Energy firm behind Britain’s largest power station cleared after environmental investigation

The energy company behind Britain’s largest power station will face no further action after an investigation into the sustainability of its wood pellets.

Energy giant Drax runs a ‘green’ biomass power station in South Yorkshire providing around five per cent of all UK electricity.

It burns millions of tonnes of wood pellets every year, which it imports from North America.

This is treated as renewable energy because the carbon released was first absorbed from the atmosphere during the trees’ lifecycle.

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Fossil fuel, in comparison, releases carbon that has long been locked underground.

Drax has received billions in Government subsidies.

But the firm faced a ten-month investigation by the UK’s financial watchdog, concerning the sourcing of its wood.

This followed whistleblower claims the firm had misled the market over the sustainability of wood pellets sourced from Canada.

The London-listed group has long faced accusations of sourcing pellets from environmentally important forests around the world, though the company says it is confident the wood is sustainable and legally harvested.

The FCA investigation covered the period January 2022 to March 2024.

The FCA said it reviewed thousands of pages of complex material and interviewed individuals from the company.

It added the probe was limited to the regulator’s legal remit, focusing on whether Drax’s annual reports and accounts contained misleading statements or left out important information investors needed to know.

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The FCA notice read: “We undertook an extensive investigation following concerns raised regarding disclosures to the market about the sustainability of Drax’s Canadian biomass. We did not find evidence that justified any further action.”

Last year, Drax’s former head of public affairs and policy, Rowaa Ahmar, made accusations the company had misled over its biomass sourcing as part of her claim for unfair dismissal at an employment tribunal. Drax denied her claims.

The firm and Ms Ahmar reached a settlement with Drax just over a week after the case opened.

Will Gardiner, Chief Executive of Drax, said: “We recognise the importance of compliance with our regulatory obligations and have worked constructively with the FCA throughout this investigation. We are pleased to see the investigation closed with no action being taken.”

The investigation came weeks after the Government confirmed it would continue with new subsidies for Drax’s North Yorkshire power plant after the existing subsidy ends in 2027.

Ministers said at the time the plant was “important to delivering a secure, value-for-money power system”.

However, the new arrangements will halve the subsidies paid to Drax and include a windfall mechanism that means 30 to 60 per cent of profits will be returned to consumers if they exceed expected limits.

In theory, burning wood pellets should create carbon-neutral energy because the trees and other plants burned first absorb carbon, then are burned and release the same carbon back into the atmosphere.

But critics say this assumes the companies only use sustainable wood in their boilers.

Environmental groups and campaigners have long called for an end to all subsidies for burning wood from forests and energy crops in power stations, redirecting the money to wind and solar instead.

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