Power station operator Drax has agreed to pay a £25 million penalty after the energy watchdog found it failed to report accurate data on the sourcing of wood pellets it burned at its North Yorkshire plant.
Ofgem carried out a 15-month investigation into Drax over data profiling the sources of pellets it used from Canada between April 2021 and March 2022, such as sawmills or forests.
It comes after Drax was accused of burning wood from unsustainable sources as well as claims that it was taking timber from precious rare forests in Canada.
The regulator said in May last year that it was looking at whether Drax was in breach of “annual profiling reporting requirements relating to the Renewables Obligations scheme”, as well as other related matters.
Drax, which runs Britain’s biggest power station in North Yorkshire, receives hefty government subsidies for burning biomass wood chips.
There have been growing calls from environmental groups and campaigners to end all subsidies for burning wood from forests and energy crops in power stations and to not award energy companies any new support or contracts to do so.
Ofgem said, on closing the investigation, that Drax was found to have lacked the necessary data governance and controls in place.
This meant it did not give the regulator accurate and robust data on the type of wood it uses.
But Ofgem did not find any evidence that Drax’s biomass was not sustainable or that Drax had been issued renewables obligation certificates (ROCs) incorrectly.
Ofgem said Drax will pay £25 million to its voluntary redress fund as a result of the findings.
Ofgem chief executive Jonathan Brearley said: “This has been a complex and detailed investigation.
“Energy consumers expect all companies, particularly those receiving millions of pounds annually in public subsidies, to comply with all their statutory requirements.
“There are no excuses for Drax’s admission that it did not comply with its mandatory requirement to give Ofgem accurate and robust data on the exact types of Canadian wood it utilises.
“The legislation is clear about Drax’s obligations – that’s why we took tough action.
“Drax has accepted that it had weak procedures, controls and governance which resulted in inaccurate reporting of data about the forestry type and sawlog content being used.”
He added: “While Ofgem currently has no reason to believe there have been further instances of non-compliance, we won’t hesitate to act if required.”
The regulator said Drax had “engaged constructively” throughout the investigation.
Drax Group chief executive Will Gardiner said: “Although Ofgem has noted there is no evidence to suggest Drax deliberately misreported its profiling data, we recognise the importance of maintaining a strong evidence base and are continuing to invest to improve confidence in our future reporting.”
An Energy Department (DESNZ) spokesman said: “We expect full compliance with all regulatory obligations – consumers rightly expect the highest standard of accountability from generators.
“The size of the redress payment underscores the robustness of the regulatory system and the requirement that generators abide by both the spirit and the letter of the regulations.”
But the US-based Natural Resources Defence Council (NRDC) said the penalty was a “drop in the ocean”.
Matt Williams, senior advocate for the NRDC, said: “This ruling shows how difficult it is to prove that burning wood from forests is good for the environment.
“There’s one simple reason for that – it isn’t.
“The £25 million fine Drax have volunteered to pay is a drop in the ocean compared to the billions they’re asking for in new subsidies.
“The Energy Secretary Ed Miliband must see – it’s not worth paying even more of the public’s money to a company that can’t play by the rules.”
