Controversial UK Biomass Energy Giant Sees Earnings Jump By 84%
Power generation firm Drax is the latest winner from the energy price crisis, with its earnings up 84 percent in the last 12 months to £731m.
Drax, which received £6bn in green energy subsidies from British taxpayers over the last four-decades, was the latest energy giant to announce bumper profits; recent announcements include Shell (£32.2bn), Equinor (£23.8bn), EDF (£1.1bn), Centrica (£3.3bn) and BP (£23bn).
It is due to receive £800m this year.
Two MPs campaigning against its biomass subsidy urged the government to stop giving the company money, with one even accusing it of “greenwashing”.
The Yorkshire-based company reported its operating profit and profit before tax were both significantly down from 2021, while the company’s profit after tax was up at £83m, up from £55m.
Drax operates the country’s largest power station in North Yorkshire that provides 12 percent of the UK’s renewable electricity and claimed it is the largest source of renewable power by output at 11 per cent.
The firm is also home to two coal-fired power units which have been left on standby this year to help National Grid stave off blackouts over the winter amid a Russian squeeze on energy supplies.
Its chief renewables source is it 2.6GW biomass plant, which burns millions of tonnes of imported wood pellets to generate energy – providing around four percent of the UK’s overall output.
It was, however, subject to a major BBC panorama documentary, accusing it of cutting down protected forests.
Brits have been struggling with their energy bills ahead of the falling of the price cap on 1 April. Ofgem will cap gas and electric bills at £3,294 from 1 April, according to Cornwall Insights’ forecast, but Brits are still expected to pay 20 percent higher bills, as the cap only partially covers customers.
“Our renewable generation – biomass, hydro and pumped storage – are a major source of power in the UK and during periods of peak demand when there was low wind and solar power, these assets collectively supplied up to 70% of the UK’s renewable power in certain periods”, said Will Gardiner, CEO of Drax Group.
On BECCS, developing a pipeline of projects in the US targeting long-term large-scale carbon removal, he said the company “can become a world-leading solution for large-scale high-quality” removals, in its shift to cleaner energy.
“Drax stands ready to invest billions of pounds in the development of this technology and, following the introduction of the US Inflation Reduction Act, we are increasingly excited about the opportunities to deploy BECCS in the US.
“In response, the UK Government should accelerate its policy support for BECCS to make the UK a world leader in carbon removals, while attracting investment and delivering its net-zero targets.
Reacting to the results, two leading MPs with the ‘Cut Carbon Not Forests’ criticised the government for backing the UK’s bioenergy reliance, while giving Drax a billion pounds a year.
According to a survey by the group, 62 percent of the public think it’s wrong for the government to give subsidies to biomass energy production firms like Drax. 59 percent disagree with funding it to fight climate change.
Tory MP Pauline Latham MP criticised her own party, saying the UK “pays significant sums in renewable energy subsidies to bioenergy companies making sizeable profits, despite it releasing huge amounts of greenhouse gases and harming forests’ ability to absorb carbon.
“This directly costs billpayers and families through their energy bills. In the context of the cost of living crisis, the Government should be looking into these subsidies and ensuring they are used for proven renewable energy sources and energy efficiency measures, rather than harming nature.”
Tommy Sheppard MP of the SNP, said; “It’s clear that the British public aren’t falling for the myth that biomass is carbon neutral, no matter how many greenwashing PR stunts companies like Drax pull to convince people otherwise.”
“Taxpayer money should be spent on real emission-free energy sources, not on technology that pumps more carbon into the atmosphere and destroys forests worldwide. Burning tees on an industrial scale for electricity does the latter. It’s time the UK Government listened to the public and end wasteful biomass subsidies.”
By City AM
UK’s Biggest Polluter Doubles Profits while Raking In Hundreds of Millions in Government SubsidiesRachel Donald
24 February 2023
The UK gives more to bioenergy firms than any other country in the world, reports Rachel Donald
Energy giant Drax has announced huge profits, with the ‘bioenergy’ company raking in £731 million thanks to the energy crisis. The UK’s single biggest source of CO2 increased its earnings by 84% while claiming almost £900 million in government subsidies.
