The owner of the Drax power plant in North Yorkshire received record subsidies of almost £1bn for burning trees to generate electricity in 2025, a climate thinktank has calculated.

The company was paid £999m last year for generating about 4.5% of Great Britain’s electricity from its biomass plant, costing each household £13 a year, according to analysts at Ember.

The power plant was able to claim £2.7m a day from energy bills in part by increasing its power generation by about 2% from the year before – but mostly due to the rising payouts from a legacy renewables support scheme.

Drax has claimed a total of about £8.7bn in renewable energy subsidies since 2012, despite persistent claims from campaigners and scientists that the wood pellets burned at its power plant are not sourced sustainably and may be increasing carbon emissions.

The allegations have raised concerns in Westminster over the company’s claims that the millions of tonnes of wood pellets produced by its Canadian subsidiary use only low-value waste wood from sustainably managed forests.

The Guardian revealed last November that forestry experts believed the company was burning 250-year-old trees sourced from some of Canada’s oldest forests as recently as last summer, despite growing scrutiny of its sustainability claims.

The concerns that Drax may have sourced some wood from ecologically valuable forests was first raised in 2022. The company publicly denied the allegations, but court documents made available to journalists earlier this year revealed that senior staff members had raised concerns internally over the company’s statements at the time.

The tribunal documents were disclosed when the company’s former chief lobbyist took Drax to court alleging they were sacked after saying in 2022 that the company was “misleading the public, government and its regulator” about the sustainability of the imported pellets.

Drax agreed a settlement with the employee over the tribunal claim last year after reaching “a mutually agreeable position, without admission of liability”, the company said.

In response to the “explosive” court disclosures, a cross-party group of 14 MPs and peers called on Ed Miliband, the energy secretary, to halt the power plant’s subsidies while the financial watchdog investigates the company’s “historical statements”.

Drax said these allegations were investigated by the industry regulator, Ofgem, which did not find any evidence of deliberate misreporting of sustainability data. The regulator’s 16-month investigation did find “an absence of adequate data governance and controls”. Drax agreed to pay £25m in compensation for the breach.

The government has already halved the subsidies available to Drax for the electricity it generates, under a new subsidy contract which will run from next year until 2031, and promised that Drax will provide power only when it is “really” needed.

Under the new contract the power plant will have to switch to using woody biomass from 100% sustainable sources, up from the current level of 70%. The government threatened “substantial penalties” if Drax does not comply.

Frankie Mayo, the author of the report, said: “While it’s a relief these overly generous payments will halve from 2027, British taxpayers should never have been in this position in the first place.”

“Nearly £1bn for woody biomass burning is an astonishing high-water mark for public subsidies – and a problematic one as prices soar,” Mayo added.

Drax is also reviewing the future of its Canadian biomass pellet production business, and said earlier this year it would stop burning trees from British Columbia entirely before the subsidy regime takes effect.

A Drax spokesperson said its North Yorkshire power plant generated a record 15 terawatt hours (TWh) of electricity in 2025, “keeping the lights on for millions of homes and businesses, no matter the weather”.

The company claims the power plant will save £3.1bn between 2027 and 2031 compared with running a gas-fired power plant. It added that replacing its 2.6GW capacity with new nuclear reactors or gas plants would require billions in capital investment.