Drax to pay £25m after regulator finds wood pellet reporting failures

The power generator Drax has agreed to pay £25m after the energy industry regulator found it had submitted inaccurate 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 that there was “an absence of adequate data governance and controls in place” when it came to profiling the sources of wood used by Drax from Canada between April 2021 and the end of March 2022. This kind of profiling data is used to determine, for example, whether wood pellets had come from sawmills or forests.

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 the breach was deliberate, and said instead that it was “technical in nature”. It also found no evidence that the biomass sourced for the power plant was unsustainable or that Drax had wrongly laid claim to millions in renewable energy subsidies.

The regulator’s findings could help the company to secure an extension to its existing subsidy scheme, which is scheduled to end in 2027. Drax has lobbied the government for its continuation until 2030, when the company expects to be eligible for a fresh stream of subsidies for its plan to fit carbon capture technology to the plant.

Drax received more than £500m in subsidies in the last financial year. It has claimed more than £7bn in bill-payer-backed subsidies since it began work to convert the former coal plant to run on biomass in 2012. The sums have provoked outrage from green campaigners who have questioned the claims that biomass is a sustainable source of renewable energy.

Drax insists that its biomass generation is “carbon neutral” because the emissions produced from its chimney stacks are offset by the emissions absorbed by the trees that are grown to produce the pellets. But some scientists have said it would take decades for trees to absorb enough carbon dioxide to offset the emissions produced immediately as pellets are burned.

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 “the most polluting power plant in the UK” to keep burning wood pellets imported from overseas forests.

Drax’s 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] (ROC) 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.”

Drax has agreed to pay £25m towards a voluntary redress scheme – which is used to fund support for vulnerable customers – 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.

The US-based Natural Resources Defense Council said the payment was a “drop in the ocean”.

Related: Green groups urge Ed Miliband to scrap Drax subsidies

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.”