But new research shows that the majority of Brits oppose the vast subsidies the Government is giving to bioenergy – electricity produced by burning biomass like trees – every year. In fact, the Cut Carbon Not Forests coalition found that just 3% of Brits think that taxpayer money should prop up these energy companies.
The UK gives almost £2 billion to bioenergy firms, more than any other country in the world.
In 2021, the Government gave £893 million of public money to Drax, despite the firm belching out almost 20 million tonnes of CO2 annually, more than any other emitter in the country. But Drax’s emissions, and the emissions of all UK bioenergy, are omitted from the UK’s carbon footprint by the Government on the grounds that the emissions will be accounted for in the country where the trees were sourced.
Matt Williams, a campaigner for Cut Carbon Not Forests, said: “Bioenergy companies have been raking it in at the expense of families facing soaring energy bills, the world’s forests, and the climate. They’ve been allowed to claim that burning trees, instead of coal, is magically zero carbon. It’s clearly not. They’ve ridden off into the sunset, through a landscape littered with tree-stumps, pockets stuffed full of our money.”
Conservative MP Pauline Latham has criticised the Government for spending huge sums on a major polluter as millions of Brits are suffering from yet another economic crisis. “In the context of the cost of living crisis, the Government should be looking into these subsidies and ensuring they are used for proven renewable energy sources and energy efficiency measures, rather than harming nature,” she said.
Drax did not respond to a request for comment.
Bioenergy is often touted as a renewable energy source on the basis that forests are replantable. However wood-burning in this way produces more CO2 than burning coal, a notoriously filthy fossil fuel. In fact, burning biomass for power has been emitting more CO2 in the UK than coal since 2019.
“The scale of these subsidies just don’t add up,” according to Phil MacDonald, managing director of independent energy think tank, Ember. “Politicians are finding it more and more difficult to justify any increase to energy bills, and more and more difficult to justify burning biomass as the climate implications become clear. Large-scale burning of forest biomass is a threat to the climate, and should be phased-out.”
The UK is the biggest culprit in subsidising bioenergy in Europe, with last year’s £1.8 billion in subsidies representing a 70% increase from 2015.
While claiming the majority of that subsidy, Drax came under fire last year after BBC’s Panorama exposed the energy giant for importing primary forest from Canada, despite claiming it only uses sawdust and waste wood.
Scientists insist that old forests are not renewable simply because trees can be replanted – old forests support rich ecosystems and thousands of other plant species which equally capture carbon through photosynthesis. They are also home to animal and insect species that are dependent on these rich and ancient ecosystems for survival.
For economist and professor Steve Keen, viewing trees as either carbon capturing devices or furnace fuel is part of the fallacy of thinking economics can solve the crisis, says economist and professor.
“Trees in an old growth forest – as opposed to a plantation – are clearly visible components of an incredibly complex web of life, much of which is invisible,” he told Byline Times. “Damage to this web can’t be offset by planting trees elsewhere. Carbon accounting and the like do trivialise that web. They assume a level of simplicity to biological processes that is simply false and fool us into ignoring the complexity of life, without which there wouldn’t be an economy in the first place.”
Economic tricks may balance carbon on the books but emissions are on the rise in polluting countries even as they claim to head towards net zero – a practice that justifies the Government writing off Drax’s CO2 emissions despite the energy company being the country’s biggest CO2 polluter.
But Cut Carbon Not Forests and opposition MPs believe that the public is waking up. Scottish National Party MP, Tommy Sheppard, said: “It’s clear that the British public aren’t falling for the myth that biomass is carbon neutral, no matter how many greenwashing PR stunts companies like Drax pull to convince people otherwise.”
Energy firms have made record-breaking profits and claimed billions in subsidies, while millions of citizens struggle to afford to heat their homes.
Frances Sleap, of Fuel Poverty Action, said: “As our energy costs soar, UK bill payers are footing a huge bill to subsidise Drax shipping in and burning trees. This is pushing crippling energy bills up even further, without delivering environmental benefits. What we need is insulation to keep us warm, and renewables that don’t burn anything to power our future.”
