The UK’s largest emitter is looking for more public money

London, 9 January 2024 – The power company Drax is looking for new government handouts which could cost UK households an extra £12 billion, according to Ember estimates.

Biomass power stations like Drax, which burn forests to generate electricity, are unlikely to reduce emissions, and in some cases may increase them.

Drax already has a subsidy for its wood burning up until 2027. Recently, it has begun lobbying the government for an extension to this subsidy. The government’s Biomass Strategy leaves the door open for subsidy up until 2035, which would cost £11.5 billion.

These biomass subsidies could add around £14 a year to every household’s energy bill – and will grow each year, even as wind and solar bring down overall energy costs.

Explaining the numbers

Energy bills per household

To calculate the cost per household, Ember takes the total value of the subsidy (estimated at £1.1 billion in 2028) and splits that total between residential and commercial billpayers. According to the Climate Change Committee, residential bills make up 36% of the UK’s energy bill total.

Ember then splits that cost between the UK’s 28 million households (according to the ONS) which gives a figure of £14.18 added to each household’s energy bill in 2028, and more in future years.

Future subsidy

Drax currently receives a mixture of subsidy across its 4 power station generating units, all located at the same site in Selby, North Yorkshire. Each year, Ember examines the ROCs (Renewable Energy Certificate) and CfD (Contracts for Difference) subsidy receipts from Drax’s annual report.

To estimate future subsidy, we take an average of the last 5 years of Drax’s annual subsidy (to account for annual variations in subsidy due to unit shutdown or new turbine installation), and uprate it each year by the most recent inflation figure (ROCs use RPI, CfD use CPI). We believe a 5 year average is the most accurate way of calculating subsidy, as 2022 was a very unusual year in terms of gas price volatility, and so wholesale power price volatility.

The largest source of error in these future estimates is the future rate of inflation: if inflation falls significantly (currently RPI is 6.1%, CPI is 4.7%) then the amount of increase in the annual subsidy will be reduced. However, even if inflation fell to average 2%, Drax’s total annual subsidy would still be over £1 billion by 2031.

Ember’s calculations show that Drax has already received £6.2 billion in public subsidy.

The company already has an agreement with the government for further subsidy up until 2027, which will see it receiving a further £4.2 billion. Total contracted subsidy across the whole period from 2012-2027 will be more than £10 billion.

If the subsidy is extended to 2030, Ember estimates Drax will receive an additional £4.3 billion.

If the subsidy is extended to 2035, Ember estimates that Drax will receive an additional £11.5 billion, giving it a total public subsidy (2012-2035) of £21.6 billion.

The subsidies we’ve already given Drax have pushed up energy bills whilst probably not helping reduce the UK’s contribution to climate change. Following the enormous increase in gas prices over the last few years, British people simply can’t take higher energy bills – we should be investing in clean energy which brings down bills, like wind and solar. To support a modern pollution-free electricity grid, we also need to build and expand other technologies, such as nuclear and hydropower. Crucially, these technologies are provably very low emitters, unlike commercial scale wood burning.

Phil MacDonald
‍Managing Director, Ember

Emissions

Drax biomass power station is the UK’s largest emitter. In 2022, wood-burning at Drax emitted 12.1 million tonnes of carbon dioxide (CO2) into the atmosphere. These emissions are greater than the annual emissions of many entire countries, including most countries in sub-saharan Africa. For example, Afghanistan, Estonia and Zimbabwe all have lower annual emissions from their entire country than Drax.

Bioenergy companies do not dispute the scale of CO2 emitted by burning wood for power. However, they operate under the assumption that all emissions released are offset by the growth of new trees to replace those harvested for burning. This assumption is widely shared by the EU and the UK government. For this reason, wood is considered a ‘carbon neutral’ or emissions-free source of energy, making it exempt from carbon-taxation and eligible for significant public subsidy.

However, the reality of wood burning is far more complex than this. A large and growing majority of scientific evidence shows that burning wood for power is often not carbon neutral, and in some circumstances can be a worse polluter than coal. There is also strong evidence that wood-sourcing practices are damaging to natural forests, risking further ecological harm.

The European Academies Sciences Advisory Council (EASAC) states that using woody biomass for power “is not effective in mitigating climate change and may even increase the risk of dangerous climate change”.

Where does the wood come from?

Drax imports most of its wood from forests in the USA and Canada, via tankers crossing the Atlantic. Drax has also recently sourced wood from forests South America and Eastern Europe. In 2022, Drax stopped importing wood from Russian forests following the invasion of Ukraine.

About Ember

Ember is an independent energy think tank that aims to accelerate the clean energy transition with data and policy. It creates targeted data insights to advance policies that urgently shift the world to a clean, electrified energy future.

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