Regulator urged to investigate if Drax's green credentials are genuine
Parliament’s business and energy select committee today released a report that called upon Ofgem to investigate whether the evidence given by the North Yorkshire company was legitimate in gaining access to taxpayer subsidies.
In reaction, the company said that the recommendations show that the UK is a “potentially unattractive place to do business” with companies “looking at more welcoming countries to spend their money”.
It comes as the watchdog confirmed it had opened an additional level of scrutiny into Drax following allegations by BBC’s Panorama which cast doubt on whether the wood pellets burned in its power plant in the region were sustainable.
The programme claimed that it imports high-grade wood from virgin forest, rather than from sources such as leftover wood and sawdust, which the company says makes the energy source eco-friendly.
Drax disputes the claims as “false and misleading” by the BBC and “others who are not close to our business”.
The select committee said that it does not believe that the estimated £11bn in taxpayers’ money given to the company between 2011 and 2027 “represented either value for money or the best use of public funds”.
MPs said that the Government support should not be extended beyond 2027 in favour of alternatives, which could include Drax’s proposal to use carbon capture and storage technology to remove pollution from its process called BECCS (Bioenergy with carbon capture and storage).
Drax last month missed out on Government funding for its BECCS project, and has since entered separate talks with ministers in order to get it over the line.
Graham Stuart, the energy minister, told MPs that the Secretary of State had tasked officials with looking at a “bridging option” between 2027, when subsidies end, and 2030, when Drax plans to become carbon negative.
A spokesperson for the company claimed the report was “confused” and indicative of why companies such as Drax could look at more lucrative subsidies abroad.
“Drax Power Station plays a vital role in the UK power grid and is supported in the same way as nearly every other power station via the energy market regime, without which the country would not be able to keep the lights on,” they said.
"This report complains that the UK is on course to miss its renewable power targets whilst simultaneously calling on government to effectively stop supporting the country's single biggest generator of renewable power.
“With confused views like this, the UK is becoming a potentially unattractive place to do business and invest in, and companies are looking at more welcoming countries to spend their money.”
Committee Chair Darren Jones said, “Without a coherent, overarching delivery plan, the Government risks undermining the UK’s ability to generate, store and distribute the fossil fuel free electricity the country needs to hit Net Zero.
“The UK is now competing with the US and Europe for investment. Government must urgently make us an attractive investment proposition again and ensure that the pool of capital and labour available for building low-carbon energy projects is not lost.”
An Ofgem spokesperson said: “Ofgem takes scheme compliance extremely seriously and where we identify or suspect that requirements are not being met we may decide to investigate further.
“We regularly undertake additional audits of Drax’s adherence to the Renewables Obligation scheme, using an independent auditor. This is an extra layer of assurance, over and above the requirements set out in regulations, recognising the significant values involved.”