Yahoo Finance Drax power station giant investigated over greenwashing concerns
The energy regulator is investigating Drax over claims that the power station operator has been “greenwashing” its environmental record.
Ofgem on Wednesday confirmed it had opened an enforcement case against the FTSE 250 company, sending its shares more than 5.5pc lower.
A statement issued by Ofgem said the investigation will examine how Drax has reported data that is used to calculate green subsidies.
The company runs a wood-fired power plant in Selby, Yorkshire, which has received billions of taxpayer pounds through schemes designed to support renewable energy.
However, a BBC documentary last year claimed that Drax was “chopping down trees and taking logs from some of the world’s most precious forests” to provide fuel for its plant.
Drax insists it only uses sawdust or wood waste that is unwanted by the timber industry.
In the most extreme scenario the company could be stripped of its green subsidies, should Ofgem’s investigation find against it. Less severe penalties could include fines.
In a two-sentence statement published on its website, Ofgem stressed that the investigation itself “does not imply that we have made any findings about possible non-compliance by Drax”.
The investigation concerns Drax’s reporting of data related to the Renewables Obligation scheme, under which electricity suppliers must present a certain number of Renewables Obligation Certificates (ROCs) to Ofgem each year.
They can do this by obtaining ROCs or paying into an industry-wide fund.
Suppliers who generate renewable electricity receive ROCs, which they can either hold on to or trade with other businesses.
A Drax spokesman said: “Like all energy generators, Drax receives regular requests from Ofgem and continues to cooperate fully throughout this process.
“Last year Drax appointed a third party to independently verify the accuracy of its biomass sustainability and profiling data as part of an ongoing process.
“Drax is confident in the compliance of its biomass with the Renewables Obligation criteria.”
A longer statement issued to the market by Ofgem said: “Building on our compliance investigation and ongoing review of associated evidence, Ofgem has opened an enforcement case into Drax’s compliance with its Renewables Obligation requirements with a particular focus on energy profiling data and associated reporting.
“This follows concerns about the robustness of Drax’s reporting and the associated controls in place.
“As a responsible scheme administrator, it is right that we assure ourselves that Drax is fully compliant with its obligations relating to the scheme.
“Based on the evidence reviewed to date, Ofgem has not established any non-compliance that would affect the issue of ROCs (and therefore associated financial benefits), however the scope of our investigation will consider all relative parts of the legislation and we stand ready to take action where appropriate.”
