found to lack the necessary “governance and controls”.

This means Drax incorrectly reported data submitted to Ofgem for the year ending March 2022 and was unable to support claims about how imports were sourced.

Drax will pay £25m into a fund to help charities support vulnerable energy customers.

Ofgem chief Jonathan Brearley said: ‘Energy consumers expect all companies, particularly those receiving millions annually in public subsidies, to comply with legal requirements.

‘There is no excuse for Drax’s admission that it failed to meet its mandatory requirement to provide Ofgem with accurate and robust data on the exact type of Canadian wood it uses.’

Drax director Will Gardiner said: “We recognise the importance of maintaining a strong evidence base and continue to invest to improve confidence in future reporting.”

Matt Williams of the US-based Natural Resources Defense Council said: ‘This shows how difficult it is to prove that burning forest wood is good for the environment.

There is a simple reason for this: it is not. £25m is a drop in the ocean compared to the billions they are asking for in subsidies.