Drax profits rise as electricity generation falls, show new figures

  • London

  • 22 April 2024

More than half a billion pounds of public money was spent on biomass-burning at Drax last year, even as the power station produces less electricity

Drax, Europe’s largest biomass power generator and the UK’s largest single source of CO2, released its annual report on Thursday 21st March. The data reveals the power station is progressively generating less power for the UK grid, even as profits progressively rise.

In 2023 Drax generated 11.5 TWh of electricity, a fall from 12.7 TWh in 2022, and a further fall from 14.1 TWh in 2021. This now means Drax produces just 8% of renewable electricity in the UK, and less than 4% of the UK’s total electricity.

Over the same period, profits have risen sharply. Profits (adjusted EBITDA, a widely used form of profitability) increased to £1,214m in 2023. This was £731m in 2022, and £398m in 2021. The profits come from subsidies; from selling power at the UK’s very high power prices; and from wood pellet sales to other companies.

In 2023 Drax earned £539m (2022: £586m) in direct government subsidies for burning forest biomass. This brings the total public subsidy the company has received for biomass to around £7 billion, even as concerns grow over the climate impacts of wood burning. The BBC revealed in February that the company is continuing to burn wood from rare and protected forests across from North America, even after having been caught last year.

Further subsidies demanded

The company is currently looking for an extension to its subsidies, which are due to end in 2027. Ember estimates that it could cost the public £4bn extra if these subsidies are extended –  and possibly much more, depending on the end date. 

The company is also looking for brand new subsidies for its new BECCS plant: bioenergy with carbon capture and storage. This power station aims to burn wood and capture the resulting CO2 under the north sea. Ember estimates that the project would cost the UK public £1.7billion each year.

Drax’s profits continue to climb, but the benefit to the public is falling. Every year, more clean power is being built which is substantially cheaper than Drax, and which doesn’t have the same risk for the climate of burning wood. The power station is not just burning millions of tonnes of wood - it’s also burning millions in public money. The government should think very seriously before gifting the power station further cash.

Phil MacDonald Managing Director, Ember
Concerns over the climate change impact of biomass

Despite being considered carbon neutral under UK law, there is a growing scientific consensus that burning wood for power cannot be assumed to deliver climate benefits and instead may well be contributing to climate change. With more scrutiny of the biodiversity and climate impacts of Drax’s business model—importing millions of tonnes of wood from North America and burning it in the UK—concern is building among key decision-makers in the UK. In January 2022, the Climate Change Committee’s David Joffe told a parliamentary committee that “There are big challenges to ensuring the sustainability of biomass grown outside the UK. It is not impossible but it is very difficult…It is not something that the UK should be relying on at large scale”.

In August 2022, then Business Secretary Kwasi Kwarteng told fellow MPs “There’s no point getting [wood pellets] from Louisiana . . . that isn’t sustainable . . . [and has] . . . a huge cost financially and environmentally . . . [it] doesn’t make any sense to me at all.”

Notes to editors

  • Drax do not publish the split between ROCs and REGOs in their annual report, but have released to journalists that they earnt £602m in 2023 from ROCs (2022: £615m). Because of very high power prices in 2022 and 2023, their CFD income has dramatically reduced, so in 2023 they paid back £63m (2002: £33m). With power prices reducing in 2024, we expect total subsidies to rise substantially next year.
  • Ember estimates the value of future subsidies in line with the index they are tagged to: ROC prices increase each year by Retail Price Index (RPI), which currently stands at 4.5%. CfDs increase each year by the Consumer Price Index (CPI), which currently stands at 3.8%.
  • Drax also has some Scottish hydropower assets, some of which receive ROCs. The amount is not declared in the financial reports but is less than <2.5% of the overall subsidy Drax receives.
  • BECCS: Ember’s May 2021 estimate put the cost of BECCS at £181 per MWh in this 2020 research. This is supported by the October 2021 BEIS “Investable commercial frameworks for power BECCS” paper which estimates the price similarly, at £179 per MWh.

Media enquiries

Phil MacDonald

Managing Director

About Ember

Ember is an independent energy think tank that aims to accelerate the clean energy transition with data and policy. It creates targeted data insights to advance policies that urgently shift the world to a clean, electrified energy future.