The Financial Conduct Authority's (FCA) decision to drop its probe into Drax Biomass has sparked relief for the company, with shares rising by 1.2% on Thursday following a nearly ten-month investigation. The inquiry centred on concerns that Drax may have made misleading statements regarding the sustainable sourcing of wood pellets for its biomass power station in Selby, North Yorkshire.
Drax imports millions of tonnes of wood pellets annually from across the Atlantic, generating approximately 4.5% of Great Britain's electricity and receiving billions of pounds in government subsidies to support national carbon-cutting objectives – including £999 million in 2025. The company asserts that this biomass provides reliable renewable electricity, contributing to the UK's transition away from fossil fuels.
Environmental campaigners and scientists have consistently raised concerns that the wood pellets burned at Drax's plant are not sourced sustainably and could potentially increase carbon emissions. The FCA investigated whether Drax's annual reports and accounts between 2021 and 2023 contained misleading statements or omitted crucial information that investors needed to be aware of.
The regulator reviewed thousands of pages, but ultimately found "no evidence that justified any further action." The FCA stressed the importance of accurate reporting for market integrity and informed investor decisions, noting it takes proportionate action where evidence supports it, and closes cases swiftly when it does not.
This investigation follows a previous incident in 2024 where Drax agreed to pay £25 million after Ofgem found inadequate data governance and controls in its reporting. However, Ofgem clarified that there was no evidence of deliberate breach, deeming the issue "technical in nature." At that time, it also found no proof that the biomass was unsustainable or that Drax had wrongly claimed renewable energy subsidies.
Drax's chief executive, Will Gardiner, welcomed the FCA's decision, stating that the company had worked constructively with the regulator throughout the investigation and recognised the importance of complying with regulatory obligations. The FCA's announcement is likely to be a relief for Drax, but it also highlights ongoing concerns about the sustainability of its biomass sourcing practices.