Yahoo Finance Britain’s biggest power station sees profits rocket after surge in energy bills
The operator of the UK’s largest and most controversial power station has seen its profits jump more than tenfold on the back of increased energy prices.
Drax’s pre-tax profits hit £796m in 2023, up from £78m the year before. The company’s wood-burning plant at Selby, Yorkshire, generated most of the company’s earnings.
The Selby plant enjoys generous government subsidies but has attracted widespread criticism from environmentalists because it burns wood-chips imported from North American forests.
Drax argues that it is a sustainable method of energy generation.
The Selby plant is vital to the UK’s energy security because it generates more than 4pc of the nation’s electricity.
It also provides grid stability because it can be fired up during periods when low winds and a lack of sunshine slash output from wind and solar.
Drax’s other main asset is a hydroelectric facility at Cruachan in the Scottish highlands.
Will Gardiner, chief executive of Drax Group, said: “Drax performed strongly in 2023 and we remained the single largest provider of renewable power by output in the UK.
“We have created a business which plays an essential role in supporting energy security, providing dispatchable, renewable power for millions of homes and businesses, particularly during periods of peak demand when there is low wind and solar power.”
Drax claims it creates carbon-neutral electricity because trees grow by absorbing CO2. If they are burned it releases the same CO2 back into the atmosphere, so the process is carbon neutral as long as the trees are replaced.
However, the use of “biomass” fuel has come under increasing scrutiny as a power source in the UK. The fuel, which generates about 10pc of the country’s power, is considered low-carbon only if the forests where it’s sourced are regrown and the wood would otherwise go to waste.
This week Canadian environmental groups accused Drax of “ecocide” over allegations it is burning trees taken from ancient and protected woodland in Canada.
In response, Drax said it sources its biomass fuel from “sawmill residues, harvesting residues, and fibre which has little other use or market value. We do not own forests or sawmills and are not responsible for the licensing and harvesting of forests.”
Mr Gardiner said Drax hoped to press ahead with plans to add carbon capture units to its boilers. This would make the Selby plant carbon-negative because CO2 captured from the air by trees would then be buried underground forever.
However, the carbon capture plans are in limbo because Drax is waiting for the outcome of a government consultation on whether to extend existing subsidies for its biomass units beyond their 2027 expiry date.
The extension would tide it over until its carbon capture project can start in 2030. The government consultation closes today with a decision expected in April.
Mr Gardiner said: “Policy support for our carbon capture project continues to progress and we remain in formal discussions with the UK government to ensure Drax Power Station can play a long-term role in UK energy security.”
While Drax’s pre-tax profits leapt higher, generating companies have been hit by the Electricity Generator Levy, which was imposed by the Government because of the surge in profits linked to global energy price rises.
That cost Drax Group £205m.
Along with other items, it means the group’s adjusted profits after tax were £469m compared with £338m in 2022.
