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The UK’s energy regulator has cleared Drax, the nation’s largest energy station, of accusations that it’s environmentally unsustainable, even because it discovered holes within the firm’s provide chain knowledge.
After a 16-month investigation, Ofgem stated Drax didn’t have enough knowledge on the sustainability of the wooden it imported to burn in its biomass models in 2021-22, and ordered a full impartial audit of its provide chain for final yr.
Drax can pay £25mn into Ofgem’s Voluntary Contributions Fund to atone for the breach.
“Drax has accepted that it had weak procedures, controls and governance which resulted in inaccurate reporting of data,” stated Jonathan Brearley, Ofgem’s chief government.
Nevertheless, Ofgem stated the misreported knowledge had been “technical in nature” and there was no proof that Drax’s biomass was unsustainable, or that the corporate shouldn’t have acquired the £548mn in clear energy subsidies it was paid final yr.
“It is welcome that Ofgem has found no evidence that our biomass failed to meet the sustainability criteria of the Renewables Obligation (RO) scheme, nor that the ROCs we received for the renewable power we produced had been provided incorrectly,” stated Will Gardiner, Drax’s chief government.
However, the findings of the investigation will present extra ammunition for campaigners, who’ve rubbished Drax’s claims that burning imported wooden from Canada and the US is each carbon impartial and sustainable.
Biomass accounts for 11 per cent of energy technology within the UK, however its use rests on assurances that the wooden concerned is from sustainably managed forests with ongoing replanting. The National Audit Office this yr forged doubt on the trustworthiness of the UK monitoring course of.
“This ruling shows how difficult it is to prove that burning wood from forests is good for the environment,” stated Matt Williams, on the National Resources Defense Council. “There’s one simple reason for that — it isn’t.”
But analysts stated the conclusion of Ofgem’s investigation will pave the best way for the federal government to increase the subsidy regime that is because of expire in 2027.
Subsidies accounted for an estimated 13 per cent of Drax’s £7.5bn energy technology revenues final yr, in keeping with analysis platform Visible Alpha.
“The ending of the Ofgem investigation is a clear positive for Drax,” stated Alexander Wheeler at RBC Capital Markets. “This announcement also confirms no issues with biomass sustainability, which is clearly important as Drax continues its discussions with the government,” he added.
Drax shares rose slightly below 1 per cent in early London buying and selling to 660p and are up by greater than a 3rd up to now this yr.
On Tuesday, 41 environmental teams from all over the world despatched an open letter to Ed Miliband, the energy secretary, to induce him to scrap plans for additional assist for the corporate.