Biomass fuel burnt by Drax Group (LSE:DRX) is being investigated by UK energy regulator Ofgem to see if it complies with sustainability rules, with its own scientific advisers questioning whether it should even be calling biomass 'carbon neutral'.
The news cast a shadow over the FTSE 250-listed group as it reported results, including a pledge for a £150mln share buyback for investors.
Its move to burning woody pellets to produce electricity began in 2012 and has seen it become the world's biggest wood-burning power plant, with wood sourced from forests where it says new trees are planted to absorb the greenhouse gases the burning creates. The UK government classes bioenergy as renewable and has been paying the company subsidies but the science is disputed.
An investigation by a specialist consultancy was launched into its sourcing arrangements by Ofgem in 2021, following a BBC documentary that found the Yorkshire power group was cutting down “environmentally important” forests in Canada.
Drax has claimed that all the Canadian woody biomass it used in 2021 and 2022 was certified under the Sustainable Biomass Program.
However, Ofgem has commissioned a third-party audit due to growing media scrutiny and concerns, the Financial Times reported today, following a freedom of information request.
The company has been told by its independent advisory board to "reassess its criteria for determining carbon neutrality" and "move away from saying 'carbon stocks are increasing/stable' and stating biomass is carbon neutral," according to a separate report.
Its advisory board is chaired by former government chief scientific adviser Prof Sir John Beddington.