Sheppard agrees: “Taxpayer money should be spent on real emission-free energy sources, not on technology that pumps more carbon into the atmosphere and destroys forests worldwide. Burning tees on an industrial scale for electricity does the latter. It’s time the UK Government listened to the public and end wasteful biomass subsidies.”
Critics say power generator would make loss without public support as firm boosts dividend after 84% rise in profits to £731m
Alex Lawson
Ministers are under pressure to cut subsidies to the operator of Britain’s biggest power station after it reported an 84% increase in annual profits, helped by high electricity prices.
Drax, the power generator that owns the eponymous plant in North Yorkshire, posted underlying profits of £731m for 2022, up from £398m a year earlier.
The company also increased its dividend by 11.7% to 21p a share – an £84m payout to shareholders.
Drax, which has faced criticism over its use of biomass, has benefited from soaring power prices over the past year. Electricity prices are linked to wholesale gas costs, which have risen sharply since the Russian invasion of Ukraine.
Will Gardiner, the chief executive, said: “Drax delivered a strong performance in 2022, and played a significant role in ensuring security of supply during a challenging year for the UK’s energy system.”
Drax, which supplies up to 6% of the UK’s electricity, and is seen as a source of when weather conditions preclude significant wind and solar power generation.
Climate campaigners have accused Drax of greenwashing, arguing its biomass operations, which burn wood pellets to produce electricity, are far from green and can even increase the CO2 emissions driving the climate crisis.
Most of the wood is imported from North America. The former energy secretary Kwasi Kwarteng called its business model “not sustainable”.
Drax was the subject of a BBC Panorama investigation over alleged forest destruction and has also been accused of “environmental racism”.
The power company said it had earned £837m in subsidies in 2020 and £885m in 2021. The level of support fell to £617m in 2022 as electricity prices exceed an agreed “strike price” agreed to encourage renewable investment.
This meant Drax paid out £33m to the Low Carbon Contracts Company, a government-owned firm, compared with receiving £231m under the same mechanism a year earlier. However, it still received £650m under an older renewable energy scheme.
The thinktank Ember has estimated that, from 2012 until 2027, when the support runs out, Drax would have collected more than £11bn in subsidies.
The Conservative MP Pauline Latham said: “The government pays significant sums in renewable energy subsidies to bioenergy companies making sizeable profits, despite it releasing huge amounts of greenhouse gases and harming forests’ ability to absorb carbon.
“This directly costs bill payers and families through their energy bills. In the context of the cost of living crisis, the government should be looking into these subsidies and ensuring they are used for proven renewable energy sources and energy efficiency measures, rather than harming nature.”
Sally-Ann Hart, a Conservative MP, said: “Burning imported wood pellets for electricity is not cheap for bill payers. Given the growing environmental concerns, ministers shouldn’t commit to new subsidies for this energy source.skip past newsletter promotion
“We should prioritise investment in clean and cheap energy sources that keep the lights on and bills low while tackling climate change, not an industry which risks fuelling deforestation.”
Research by the Cut Carbon Not Forests coalition found that 62% of 2,005 UK adults surveyed thought it was wrong for the government to hand the bioenergy generator large subsidies, particularly during a cost of living crisis.
The SNP MP Tommy Sheppard said: “It’s clear that the British public aren’t falling for the myth that biomass is carbon neutral, no matter how many greenwashing PR stunts companies like Drax pull to convince people otherwise.”
Drax is the latest UK energy firm to report a sharp rise in profits, after BP, Shell and the British Gas owner, Centrica. Their gains led to renewed calls for tougher windfall taxes.
Some of Drax’s operations are covered by the electricity generator levy introduced this year but the company said recognition in the construction of the tax that biomass costs were higher than those of windfarms meant the levy “should not have an adverse impact on biomass generation”.
Separately, more than 180 staff at the Drax plant near Selby, in North Yorkshire, have begun a series of strikes that will run through February, March and April after rejecting a proposed pay deal.
The company also agreed to extend the life of two coal units through the winter after a government request, amid fears over power cuts. The units have not been called into action but Drax said on Thursday that they “delivered income during the final quarter of 2022”.
