The UK’s energy regulator has commissioned a probe into power company Drax’s compliance with sustainability rules, after growing external scrutiny of the wood it burns to generate electricity.
Documents obtained under a freedom of information (FOI) request show Ofgem last year began looking into whether the energy company had complied with the UK’s biomass sustainability rules, a move that followed a BBC documentary which raised questions about whether wood it had procured from Canada was sustainably sourced.
Ofgem in October 2022 told the government-owned body that administers energy agreements, known as the Low Carbon Contracts Company (LCCC), that Drax had provided documentation to show that all the Canadian woody biomass it used in 2021 and 2022 was certified under the Sustainable Biomass Program, the documents show.
But the regulator told the LCCC in February it had commissioned a third party, US-based consulting group Black and Veatch (B&V), to do an additional audit given it was “getting more questions”, including from the media. The audit would “protect ourselves from potential external scrutiny”, the regulator said.
Will Gardiner, Drax chief executive, was a board member of the Sustainable Biomass Program until last month.
Opinion is divided over whether woody biomass is an environmentally sustainable and low-emissions alternative to fossil fuels. Advocates say the carbon dioxide emitted from burning wood is offset by that absorbed by the trees as they grow.
Under UK rules, at least 70 per cent of a power generator’s woody biomass consignment must be classified as sustainable.
Compliance is demonstrated via industry certification schemes such as the Sustainable Biomass Program (SBP), or through the collection of evidence that demonstrates the rules have been met.
Drax told Ofgem in October that it was “reviewing how the [SBP scheme] claims were substantiated.” The SBP supply reports were authored by Drax employees and certified by a third party.
B&V, which will conduct the additional sustainability audit commissioned by Ofgem this year, was also selected by Drax in 2021 to help the company with research, engineering and technical support over a three-year period.
Almuth Ernsting, the founder of campaign group Biofuelwatch who obtained the FOI documents, said Ofgem should “urgently review” whether relying on the SBP scheme was appropriate, as well as the selection of B&V rather than an expert group not previously associated with Drax.
B&V said it had “robust processes in place to identify and mitigate potential conflicts of interest”.
Ofgem said it took “scheme compliance extremely seriously . . . There has recently been a high level of public interest in Drax’s activity, so the public would rightly expect us to be robust in assessing Drax’s eligibility for scheme funding.”
Drax said Ofgem had “recently informed” the company that it would undertake an audit “to verify the information the business provides to the regulator.”
Drax has maintained that the wood it uses is sustainable and says it only takes residual wood from other industries and does not harvest forests itself.
The company last year had to explain its ownership of two Canadian forest logging licenses, arguing that it had agreements with sawmilling companies to transfer the rights to them and take the “residual” wood. The British Columbia state government said the arrangement was “uncommon”.
Alan Knight, Drax’s group director of sustainability, told analysts at Jefferies in March that the company would not renew or obtain such licences in future, citing bad “optics”.
That came soon after asset manager Schroders told a UK parliamentary inquiry into deforestation that it had “called for a firmer commitment” from Drax to dispose of all such licences.
Drax said it did not harvest forests or “drive harvesting decisions”.
