Drax Group (LSE:DRX)’s publicly funded subsidies could be at risk amid an investigation into the biomass power generator’s sustainability practices, Parliament heard on Tuesday.
Questions were raised over renewable-classed Canadian-sourced wood pellets used to produce power at Drax’s North Yorkshire power station in a House of Lords debate.
According to Canadian environmentalists, Drax’s pellets have been sourced from ancient rainforests, contrasting the company’s line that they come from forestry waste.
If indeed the case, Drax could face losing government subsidies through the Contract for Difference and Renewable Obligation schemes, which aim to encourage clean energy and ensure earnings for generators.
Drax has been paid roughly £11bn worth of subsidies through such schemes, the House of Lords heard, with Ofgem currently investigating whether the firm has breached licences over renewables reporting.
“If it is proved that they are not in compliance, then of course some of the value of the certificates they have received will be withdrawn,” Conservative Martin Callanan said.
However, Callanan also played down the accusations from environmental groups, suggesting people should wait for the outcome of Ofgem’s investigation.
Baroness Rosel Boycott argued that Drax had claimed to be using sustainably-sourced wood without “any detailed full-cycle carbon accounting and audit trail” meanwhile.
Ofgem has yet to report findings on Drax’s sustainability claims, with the pellet burning classed as renewable based on the idea that no more emissions are produced from the practice than are collected during the trees’ lifespan.
Environmental groups have repeatedly lashed out at the use of biomass energy generation, with the likes of Ember arguing the emissions released in the process still fuel climate change.
Drax responded to the debate: “We are confident in our business and operations and committed to ensuring the biomass we source delivers positive outcomes for the climate.”
The group has also placed pressure on the government to further subsidise the addition of carbon capture technology to its biomass plant, having previously hinted investment could be redirected without this.