Drax Group (LSE:DRX)’s 84% underlying profit increase in 2022 has sparked calls from numerous MPs to scrap subsidies for its biomass operations
Reporting pre-tax earnings of £731mln last year, up from £398mln in 2021, Drax has been the subject of scrutiny due to subsidies it receives from the government for generating power at its Yorkshire biomass plant.
According to think tank Ember, Drax received £893mln in public subsidies in 2021 through renewables obligation certificates and contract for differences (CFDs) to help it produce so-called carbon-neutral power by burning wood pellets at the plant.
This figure could rise to £11bn by 2027, Ember added, with the scheme having begun in 2012 to boost renewable production in the UK.
Ember also cited Drax as the UK’s single largest CO2 emitter.
These subsidies “directly cost bill payers and families through their energy bills,” said conservative MP Pauline Latham, hitting households harder after a year of already inflated prices.
Latham also claimed the plant could hardly be classed as renewable given it releases “huge amounts of greenhouse gases” and harms “forests’ ability to absorb carbon”.
Scientists have previously called for biomass to no longer be classed as a green fuel, including EASAC’s Michael Norton, who suggested doing so had a “perverse impact on the climate”.
Another conservative MP, Sall-Ann Hart commented: “We should prioritise investment in clean and cheap energy sources… not an industry which risks fuelling deforestation.”
Drax also operates hydro and pumped storage power stations, at times supplying up to 70% of the UK’s renewable power “when there was low wind and solar,” according to chief executive Will Gardiner.
Drax reported earnings per share of 85.1p, compared to 2021’s 26.5p, and a dividend of 21p per share, up from 18.8p, equating to an £84mln payout to shareholders.