Energy company Drax is currently facing scrutiny from the UK’s financial watchdog regarding its practices in sourcing wood for biomass pellets. This investigation has been sparked by serious allegations from whistleblowers, raising concerns about the company’s procurement methods and the sustainability of its operations.

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The London-listed company announced that the Financial Conduct Authority (FCA) investigation spans over two years, from January 2022 to March 2024. The probe will also examine the compliance of the Drax annual reports from 2021, 2022, and 2023 with regulations concerning listing, disclosure, and transparency.

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FIND US ON

The situation arose following serious allegations made by Rowaa Ahmar, Drax’s former head of public affairs and policy, in March. She accused the company of misleading the public regarding the sourcing of wood for its biomass pellets, a central component of her assertion for unfair dismissal during an employment tribunal. In response, Drax firmly denied all of her claims, standing by its practices and integrity. However, just over a week after the tribunal case commenced, Drax and Ms. Ahmar reached a settlement, drawing a swift conclusion to this contentious dispute.

Just weeks before the tribunal convened, the UK Government confirmed that it would proceed with new subsidy arrangements for Drax’s wood-burning power plant located in North Yorkshire, even after the current subsidy framework is set to expire in 2027. These new subsidies are significant because the Drax power station is responsible for generating approximately 5% of the United Kingdom’s electricity supply. Officials indicated that maintaining Drax’s operations is crucial for ensuring a secure and cost-effective power system, underlining the plant’s role in the broader energy strategy.

However, the forthcoming subsidy arrangements entail a substantial reduction, halving the financial support that Drax previously received. The new framework will incorporate a windfall mechanism stipulating that if Drax’s profits exceed anticipated limits, between 30% and 60% of those excess profits must be returned to consumers. This measure aims to balance the financial benefits of renewable energy production with the interests of consumers. Drax’s economic viability has been heavily reliant on the billions in government subsidies it has obtained for burning wood pellets, which are classified as a renewable energy source. This dependency on financial support has raised eyebrows among environmental groups and activists, who have long advocated for the cessation of subsidies for burning wood sourced from forests and energy crops in power stations. They argue that these funds should be redirected toward developing more sustainable energy sources, such as wind and solar power, which have a lower environmental impact

Investigations conducted by various environmental organisations have alleged that Drax has sourced wood from ecologically sensitive forests across the globe. In response, Drax has consistently asserted that its biomass is both sustainable and legally harvested, maintaining that its practices align with environmental protection standards. This ongoing conflict highlights the tension between renewable energy initiatives and ecological preservation, with both sides presenting compelling arguments in the debate over the future of energy production in the UK.