Power station operator Drax has agreed to pay a £25 million fine after the energy watchdog found it had failed to report accurate data following an investigation into the sustainability of biomass used at wood-burning power stations.
Ofgem conducted a 15-month investigation into Drax, which claimed it was burning wood from unsustainable sources and taking timber from valuable rare forests in Canada.
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The regulator said in May last year it was investigating whether Drax had breached “annual profiling reporting requirements for the Renewable Energy Obligation Scheme” and other related matters.
Obligations
Drax, which operates the UK’s largest power station in North Yorkshire, receives heavy government subsidies for burning biomass wood chips.
Environmental groups and activists are increasingly calling for the end of all subsidies for burning forest timber and energy crops at power plants and for no new support or contracts to be given to energy companies to do so.
On completing its investigation, Ofgem said it found that Drax lacked the necessary data controls and management, which meant the company was not providing the regulator with accurate and reliable data about the types of timber it was using.
However, Ofgem found no evidence that Drax’s biomass was unsustainable or that Drax had been issued with a Renewable Energy Obligation Certificate (ROC) in error.
strict
Ofgem said Drax would pay £25 million into the voluntary compensation fund as a result of its investigation.
Ofgem chief executive Jonathan Brearley said: “This was a complex and detailed investigation.”
“Energy consumers expect all businesses to comply with all statutory requirements, particularly those that receive millions of pounds a year in public subsidies.
“There is no excuse for Drax’s admission that it failed to comply with mandatory requirements to provide ObGem with accurate and reliable data about the exact types of Canadian timber it uses. The law is clear about Drax’s obligations, which is why we have taken tough action.”
Accountability
“Drax acknowledged that weak procedures, controls and governance meant that data on forest types and the content of sawlogs used was inaccurately reported.”
He added: “Ofgem has no reason to believe there are further cases of non-compliance at present, but will not hesitate to act where necessary.”
The regulator said Drax had “constructively engaged” throughout the investigation.
Drax Group chief executive Will Gardiner said: “While Ofgem said there was no evidence to suggest Drax knowingly misreported profiling data, we recognise the importance of maintaining a strong evidence base and are continuing to invest in improving confidence in future reports.”
A spokesman for the Australian Department of Energy (DESNZ) said: “We expect full compliance with all regulatory obligations and consumers rightly expect the highest standards of accountability from generators.”
money
“The magnitude of the compensation awards highlights the robustness of the regulatory system and the requirement that generators comply with both the spirit and the letter of regulations.”
But the US-based Natural Resources Defense Council (NRDC) said the fine was “a drop in the ocean”.
“This ruling shows how difficult it is to prove that burning forest wood is good for the environment, for a simple reason: it’s not good for the environment,” said Matt Williams, a senior attorney at NRDC.
“The £25 million fine that Drax has offered to pay voluntarily is dwarfed by the billions of dollars they are demanding in new subsidies.
“Energy Secretary Ed Miliband must realise that it is not worth handing out more of the public’s money to companies that cannot play by the rules.”
This author
Holly Williams is PA Business Editor.
