The Financial Conduct Authority (FCA) has closed its investigation into energy company Drax over the sourcing of wood for biomass, confirming no further action will be taken.
The probe, launched in August last year, followed whistleblower claims that the firm had misled the market regarding the sustainability of wood pellets sourced from Canada. Drax runs the UK's largest power station in Yorkshire, which receives Government subsidies for burning biomass to generate power, classified as renewable.
The FCA investigation covered the period from January 2022 to March 2024, examining Drax's statements on biomass sourcing and compliance of its annual reports for 2021, 2022, and 2023 with listing, disclosure, and transparency rules.
In a notice published online on Thursday, the FCA stated it reviewed thousands of pages of complex material and interviewed individuals from the company. The regulator noted the probe was limited to its legal remit, focusing on whether Drax's annual reports and accounts contained misleading statements or omitted important information for investors.
The notice read: “We undertook an extensive investigation following concerns raised regarding disclosures to the market about the sustainability of Drax’s Canadian biomass. We did not find evidence that justified any further action.”
Last year, Drax’s former head of public affairs and policy, Rowaa Ahmar, made accusations that the company had misled over its biomass sourcing as part of her claim for unfair dismissal at an employment tribunal. Drax denied her claims, and the firm reached a settlement with Ms Ahmar just over a week after the case opened.
Will Gardiner, chief executive of Drax, said: “We recognise the importance of compliance with our regulatory obligations and have worked constructively with the FCA throughout this investigation. We are pleased to see the investigation closed with no action being taken.”
The investigation came weeks after the Government confirmed it would continue with new subsidies for Drax’s North Yorkshire power plant after the existing subsidy ends in 2027. The power station produces around 5% of the UK’s electricity, and ministers said the plant was “important to delivering a secure, value-for-money power system.”
The new arrangements will halve the subsidies paid to Drax and include a windfall mechanism that returns 30% to 60% of profits to consumers if they exceed expected limits. Drax would not be financially viable without the billions it has received in Government subsidies.
In theory, burning wood pellets should create carbon-neutral energy because the trees and other plants burnt first absorb carbon, then release the same carbon back into the atmosphere when burnt. However, critics argue this assumes companies only use sustainable wood in their boilers.
Environmental groups and campaigners have long called for an end to all subsidies for burning wood from forests and energy crops in power stations, redirecting the money to wind and solar instead.
