Drax Group (LSE:DRX) climbed on Thursday after unveiling a deal to supply wooden pellets for sustainable aviation fuel production in the US.
FTSE 250-listed power generator Drax said it had agreed “heads of terms” to sell over a million tonnes of the biomass pellets to US-based Pathway Energy annually.
Pathway will then use the pellets, taken from cut-down trees, to produce sustainable aviation fuel at a planned plant in Port Arthur, Texas.
Sustainable aviation fuel, which can be made using the likes of waste, is expected to play a major part in decarbonising the aviation industry.
“[This] is an important step in the energy transition and for decarbonising the aviation sector through sustainable aviation fuel production,” Drax boss Will Gardiner said.
However, Drax has repeatedly come under scrutiny over its use of wood pellets, which are controversially classed as carbon-neutral, to produce power.
Drax’s wood-powered North Yorkshire power station was the UK’s single largest source of emissions last year, according to a report in August from think tank Ember.
“Wood pellets have an equivalent carbon intensity to coal but are burned at higher volumes due to their low energy density, meaning that burning wood emits more carbon dioxide than coal or gas, per kilowatt hour of electricity,” Ember said at the time.
Shares in Drax climbed 2.3% to 650p on Thursday.