A Bloomberg investigation said that Drax idled one of its generating units at the North Yorkshire power plant for a significant period in 2022, during a time when soaring energy prices placed immense pressure on household bills.
The unit earns a fixed subsidy levied on energy bills, and if Drax had kept the unit running, it would have been obliged to repay approximately £639 million (€742.4 million) to British bill payers as of last month, the report said.
Bloomberg stated that instead of doing this, Drax utilised a surge in global wood pellet prices to profit from selling them on, which made more money than Drax would have received from electricity generation.
The subsidy contract stipulates that energy projects receive a fixed price for every megawatt of electricity generated.
It is standard for companies to then receive a payment levied on energy bills, which makes up the earnings from the wholesale market to an agreed strike price.
Companies have had to pay the difference back to consumers over the past year, because market prices have been higher than the subsidy level.
Drax is not alleged to have broken any market rules.
Drax strongly denied Bloomberg's suggestions, stating it was "false, inaccurate and misleading".
A Drax spokesperson said: “The Russians’ invasion [of Ukraine] created unprecedented challenges to the electricity market due to constrained fuel supplies, leading to an increase in both the demand for biomass and the price of pellets.
“Given this, we had to make responsible decisions on our winter hedging to minimise risk to Britain’s energy security and our business […] No serious observer of the energy system would advocate that we ought to have exposed Britain’s power grid and our business to increased risks.”
Drax denies claims it benefitted from subsidy loophole
