Drax is at risk of losing billions of pounds in government funding, with Ofgem reviewing greenwashing claims linked to the sustainability credentials of its biomass projects.
The power group first faced allegations of greenwashing after an investigation by BBC’s Panorama team revealed the firm was logging virgin forest in Canada to make wood pellets for its biomass plants, while claiming that most of its pellets came from sawdust.
It also claimed it was cutting down mature, carbon-rich trees, which Drax denies.
Following the revelations, the power company now faces an additional “assessment audit” from Ofgem over its renewable obligations, the i newspaper reported.
If Ofgem finds against Drax, the report said that one of the penalties being considered by the regulator includes the revocation or withholding of ‘Renewable Obligation’ payments, which grant Drax projects their renewable status and allows the firm to access government green subsidies.
Drax confirmed the probe to City A.M. but has played down its significance, arguing that it commonly received requests for information from watchdogs and regulators.
A Drax spokesperson said: “We frequently receive information requests from Ofgem and they also undertake regular audits of Drax to ensure our adherence to our obligations under the Renewables Obligation Certificates (ROCs) and Renewable Energy Guarantees of Origin Certificates (REGOs).
“Any recent information requests that Ofgem has made to us have not been undertaken using formal investigative powers. We take all requests from Ofgem very seriously and are committed to ensuring the biomass we source delivers positive outcomes for the climate, for nature and for the communities in which we operate.”
When approached for comment, Ofgem said: “Ofgem takes scheme compliance extremely seriously and where we identify or suspect that requirements are not being met we may decide to investigate further. We do not, however, provide comment on individual compliance cases, nor any ongoing audits or investigations.
Revoking its renewable status would have a huge impact on Drax, which is heavily reliant on government support.
Drax has received £6bn in green energy subsidies from British taxpayers over the last four-decades, and is due to receive £617m this year.
Earlier this year, Drax posted an 84 per cent boost in earnings, which have risen to £731m over 12 months of trading.