Renewable energy supplier Drax (DRX) came under pressure on 15 September following news that the National Audit Office will issue a report on the Government’s biomass strategy, including analysis of how support had been funded and implemented.

Drax argues burning wood pellets is a sustainable source of renewable energy, but not everyone agrees. Critics highlight subsidies Drax received for burning biomass totalled £617 million in 2022 according to think-tank Ember.

Its shares were the biggest faller in the FTSE 250 index losing just over at tenth to 497.6p and marking their lowest point since October 2022. The shares then bounced 2% on 18 September after analysts said the fall was overdone.

The Government last month laid out its biomass strategy – biomass is defined as any material of biological origin – and its potential role in achieving net zero by 2050. It said: ‘We will continue to monitor the levels of biomass supply to ensure the UK can secure the necessary supply for increasing biomass use across the economy and we will consider interventions to remove barriers to increasing biomass supply if necessary.’

The Government added: ‘Based on current analysis, the strategy sets out that biomass uses that can produce negative emissions (i.e., those that capture and store CO2) should be prioritised in the long term to support UK’s net zero target.’

Drax has spearheaded the UK’s energy transition over the last few years after repurposing its power station at Selby, Yorkshire to burn wood pellets (biomass) instead of coal to generate electricity.

The firm also generates power from hydroelectricity assets and pumped storage. The latter works like a giant battery produced by two reservoirs which sit between a hanging valley.

The company also has plans to transform the Selby power station into the world’s largest BECCS (bioenergy carbon capture and storage) project aimed at capturing 8 million tonnes of CO2 a year by 2030.

It is building transportation facilities to carry the gas into storage facilities under the North Sea, permanently removing it from the atmosphere.

Shares in Drax sank last October thanks to a Panorama investigation which cast doubt on whether the wood pellets it makes in Canada were from a sustainable source. 

Analyst Adam Forsyth from Longspur Capital sees the NAO’s forthcoming report as a ‘normal response’ to policy announcements. Furthermore, he notes the report follows the announcement on 15 September of a NAO report into ‘Approaches to Achieving Net Zero Across the UK.’

He says: ‘We think that Drax’s BECCS solution is really the only near-term solution at scale that can create negative emissions and overcome the problem of areas that cannot be decarbonised.
This is the Net in the UK’s Net Zero target. These reports are commonplace and seldom impact policy timing.’

‹ Previous2023-09-21Next ›