Drax is facing an investigation by the energy regulator into the sustainability of the biomass it uses at its wood-burning power plant amid growing scepticism over its green credentials.
The energy regulator, Ofgem, said it would investigate whether the owner of Britain’s biggest power plant, in North Yorkshire, was in breach of the reporting rules required for its renewable energy subsidy scheme.
Ofgem is expected to investigate the accuracy of the energy company’s sustainability reports relating to the sourcing of its wood pellets, 80% of which are imported from forests in the US and Canada.
The FTSE 250 company’s share price tumbled by about 6% to 553p after the regulator announced the investigation on Wednesday morning.
Ofgem said it opened the enforcement case after its investigations into the company’s sustainability reports and the controls it has put in place to guarantee its green claims. The regulator added that the opening of the new investigation did not imply it had found a breach of its rules, but it would stand ready to act if appropriate.
Drax has received billions in renewable energy subsidies for its biomass electricity while facing growing criticism over its “carbon neutral” claims and deepening scepticism over the sustainability of burning imported wood to generate electricity.
A spokesperson for Drax said it was confident its biomass was compliant with the criteria of the renewable subsidy scheme.
“Last year Drax appointed a third party to independently verify the accuracy of its biomass sustainability and profiling data as part of an ongoing process,” the company said in a statement. “Like all energy generators, Drax receives regular requests from Ofgem and continues to cooperate fully throughout this process.”
The Guardian revealed last year that Kwasi Kwarteng, the business and energy secretary at the time, told a private meeting of MPs that Drax importing wood to burn in its power station was “not sustainable” and “doesn’t make any sense”. In a recording of the meeting, Kwarteng also admitted: “We haven’t actually questioned some of the [sustainability] premises of it.”
The political scepticism followed a decision to oust Drax from an investment index of clean energy companies in 2021 as doubts over the sustainability of its plant mounted within the financial sector.
The company has consistently claimed that it uses wood from forests that are sustainably managed, but experts believe there are poor practices regarding the sources of wood and forest management in some parts of the timber industry.
There are also uncertainties around the emissions associated with transporting wood chips across the Atlantic and burning biomass to run power plants.
Drax, which generates about 6% of the UK’s electricity, claims that burning biomass to generate power is “carbon neutral” because the emissions from incinerating wood pellets are offset by the carbon dioxide absorbed when the trees they are made from grow.
Drax had also claimed it could create “negative carbon emissions” by using new technology to capture the carbon emissions from the biomass power plant. However, the company told investors this year it would pause its plans to invest in the carbon-capture project while it waited for more details from the government on a possible subsidy.
