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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 the company over data that profiled the sources of pellets it used from Canada between April 2021 and March 2022, such as whether the wood came from sawmills or forests.
Drax has historically faced accusations of burning wood from unsustainable sources overseas as well as claims that it was taking timber from precious rare forests in Canada.
On closing the investigation, Ofgem said Drax was found to have lacked the necessary data governance and controls, meaning it did not give the regulator accurate and robust data on the type of wood it uses.
The regulator said it found no evidence to suggest the breach was deliberate but was instead “technical in nature”.
Drax will pay £25 million to its voluntary redress fund as a result of the findings, it added.
The company currently gets hefty government subsidies for generating electricity by burning biomass wood chips, which is classified as renewable power.
Proponents of biomass say it can create carbon-neutral energy because trees and other plants first absorb carbon, then are burnt and release the same carbon back into the atmosphere.
However, critics say this assumes the companies only use sustainable wood in their boilers and have expressed doubts over the carbon sequestration logic.
The Government is facing growing calls from environmental groups and campaigners to end the subsidies for firms that burn wood and redirect the money to renewable energy such as wind and solar.
Ofgem said it found no evidence to suggest Drax did not meet the UK’s threshold that a minimum of 70% of biomass must come from sustainable sources in order to receive public funding.
Ultimately, the data under investigation fell outside the criteria used to determine the amount of subsidies the firm received, it added.
The regulator’s 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.