Campaigners argue its claims of producing renewable energy are exaggerated
By CALUM MUIRHEAD, CITY REPORTER
23 February 2023
Power station operator Drax sparked fury yesterday after its profits soared, fuelled by hundreds of millions in taxpayer subsidies for supposedly ‘green’ energy.
The company also attracted the ire of environmental campaigners, who argue its claims of producing ‘renewable’ energy are exaggerated and point out that it is one of Britain’s biggest carbon dioxide polluters.
Drax runs a biomass power plant in Selby in North Yorkshire which burns wood pellets to generate electricity
Yesterday it reported a profit of £731 million for last year, up from £398 million in 2021 as it cashed in on soaring power prices.
The company often touts its green credentials, stating it was the UK’s ‘largest source of renewable power’ last year and had played ‘a significant role’ in bolstering Britain’s energy security.
Drax reported a profit of £731million for last year – up from £398million in 2021. Pictured: Drax power station in North Yorkshire
But campaigners accuse the company of ‘greenwashing’ its operation as the pellets burned in its power plant are made from wood cut from forests in Canada, the US and Estonia which is then shipped over to the UK.
Critics have pointed out that, rather than being a green source of energy, the burning of biomass emits large amounts of greenhouse gases.
Burning wood is the UK electricity industry’s second biggest cause of carbon dioxide (CO2) emissions, with the Drax plant being the largest single source.
The company is also the fourth largest CO2 emitter in Europe, according to energy think-tank Ember.
Anger has also been sparked by the fact Drax’s profits are heavily reliant on Government bioenergy subsidies.
The taxpayer paid out £1.8 billion to the industry in 2021, making the UK the biggest subsidiser of bioenergy in Europe.
Drax received the vast majority of this funding, taking £893 million, meaning that without taxpayer backing its losses could have run into hundreds of millions of pounds.
These subsidies were also estimated by Ember to have added £11.60 to the average household energy bill.
Drax is able to claim the hefty sums because the government considers burning wood and other biomass to be ‘carbon neutral’ despite the fact CO2 absorbed by trees is released back into the atmosphere during the process.
Wood burning also emits large amounts of fine particles, which in high enough concentrations can cause health problems such as high blood pressure, strokes and premature death.
Matt Williams, from campaign group Cut Carbon Not Forests, said: ‘Drax’s enormous profits are propped up by enormous renewable energy subsidies.
Drax runs a biomass power plant in Selby, North Yorkshire, burning wood pellets
‘But this is money for nothing: burning the world’s forests isn’t low-carbon at all, and it takes money from struggling families by raising their energy bills.’
Conservative MP Pauline Latham called on the government to ensure the subsidies were being used for ‘proven renewable energy sources’.
‘The Government pays significant sums in renewable energy subsidies to bioenergy companies making sizeable profits, despite it releasing huge amounts of greenhouse gases and harming forests’ ability to absorb carbon. This directly costs billpayers and families through their energy bills,’ she said.
The comments echoed those made last year by the then-business secretary Kwasi Kwarteng, who said in August that Drax’s business model of importing wood from abroad to burn in its power plant ‘doesn’t make any sense’ and did not help lower the UK’s carbon emissions.
A Drax spokesman said: ‘Drax plays a vital role in UK energy security and is this country’s biggest renewable power generator by output, providing enough reliable, renewable electricity for 4 million homes, whatever the weather.’
They added: ‘Biomass has played a crucial role in displacing fossil fuels and supporting more intermittent renewables like wind and solar – enabling Britain’s electricity grid to decarbonise at a faster rate than any other in the world.
‘In the coming years, we plan to invest billions of pounds into accelerating our plans to produce more renewable energy, deliver carbon removals... and reduce our own emissions.’
Matt Williams from Cut Carbon Not Forests said: ‘Burning forests isn’t low-carbon... and it takes money from struggling families by raising energy bills.’
Tory MP Pauline Latham called on the Government to ensure subsidies were used only for ‘proven renewable energy sources’. A Drax spokesman said biomass has ‘played a crucial role in displacing fossil fuels’.
