Drax has converted four coal plants to biomass, supplying approximately 6% of UK electricity.

The UK government and British power generator Drax have agreed to reduce Drax’s subsidies by 50% from 2027 to 2031 while committing the company to source 100% of its woody biomass from sustainable origin.

The move is part of a broader strategy to ensure the sustainability of biomass as a source of renewable energy.

The deal will save consumers £170m ($211m) annually in subsidies, compared to the costs of procuring natural gas for reliable energy supplies.

Drax has transformed four of its former coal plants to utilise biomass, contributing around 6% to the national electricity supply. These conversions were supported by government subsidies set to expire in 2027.

The government has stated that it “cannot allow Drax to operate in the way it has done before or with the level of subsidy it received in the past.”

Environmental groups have raised concerns about the sustainability of using wood pellets for electricity generation, suggesting it could lead to deforestation.

In response, the new agreement mandates that Drax must source its woody biomass entirely from sustainable sources, an increase from the previous 70% requirement.

The government has specified that materials from primary and old-growth forests will not qualify for subsidies, and non-compliance will result in fines for Drax.

Drax asserts that it already adheres to the new sustainability criteria, claiming its biomass comes from 100% sustainable sources. The company uses wood residuals or byproducts from trees mainly harvested for lumber.

The company stated that the demand for wood from sustainably managed forests can promote forest growth.

Under the new terms, Drax will operate at a maximum load factor of 27%, lower than current levels, and will provide low-carbon power only when necessary.

In August 2024, UK energy regulator Ofgem announced that Drax Power would pay £25m for misreporting data on imported biomass from Canada.