Energy giant Drax has announced plans for a new data centre at its North Yorkshire power station, which runs on wood-based fuel. The FTSE 250 company's biomass plant is primarily powered by wood pellets, alongside straw and sunflower pellets.
Drax revealed it intends to harness surplus energy capacity at the plant to supply the new facility, through a newly formed partnership with AI infrastructure firm Radiant. The project targets more than one gigawatt of capacity.
Phased rollout and investment
Drax said it hopes the data centre's total capacity will surpass one gigawatt, with the initial phase set to deliver up to 100 megawatts by 2028, and a second phase adding a further 500 megawatts by 2031. The overall investment, encompassing semiconductor chips, could top £20bn, with an initial £2.5bn committed as part of the first phase.
Chief executive Will Gardiner said the project would "help secure the long-term future of the site and protect hundreds of jobs, maintain a critical source of this country's energy security, support northern growth and enable us to continue delivering for our local communities."
Market reaction and policy context
Drax's share price climbed 8.5 per cent to 877p on Tuesday morning following the news, making it the standout performer on the FTSE 250, as reported by City AM.
The announcement follows John Healey's confirmation that data centres would be permitted to utilise onsite generation while awaiting a grid connection, in a bid to accelerate their development. At last week's Budget speech, the Chancellor revealed a new "British Data Centre Covenant" with "strict tests that data centres must meet: To invest in local communities, create local jobs and protect local water supplies."
"In return, critical data centres will get the grid connections they need, and, where necessary, be allowed to build onsite generation while they wait," Healey said.
Industry frustration and environmental concerns
The announcement came in response to mounting frustration from AI hyperscalers, who have faced lengthy delays in securing grid connections for data centre projects. Last month, Microsoft withdrew from a partnership with UK neocloud firm Nscale after the company's proposed data centre development in Essex failed to secure a grid connection until at least 2030.
However, Drax's move could draw criticism from environmental groups concerned about carbon emissions generated by burning wood to power AI infrastructure. Earlier this year, reports indicated that using wood for power generation could prove more damaging to the climate than burning gas, even when carbon dioxide emissions are captured.
Drax has also previously come under scrutiny regarding its receipt of government green energy subsidies, with its use of wood pellets classified as a renewable energy source.
