• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 18 hours How Far Have We Really Gotten With Alternative Energy
  • 2 days The United States produced more crude oil than any nation, at any time.
  • 1 day China deletes leaked stats showing plunging birth rate for 2023
  • 2 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 7 days Bad news for e-cars keeps coming
Equinor Fights NIMBY Feelings in New York Battery Storage Project

Equinor Fights NIMBY Feelings in New York Battery Storage Project

Equinor's proposed battery storage facility…

Could Taiwan’s Energy Crisis Derail the AI Boom?

Could Taiwan’s Energy Crisis Derail the AI Boom?

Taiwan's energy crisis poses significant…

City A.M

City A.M

CityAM.com is the online presence of City A.M., London's first free daily business newspaper. Both platforms cover financial and business news as well as sport and…

More Info

Premium Content

UK Energy Giant Drax In Hot Water Over Alleged Misuse Of Profit Cap

  • Drax is under investigation following allegations that it reduced operations of one of its biomass units to avoid customer pay-outs, raising concerns about the robustness of legislation regarding price controls.
  • The company is accused of avoiding the need to return £639m to households by generating biomass power from other units with no profit caps, rather than from a taxpayer-supported generator with a profit cap.
  • The energy company defended itself by arguing that it prioritised units with hedged supplies, stating that it would have cost households more to generate from units on short-term arrangements or spot prices.

The chair of a leading Westminster panel has vowed to investigate reports Drax has been switching off one of its biomass units to reduce pay-outs to customers last winter.

Angus MacNeil, SNP MP and chair of the energy security and net zero committee told City A.M. the latest accusations were “concerning” and could be included in its upcoming review of customer protections.

He said: “These are concerning reports which merit further investigation, I will bring these facts to my wider committee for further deliberation. Further, my committee have an inquiry ‘Preparing for Winter’ and we will be looking at customer protections offered by Ofgem and if the legislation is robust enough regarding price controls.”

This follows former secretary of state for energy and climate change and current Liberal Democrat leader Ed Davey accusing Drax of “acting in in bad faith.”

“This is gaming the contract, which is supposed to protect consumers in these circumstances,” he said to Bloomberg yesterday.

Former BEIS minister Jacob Rees-Mogg accused Drax of “playing the system while shipping wood from Canada to the UK to burn, which is not environmentally friendly.’

“It’s a racket,” he told The Daily Mail last night.

Drax is under fresh scrutiny from MPs after Bloomberg accused Drax of slashing generation for weeks at a time from a taxpayer supported biomass generator covered by a profit cap agreed with the government.

This would have required them to hand back £639m to households, according to Bloomberg’s calculations, but instead Drax generated biomass power from other units covered by lucrative legacy renewable contracts without any profit caps.

The idle generator, known as ‘Unit 1’, has received £1.4bn in subsidies since a deal was first secured with Whitehall seven years ago.

Drax has slammed Bloomberg’s reports as “false, inaccurate, and misleading.”

It argues that the company prioritised units that were hedged with supplies, and that it would have cost households more to generate from units on shorter term arrangements or spot prices.

Ofgem to clamp down on generator activity

Ofgem does not have the powers to unpick contractual arrangements between the government and generators, but it has announced plans to adjust the so-called ‘balancing mechanism’ – which will now be scrutinised by energy security and net zero committee to ensure they are sufficiently stringent.

The watchdog wants to prevent generator owners from being able to hold back supplies, so they can no longer harness higher prices on the market for turning on back-up generation at times of peak demand – which would include biomass generators.

While this has been within the rules, it led to generators charging prices of up to £6,000 per megawatt hour for long duration supplies, leaving National Grid’s electricity system operator with a bill of £3.1bn to keep supply and demand matched through 2021-22.

This was then imposed on consumers at the height of the energy crisis – who were already grappling with record energy costs.

Separately, Ofgem has launched an investigation into Drax has broken reporting rules around its flagship renewable payments programme.

Last year, Drax reported a profit of £731m, up from £398m in 2021, cashing in on soaring power prices.


Collectively, it has received £6bn in green energy subsidies from British taxpayers over the last four-decades.

The company is currently locked in talks with the government over a potential £2bn biomass carbon capture project, with Drax looking for its legacy renewable contracts to remain supported over the development of the project.

This project is considered crucial in securing future revenues for Drax beyond 2027, when its existing subsidy for burning wood pellets in its power plant will come to an end.

Drax has been approached for comment.

By Nicholas Earl via CityAM

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News