Drax under investigation over sources of the wood it burned for power

DRAX GROUP is being investigated by the Financial Conduct Authority (FCA) over “certain historical statements” it made regarding the sourcing of its wood pellets for its biomass power station in North Yorkshire.

This investigation follows a probe last year by energy watchdog Ofgem which concluded that Drax had misreported data in its annual reporting from 1 April 2021 to 31 March 2022. Ofgem also found that Drax was unable to support the reliability of its profiling data for the type of forests and sawlogs it sourced wood from in Canada.

The probe resulted in Drax agreeing to pay a fine of £25m (US$34m) and the company re-submitting its annual reports in respect of its biomass sourcing.

The FCA’s investigation will double down on Drax’s reporting, covering the company’s operations from January 2022 to March 2024.

Mounting scandal

Drax power station in North Yorkshire generates 5% of the UK’s electricity with most of the wood it burns sourced from the US and Canada. The company has been under the spotlight for a couple of years now after a BBC Panaroma investigation alleged the company was cutting down old-growth forests in Canada.

In March this year, a former employee of Drax claimed the company tried to “silence” her after she voiced concerns about its biomass sourcing, specifically that it was sourcing “unsustainable wood” reports The Times. In a case brought to the Central London employment tribunal, Drax has denied the former employee’s claims alleging she was not a reliable witness.

Tighter subsidies

Compounded by mis-reporting allegations, the government also announced earlier this year that it would halve its subsidies to Drax once its current Contracts for Difference (CfD) agreement ends in April 2027.

The company received £869m in public subsidies last year, but this is set to fall to £470m according to the government. The change is expected to save £6 per household on annual energy bills.

Under its current agreement with the government, Drax needed to provide evidence that at least 70% of its wood pellets were sustainably sourced. Under its new agreement, by 2027 the company must prove that 100% of the wood it burns is certified sustainable.

Drax said it will co-operate with the FCA’s investigation.