Drax set to be probed by MPs over subsidy profiteering allegations

A view of the cooling towers of the Drax coal-fired power station near Selby

Angus MacNeil, the chairman of Parliament’s Energy Select Committee said that the findings published by Bloomberg were “concerning" and “merit further investigation”.

“I will bring these facts to my wider committee for further deliberation,” he said.

An investigation by the news website earlier this week claimed that Drax avoided sending as much as £639 million to consumers since April last year.

Last year the company posted a record £731 million profit.

Drax said in a statement that the allegations were “false, inaccurate and misleading”.

The company has received £1.4 billion in subsidies since 2016, and under agreements with the Government, its earnings are capped if prices rise to a point where it does not need them, and should then send the remaining money to consumers.

The reports claimed that after prices reached this point in April last year during the energy crisis, Drax did not use a generator for extended periods so that it did not have a cap on earnings.

This is not current rules, but has prompted concern from MPs over whether it was in the spirit of the agreement between the company and government.

Ed Miliband, Labour’s shadow climate change secretary said: "These are serious claims, and the government must urgently consider appropriate action. The Conservatives must explain why they have allowed a situation in which households have been ripped off.”

A Drax spokesperson said: “The allegations made by Bloomberg are false, inaccurate, and misleading. Drax was a net buyer of pellets in this period to enable the plant to generate baseload power to keep Britain’s lights on and was the single largest generator of renewable electricity in the country last year.

“No serious observer of the energy system would advocate that we ought to have exposed Britain’s power grid and our business to increased risks.

“The Russian’s invasion created unprecedented challenges to the electricity market due to constrained fuel supplies, leading to an increase in both the demand for biomass and the price of pellets. Given this, we had to make responsible decisions on our winter hedging to minimise risk to Britain’s energy security and our business.

“Our RO units were already hedged for the period, so we took the responsible decision to preserve supplies for Winter 2022 by not hedging the now uneconomical CfD unit. We kept the CfD unit in reserve, available to either cover an unexpected outage of one of our other units, or to be dispatched in times of system stress. The unit did run in line with its availability when system margins were tight and prompt prices made it economical.”

Drax were yesterday accused of “profiteering” from the energy crisis following the allegations that it did not return taxpayer subsidies while the business was profitable.

Philip Dunne, head of Parliament’s Environmental Audit Committee said:“It is simply not right for energy companies to be profiteering from the energy crisis.

“The situation highlights how current electricity market arrangements are in need of reform.”

Lord Randall of Uxbridge: “Drax certainly know how to play the system.

“Despite all the evidence, with hundreds of scientists coming out against biomass, and countless investigations against Drax, they continue on their merry way pocketing the hard earned money of billpayers.

“From 2012 until 2027 they will receive £11 billion in low-carbon subsidies, despite being the UK's biggest source of carbon dioxide.

“In these times of high inflation hurting families, the government must call out Drax for this behaviour and commit to ending future subsidies for biomass.”

It comes as the Government's long-awaited biomass strategy continues to be delayed, with the situation surrounding Drax rumbling on over the past year following allegations of “greenwashing”.

Ministers earlier this year passed on the opportunity to invest in the company’s carbon capture scheme, despite warnings from the head of the project that ministers will struggle to meet their Net Zero targets without deploying it.