Ministers are under pressure to cut subsidies to the operator of Britain’s biggest power station after it reported an 84% increase in annual profits, helped by high electricity prices.
Drax, the power generator that owns the eponymous plant in North Yorkshire, posted underlying profits of £731m for 2022, up from £398m a year earlier.
The company also increased its dividend by 11.7% to 21p a share – an £84m payout to shareholders.
Drax, which has faced criticism over its use of biomass, has benefited from soaring power prices over the past year. Electricity prices are linked to wholesale gas costs, which have risen sharply since the Russian invasion of Ukraine.
Will Gardiner, the chief executive, said: “Drax delivered a strong performance in 2022, and played a significant role in ensuring security of supply during a challenging year for the UK’s energy system.”
Drax, which supplies up to 6% of the UK’s electricity, and is seen as a source of when weather conditions preclude significant wind and solar power generation.
Climate campaigners have accused Drax of greenwashing, arguing its biomass operations, which burn wood pellets to produce electricity, are far from green and can even increase the CO2 emissions driving the climate crisis.
Most of the wood is imported from North America. The former energy secretary Kwasi Kwarteng called its business model “not sustainable”.
Drax was the subject of a BBC Panorama investigation over alleged forest destruction and has also been accused of “environmental racism”.
The power company said it had earned £837m in subsidies in 2020 and £885m in 2021. The level of support fell to £617m in 2022 as electricity prices exceed an agreed “strike price” agreed to encourage renewable investment.
This meant Drax paid out £33m to the Low Carbon Contracts Company, a government-owned firm, compared with receiving £231m under the same mechanism a year earlier. However, it still received £650m under an older renewable energy scheme.
The thinktank Ember has estimated that, from 2012 until 2027, when the support runs out, Drax would have collected more than £11bn in subsidies.
The Conservative MP Pauline Latham said: “The government pays significant sums in renewable energy subsidies to bioenergy companies making sizeable profits, despite it releasing huge amounts of greenhouse gases and harming forests’ ability to absorb carbon.
“This directly costs bill payers and families through their energy bills. In the context of the cost of living crisis, the government should be looking into these subsidies and ensuring they are used for proven renewable energy sources and energy efficiency measures, rather than harming nature.”
Sally-Ann Hart, a Conservative MP, said: “Burning imported wood pellets for electricity is not cheap for bill payers. Given the growing environmental concerns, ministers shouldn’t commit to new subsidies for this energy source.
“We should prioritise investment in clean and cheap energy sources that keep the lights on and bills low while tackling climate change, not an industry which risks fuelling deforestation.”
Research by the Cut Carbon Not Forests coalition found that 62% of 2,005 UK adults surveyed thought it was wrong for the government to hand the bioenergy generator large subsidies, particularly during a cost of living crisis.
The SNP MP Tommy Sheppard said: “It’s clear that the British public aren’t falling for the myth that biomass is carbon neutral, no matter how many greenwashing PR stunts companies like Drax pull to convince people otherwise.”
Drax is the latest UK energy firm to report a sharp rise in profits, after BP, Shell and the British Gas owner, Centrica. Their gains led to renewed calls for tougher windfall taxes.
Some of Drax’s operations are covered by the electricity generator levy introduced this year but the company said recognition in the construction of the tax that biomass costs were higher than those of windfarms meant the levy “should not have an adverse impact on biomass generation”.
Separately, more than 180 staff at the Drax plant near Selby, in North Yorkshire, have begun a series of strikes that will run through February, March and April after rejecting a proposed pay deal.
The company also agreed to extend the life of two coal units through the winter after a government request, amid fears over power cuts. The units have not been called into action but Drax said on Thursday that they “delivered income during the final quarter of 2022”.
