Energy giant Drax is being investigated by Britain’s financial watchdog about where it gets the wood from that it burns to create electricity.
It follows accusations by a former Drax insider in March that the company had misled over its sourcing of wood for biomass pellets.
The London-listed company denied those claims. It said it would “co-operate with the FCA as part of their investigation” on Thursday.
Drax, which used to burn coal at its Yorkshire power station, now receives multimillion-pound subsidies from energy bill-payers to burn woody biomass pellets.
The UK government supported this switch as a way to clean up power supplies, and classed the resulting bioenergy as renewable.
But that status and the enormous subsidies have been disputed by campaigners and some scientists who fear bioenergy is less green than thought, based on its impact on forests and the years needed for its emissions to be offset.
Sky News was the first to reveal in 2021 that Drax’s Selby power station is Britain’s largest single source of emissions.
But the station provides 5% of Britain’s electricity and has the advantage of being highly flexible: it can easily be turned up, down or off to match demand, a feat that eludes wind, solar and nuclear power.
Shares in the FTSE 250 firm fell more than 12% on Thursday morning.
Please use Chrome browser for a more accessible video player
Search for ‘climate justice’ reaches world court
The group said the Financial Conduct Authority (FCA) probe covers its biomass sourcing statements from January 2022 to March 2024.
It will also assess the compliance of Drax’s annual reports from 2021-2023 with financial disclosure and transparency rules.
The regulator said: “We can confirm that the FCA has opened an investigation into Drax Group.”
Its probe intensifies scrutiny over Drax, which last year paid a £25m penalty over misreported biomass data, particularly concerning sourcing from Canadian forests.
Then in March, Drax’s former head of public affairs and policy, Rowaa Ahmar, suggested the company had misled over its sourcing of wood for biomass pellets, which were made as part of a claim for unfair dismissal at an employment tribunal. Drax denied the claims.
The two quickly reached a settlement.
Weeks earlier, the government confirmed it would extend subsidies for Drax’s “important” bioenergy, but halve the amount paid and include a windfall mechanism to recoup some of the profits.
Frankie Mayo, energy analyst at thinktank Ember, said it’s “right that the UK’s largest emitter faces additional scrutiny”, given its cost, environmental impact and dependence on wood product imports.
