The UK government has reached an agreement with Drax to reduce the energy producer’s subsidies by half between 2027 and 2031 while tightening sustainability requirements for its use of woody biomass.
Drax, the UK’s largest renewable power generator, has relied on government subsidies to convert four former coal plants to biomass, supplying around 6% of the country’s electricity. However, following a consultation on extending the subsidies, the government stated that Drax would not be permitted to continue operating under its previous model or receive the same level of financial support.
“Biomass currently plays an important role in our energy system, but we are conscious of concerns about sustainability and the level of subsidy biomass plants have received in the past,” said Energy Minister Michael Shanks. The government did not disclose the exact figures of the revised subsidy.
Environmental groups have raised concerns over the sustainability of Drax’s biomass operations, arguing that the use of wood pellets for electricity generation can contribute to deforestation. Under the new agreement, Drax must increase the share of its biomass sourced from sustainable sources to 100%, up from the current 70%. Material from primary and old-growth forests will be excluded from subsidies, and the company will face financial penalties if it fails to meet these criteria.
Drax maintains that it already meets these sustainability standards, stating that its biomass comes exclusively from wood residues and byproducts of trees primarily harvested for lumber. The company argues that demand for sustainably managed forest products can contribute to forest growth.
As part of the agreement, Drax will operate at a maximum load factor of 27%, less than half of its current levels, providing low-carbon power only when necessary. The government estimates that this arrangement will save consumers £170 million annually compared to the cost of procuring natural gas to ensure energy security.
Drax shares rose 3% following the announcement. The company expressed support for the new measures and confirmed it would continue working with the government on future reporting requirements.
Once the UK’s largest coal-powered generator, Drax has transitioned to biomass as a key component of its operations, though the debate over the sustainability of its energy sources remains ongoing.
