Drax profits rise as electricity generation falls, show new figures

Concerns over the climate change impact of biomass

Despite being considered carbon neutral under UK law, there is a growing scientific consensus that burning wood for power cannot be assumed to deliver climate benefits and instead may well be contributing to climate change. With more scrutiny of the biodiversity and climate impacts of Drax’s business model—importing millions of tonnes of wood from North America and burning it in the UK—concern is building among key decision-makers in the UK. In January 2022, the Climate Change Committee’s David Joffe told a parliamentary committee that “There are big challenges to ensuring the sustainability of biomass grown outside the UK. It is not impossible but it is very difficult…It is not something that the UK should be relying on at large scale”.

In August 2022, then Business Secretary Kwasi Kwarteng told fellow MPs “There’s no point getting [wood pellets] from Louisiana . . . that isn’t sustainable . . . [and has] . . . a huge cost financially and environmentally . . . [it] doesn’t make any sense to me at all.”

Notes to editor

• Drax do not publish the split between ROCs and REGOs in their annual report, but have released to journalists that they earnt £602m in 2023 from ROCs (2022: £615m). Because of very high power prices in 2022 and 2023, their CFD income has dramatically reduced, so in 2023 they paid back £63m (2002: £33m). With power prices reducing in 2024, we expect total subsidies to rise substantially next year.
• Ember estimates the value of future subsidies in line with the index they are tagged to: ROC prices increase each year by Retail Price Index (RPI), which currently stands at 4.5%. CfDs increase each year by the Consumer Price Index (CPI), which currently stands at 3.8%.
• Drax also has some Scottish hydropower assets, some of which receive ROCs. The amount is not declared in the financial reports but is less than <2.5% of the overall subsidy Drax receives.
• BECCS: Ember’s May 2021 estimate put the cost of BECCS at £181 per MWh in this 2020 research. This is supported by the October 2021 BEIS “Investable commercial frameworks for power BECCS” paper which estimates the price similarly, at £179 per MWh.