The owner of the Drax power plant in North Yorkshire will give shareholders a £300m windfall after a surge in taxpayer subsidies boosted its profits for the first half of the year to more than £500m.
The power station, which earns hefty subsidies from burning biomass wood chips, mainly shipped from North America, generated almost a third more electricity over the first half of this year compared with the same months last year.
This earned Drax Group £393m in biomass subsidies, which are opposed by many climate campaigners who claim that burning biomass is not sustainable and may increase carbon emissions.
The company has received more than £6bn in subsidies for its biomass plant, which is the UK’s biggest single emitter of carbon dioxide. Drax, which supplies about 5% of the UK’s electricity, has called on the government to continue supporting its power plant by extending the subsidy scheme, which is due to end in 2027, until the end of the decade.
From 2030, Drax expects to earn subsidies through a new scheme designed to support its plan to fit carbon capture technology to the power plant, in a project that could cost bill payers more than £40bn. The plans have been backed by National Grid’s electricity system operator and the UK’s independent Climate Change Committee as an important element in the UK’s efforts to meet its 2050 climate targets.
In total, the company’s adjusted earnings climbed to £515m for the six months to the end of June, up from £417m in the first half of last year. The company said rising profits would continue in the second half of the year to reach “the top end” of the City’s expectations for its full-year results.
In addition to buying back £300m of its shares, the company also promised to increase dividends by 12.6%, more than expected by City analysts, which ignited a share price leap of 11% on Friday morning.
Matt Williams, a campaigner for Cut Carbon Not Forests and the Natural Resources Defense Council, said: “It is unacceptable that this company is burning the world’s forests and making money hand over fist from environmental harm.
“A large part of those profits come from public subsidies Drax is given by claiming that burning forests is good for the planet. Worse than that, Drax has told the government it needs more subsidies after 2027 – at the same time as handing hundreds of millions of pounds to shareholders. Every time you pay your energy bill, you help pay Drax’s subsidies.”
Will Gardiner, the chief executive of Drax Group, said the power plant was playing an important role in the UK’s electricity system by “keeping the lights on for millions of homes and businesses, while supporting thousands of jobs throughout our supply chain”.
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Drax claims that burning wood pellets is carbon neutral because trees absorb as much carbon dioxide when they grow as they emit when they are burned. Capturing the carbon emissions from biomass power plants would then effectively create “negative carbon emissions”, according to Drax. These claims are disputed by environmentalists.
Simon Francis, a campaigner at the End Fuel Poverty Coalition, said Drax was profiting from a “broken energy system” and called on companies that have benefited financially from the energy crisis to “contribute more to ensure the most vulnerable households are supported” and “pay a fair tax on their ever-mounting profits”.
Meanwhile, the French energy company EDF posted a 15.7% rise in its first-half profit to €18.7bn (£15.8bn) after higher electricity production from its nuclear fleet and hydropower plants. It expects its profits over the second half of the year to be lower than in 2023 because of the decline in energy market prices since the energy crisis.
