The power generator Drax has agreed to pay £25m after the energy industry regulator found it had submitted inaccurate sustainability data on the sourcing of wood pellets used at its massive plant in North Yorkshire.
An investigation by Ofgem, which was launched last year, concluded there was “an absence of adequate data governance and controls in place” on the sourcing of wood by Drax from Canada between April 2021 and the end of March 2022.
Drax, which is the recipient of significant UK government subsidies, has faced continued scrutiny over the sustainability of its wood-burning power generation business.
About 80% of the wood pellets used at the company’s biomass plants are sourced from forests in the US and Canada.
Ofgem said there was no evidence to suggest that that the breach was deliberate, and said instead that it was “technical in nature”.
The regulator also said the data ultimately fell outside the criteria used to determine the amount of public funding that Drax received and would not affect its government subsidies. At least 70% of biomass has to come from sustainable sources for companies to receive government funding.
Drax has agreed to pay £25m towards a voluntary redress scheme to settle the matter, and resubmit its profiling data for Canadian-sourced wood pellets. It will also hire an independent auditor to produce data for its annual biomass report for the year to March.
However, Ofgem’s findings are likely to fuel further criticism around government support for Drax and biomass operations.
Drax – which owns Britain’s biggest power plant, in North Yorkshire – has received billions in renewable energy subsidies, thanks to its claim that its electricity is “carbon neutral”. It rests on claims that the trees felled to produce wood pellets absorb as much carbon dioxide while they grow as they emit when they are burned in the power plant.
This week, more than 40 green groups – including from Canada – called on the UK energy secretary, Ed Miliband, to scrap plans to pay subsidies to Drax for it to keep burning wood pellets imported from overseas forests.
The Drax chief executive, Will Gardiner, said: “It is welcome that Ofgem has found no evidence that our biomass failed to meet the sustainability criteria of the renewables obligation [certificate] scheme, nor that the ROCs we received for the renewable power we produced had been provided incorrectly.
“Although Ofgem has noted there is no evidence to suggest Drax deliberately misreported its profiling data, we recognise the importance of maintaining a strong evidence base and are continuing to invest to improve confidence in our future reporting.”
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A spokesperson for the Department for Energy Security and Net Zero said: “We expect full compliance with all regulatory obligations – consumers rightly expect the highest standard of accountability from generators. The size of the redress payment underscores the robustness of the regulatory system and the requirement that generators abide by both the spirit and the letter of the regulations.”
The US-based Natural Resources Defence Council (NRDC) said the payment was a “drop in the ocean”.
Matt Williams, a senior advocate for the environmental group, said: “This ruling shows how difficult it is to prove that burning wood from forests is good for the environment. There’s one simple reason for that – it isn’t.
“The £25m fine Drax have volunteered to pay is a drop in the ocean compared to the billions they’re asking for in new subsidies. The energy secretary, Ed Miliband, must see it’s not worth paying even more of the public’s money to a company that can’t play by the rules.”
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