Britain’s financial regulator is investigating Drax Group’s biomass sourcing disclosures, sending the company’s shares down more than 12% on Thursday, reports Reuters.
As per the news report, Drax, which generates about 5% of the UK’s electricity through coal plants converted to burn biomass, has long been under scrutiny for its fuel sourcing. The company has received billions of pounds in government subsidies as part of Britain’s green energy transition.
The Financial Conduct Authority (FCA) confirmed it is reviewing Drax’s annual reports for 2021 to 2023 to check compliance with disclosure rules. The investigation will cover statements made between January 2022 and March 2024. Drax said it is cooperating with the probe but gave no further details.
The inquiry follows last year’s penalty from energy regulator Ofgem, which fined Drax £25 million ($33.8 million) for misreporting data on wood sourced from Canadian forests. However, Ofgem’s review found no evidence that Drax had breached sustainability obligations or wrongly received renewable obligation certificates.
Drax has defended its operations, saying it only uses wood byproducts from trees harvested mainly for lumber and that sourcing from sustainably managed forests can help promote forest growth. Environmental groups, however, have challenged the company’s claims, arguing that biomass power plants are not a truly sustainable solution.
Analysts at Jefferies said the FCA’s probe puts Drax “back in the spotlight” and could add political pressure on the government’s post-2027 biomass support plan. Under the plan, subsidies for Drax will be cut in half during 2027–2031.
Shares in the company dropped as much as 12.4% to 617 pence in early trade, before trimming losses to 9.2% by 07:48 GMT.
Drax has pledged to achieve net-zero carbon emissions across its operations by the end of 2024. Meanwhile, Britain is pushing ahead with plans to decarbonise its electricity sector by 2030, which will require a wave of new renewable projects and supporting grid infrastructure.
