Drax faces formal investigation over wood pellets burned for electricity

Britain’s energy regulator has launched a formal investigation into power company Drax over whether burning wood pellets to generate electricity at its plant breached sustainability rules.

Ofgem launched an investigation last year into whether Drax complied with UK biomass sustainability rules, and escalated the investigation in an investigation announced on Wednesday. Drax shares were down about 5 percent by midday.

“We are examining whether Drax Power Limited is in contravention of the annual profiling reporting requirements relating to Renewable Obligation Scheme and other related matters,” the regulator said.

The investigation began when a BBC documentary raised the question of whether the wood that Drax had bought from Canada was sustainably sourced.

Opinion is divided among scientists whether burning wood biomass for energy is an environmentally sustainable and low-emission alternative to fossil fuels. Advocates say that offsetting carbon dioxide released from burning wood is absorbed by trees as they grow.

Ofgem has refrained from launching a formal investigation, but may step up audits and other regulatory activity if an issue is not resolved and it is concerned about possible wrongdoing.

Drax said the opening of an investigation “has no findings of non-compliance” and added that it would “cooperate fully throughout this process”.

It also said it hired an unnamed third party last year to verify the accuracy of its biomass sustainability data, but declined to share the findings. “Drax is confident in the compliance of its biomass,” it said.

Drax has stated that the wood it uses is sustainable, and states that it only takes residual wood from other industries and does not deforest itself.

As part of its initial investigation, Ofgem commissioned a third party, US-based consulting group Black & Veitch, to audit Drax’s woody biomass, which it reported to the power company in February. B&V was also selected by Drax in 2021 to help the company with research, engineering and technical support over a period of three years.

Under UK regulations, at least 70 percent of the woody biomass material used to power generators must be classified as sustainable. Compliance is demonstrated through industry certification schemes such as the Sustainable Biomass Program, or through the collection of evidence to demonstrate that regulations have been met.

Drax CEO Will Gardiner was a board member of SBP until this year. Kyla Cheynet, director of sustainability for Drax’s US operations listed as sitting in the Technical Committee of the SBP, while David McCallum has served as both SBP’s And Drax’s company Secretary.

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