Ed Miliband is under pressure from MPs to suspend subsidies worth £2m a day paid to the owner of the Drax power plant in North Yorkshire after court documents cast doubt on the company’s sustainability claims.
A cross-party group of 14 MPs and peers have called on the energy minister to halt the subsidies for Britain’s biggest power plant while the financial watchdog investigates the company’s claims about how it sources the millions of tonnes of wood pellets burned to generate electricity.
In a letter, seen by the Guardian, the politicians said they were “deeply concerned” that Drax may have been given “substantial billpayer subsidy” while the company “may have knowingly and consistently concealed information” about the green credentials of its wood sources.
The FTSE 250 owner of the Drax power plant gets about £2m a day in renewable energy subsidies, paid by consumers, on the condition it generates electricity from biomass pellets made from waste or low-value wood from sustainable forests.
Drax, Britain’s single biggest source of carbon emissions, imports millions of tonnes of wood pellets from across the Atlantic every year and is projected to receive £11bn in subsidies by the end of 2027.
The letter was sent to Miliband after “explosive” employment tribunal documents revealed that senior executives at Drax had privately raised concerns about the accuracy of its public sustainability claims, after allegations that it was burning wood from some of Canada’s most environmentally important woodlands.
The letter, signed by MPs and peers from the Labour, Liberal Democrat and Green parties, said: “We are deeply concerned that a company should be in receipt of substantial billpayer subsidy, currently guaranteed until 2031, while it may have knowingly and consistently concealed information of material relevance to its legitimacy as a subsidy recipient.
“Given that the Financial Conduct Authority are currently investigating such ‘historical statements’ made by Drax about their sourcing of pellets, we request that all future UK government contracts with Drax be suspended for the duration of this investigation,” the letter said.
A spokesperson for Drax said: “These allegations were investigated by our regulator, Ofgem, who concluded that they did not find any evidence that we had been issued with [subsidy certificates] incorrectly or that our biomass does not meet the government’s sustainability threshold. They also found no evidence of deliberate misreporting.”
The letter called on Miliband to set out what steps he would take to reassess Drax’s eligibility for future subsidies should the investigation by the City watchdog substantiate the concerns raised in the court documents. It also called on him to “take decisive action” to ensure that no further subsidy would be awarded if such practice was uncovered.
Drax, which has a stock market value of about £3bn, has become an increasingly important supplier of electricity as the UK switches to intermittent renewable generation such as wind and solar.
The tribunal documents were made available to journalists after Rowaa Ahmar, the company’s former head of public affairs, took Drax to court alleging that she was sacked after writing to the chief executive, Will Gardiner, in 2022 to say that the company was “misleading the public, government and its regulator” about the sustainability of the imported pellets.
The Guardian revealed late last year that forestry experts believed the company had continued to source 250-year-old trees from some of Canada’s oldest forests via the Burns Lake pellet plant as recently as last summer. At the time, Drax said it “does not source biomass from designated areas of old growth and only sources woody biomass from well-managed, sustainable forests”.
Chris Hinchliff, one of the MPs to sign the letter, told the Guardian that the “explosive” documents “suggest Drax may have misled ministers, regulators and the public while taking billions in billpayer subsidies”.
“That would be indefensible,” he said. “With the FCA now investigating Drax’s past claims, the government must suspend any future contracts until the truth is established. As ministers have already made clear, if Drax is found to be non‑compliant the subsidies stop. If that spells the end of Drax, it has only itself to blame.”
The company’s senior leaders, including its chief executive, publicly denied allegations made in a 2022 BBC Panorama documentary that it had burned wood sourced from “old-growth” forests in Canada, and accused the broadcaster of repeating “inaccurate claims about biomass” from “ill-informed” critics.
Meanwhile, senior colleagues raised concerns in internal emails and meetings that the company did not have enough evidence to back up the public sustainability claim, according to the tribunal documents.
The MP Barry Gardiner, who also signed the letter, said Miliband was “absolutely right to set new sustainability standards for Drax” late last year, but added that the “standard of the company’s integrity and transparency” remained in question.
“We now await the FCA investigation to see if Drax either lied directly, or deliberately misled the regulator, over its sourcing and sustainability practices. It cannot be right that public subsidy should be paid to the company if that were found to be the case, and suspending payments until the FCA review is concluded is a sensible precautionary step,” he said.
“The scale of the Drax problem is enormous for Ed Miliband. Drax supplies 5.3% of UK electricity and is a key element of our commitment to decarbonise the entire power sector. That is the dilemma the secretary of state would face in acting to cut Drax adrift. But the directors of Drax should not fool themselves that they are too big to fail. Drax must clean up or close down,” he said.
A government spokesperson said: “We will review the independent FCA’s findings when the investigation concludes. Drax will operate for less time under a clean power system and will need to use 100% sustainably sourced biomass, with not a penny of subsidy paid for anything less.”
