The UK government has halved subsidies for the Drax power station and ordered it to use 100% sustainable biomass, following criticism of its environmental impact.
The North Yorkshire plant, a major electricity provider, has faced backlash for burning wood pellets sourced from North America.
Under a new agreement, Drax’s subsidies will be cut between 2027 and 2031, saving consumers an estimated £170 million a year.
The government insists the plant will only generate power when essential. Energy Minister Michael Shanks said the previous subsidies allowed Drax to make “unacceptably large profits.”
Despite the changes, Drax Group (LSE:DRX) expects to maintain annual profits between £100 million and £200 million, and its shares rose nearly 4% to 659p following the announcement.