Sticking with Drax's biomass plant could undermine net zero – Labour must be brave

4 min read08 January

The decision on whether to end Drax's energy subsidies is not an easy one, but the government must face up to the tough choices that the Tories dodged.

Since coming to power, the new Labour government has set to work transforming our domestic energy supply in pursuit of its mission of clean power by 2030. This ambitious mission is commensurate with the need to tackle the climate crisis and free ourselves from the volatile and costly foreign fossil fuel markets that have exacerbated our cost of living.

However, it has not been without criticism. Senior Conservative MPs now take aim at the new government for delivering on many of the very measures that their party committed to when in power. One key issue that has received significant Conservative support until only very recently is one they have now decided is Labour’s problem: what to do with Drax Power Station?

Based in North Yorkshire, and once one of Europe’s largest coal-fired power stations, it now burns wood pellets to generate four per cent of the UK’s electricity. Drax switched in 2012 and made the case to the then-coalition government that its energy is renewable – because trees grow back.

As a result, each year over 7m tonnes of wood pellets, mostly from North American forests, are shipped and then burnt at Drax. Eligible for green subsidies, Drax generates eight per cent of our renewable energy, but the volumes of biomass burned means that it is also the single biggest emitter of carbon dioxide in the UK.

Since 2012 Drax has received over £7bn in green subsidies – paid through the UK billpayer. The contract contained a consumer safeguard that said if Drax could comfortably make money without subsidy, then it should send the extra money back to billpayers.

But when energy prices soared in 2022 after Vladimir Putin invaded Ukraine, Drax found a loophole. It idled generators and sold unused wood pellets at high prices on the open market, according to Bloomberg – reportedly allowing the company to avoid returning £639m to consumers whilst making £731m in profit. Lib Dem leader Ed Davey, the energy secretary who oversaw the deal when it was negotiated in 2012, said that Drax "acted in bad faith".

Drax is not only under fire in the UK. It was reported in late 2022 that it had to pay $5.7m to the states of Louisiana and Mississippi for severe air pollution violations after African American communities near their pellet factories reported severe lung disease and gargling blood after the factories began production in 2014. Drax’s mills in North America have broken environmental law over 11,000 times, a separate investigation found in November. Despite claims to the contrary, Drax’s emails indicate it has burnt wood from important old forests in Canada.

Drax plans to fit carbon capture to two of its four generators to deliver bioenergy with carbon capture and storage, or BECCS. Subsidy costs to support this would be an estimated £1.7bn a year for UK billpayers, yet questions remain on whether BECCS at Drax would work as hoped.

Drax’s subsidies end in 2027, but Labour must decide soon on whether to extend them. For this, the government must not only consider repeated business failings but also the people who depend on Drax for their jobs. Drax employed about 2,427 workers across the UK in 2021, with 904 located at Drax Power Station.

The government will face criticism no matter how it proceeds.

Though Drax’s failings have come under increased scrutiny in recent years, it is only after the Conservatives left office that Claire Coutinho, former and now shadow energy secretary, admitted the case for BECCS at Drax has "unravelled".

The new government can be certain of two things. First, any decision must avoid the failings of Drax falling on the shoulders of its workers. Unions are right to ensure that workers do not suffer through the energy transition but their fate at Drax should not be used as a bargaining chip by the company to continue operating a model that fails UK citizens.

Second, the political risks of the existing Drax model are untenably high.

Concerns about the energy transition are already being used by bad-faith actors to ferment climate scepticism. Whilst this is at odds with the British public – who support net zero –headlines of shareholder windfalls, increased bills, and sustainability breaches will arm critics who seek to undermine clean power by 2030 whilst being viewed unfavourably by voters.

Drax’s subsidy arrangement was signed off under David Cameron and has rolled over under eight consecutive Conservative energy secretaries. This is now Labour’s problem to solve.

The government’s Clean Power 2030 Action Plan, published before Christmas, acknowledged that there are multiple pathways for biomass to help deliver the mission – including by scaling down generation through to 2030. On this issue, stasis is itself a political choice. Labour must be brave and question Drax’s role in our energy future. Failing to act now will only make the problem harder to solve down the line.

Alex Mackaness is Programme Manager at the Labour Climate and Environment Forum.

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