It was a mystery last October why Drax (DRX) was removed from the S&P Global Clean Energy Index. S&P declined to talk about specific companies, except to say that it was because Drax’s carbon-to-revenue footprint standard score rose, whatever that meant.
Drax didn’t know. Having mostly switched to generating electricity from wood pellets instead of coal, it has been positioning itself as a green energy company, so its removal was a blow. It told a Parliamentary sub-committee that perhaps its “legacy thermal generation” was the reason. After some effort, Camilla Hodgson at the FT cut through S&P’s jargon. Earlier this month, she concluded that one factor for dropping Drax was the pollution produced from its remaining coal power generation and its overall energy consumption; but the main reason, which challenged Drax’s environmental business case, was because of the amount of stored carbon released from the wood in the pellets it uses.
Drax maintains that sustainable biomass is carbon neutral “at the point of combustion”. Under the Paris Agreement, emissions are counted when trees are felled, but not when the wood is burned. This was a compromise: the argument is that harvested trees are replaced by new ones that absorb an equivalent amount of carbon to that spewed out when pellets are burned, so overall emissions net out at zero. But last month, Kwasi Kwarteng, the UK’s business secretary, told MPs that the government too needed to challenge many of the premises on which the sustainability claims about burning wood pellets are based. He criticised Drax for importing 80 per cent of its pellets from North America, which has “a huge cost financially and environmentally,” he said, and “doesn’t make any sense to me.”
According to Phil MacDonald at the think tank Ember, the government, which subsidises Drax by about £800mn a year, has committed another £1bn to capture and store carbon by developing a technology called Beccs. There’s a symbiotic relationship: Drax relies on government subsidies; the government relies on Beccs being scaled up for the UK to achieve net zero by 2050. MacDonald says that “in its 2005 Select Committee evidence, Drax stated that offshore wind was five times more expensive than biomass in terms of CO2 abated”. But times change: even by 2019, a megawatt of power from Drax was costing £116.50, while that produced by wind was only £44. “Biomass power stations receive huge tax breaks, based on an outdated assumption that burning wood is carbon neutral: renewables like offshore wind guarantee emissions cuts for less than half the price of burning wood for electricity,” he said.
This supports the environmentalist argument that it’s impossible for biomass-fired power stations to be carbon neutral: it takes ages for new trees to absorb carbon; importing pellets such long distances is emissions-intensive; and large-scale harvesting of wood threatens ecosystems. It was knowing this, perhaps, that led Kwarteng to say: “I can well see a point where we just draw the line and say [biomass] isn’t working – this doesn’t help carbon emission reduction...so we should end it, but we haven’t quite reached that point yet.”
But then Kwarteng was got at. Less than a week later, he said that he “fully backed” biomass. Times have changed again – sanctions, heat and droughts have exposed the limitations of other forms of power generation. Wind and solar power are vulnerable too. Wind turbines cut out when winds are stronger than 55mph. Solar panels lose efficiency above 25 degrees centigrade. They need storage. Nuclear plants can become vulnerable, as Chernobyl, Fukushima and now Zaporizhzhia have demonstrated. Around half of France’s nuclear plants have had to be temporarily closed, partly because of lower river levels. Fracking in the US was encouraged by politicians who denied climate change, and now leakages of raw methane from thousands of small wells (both active and supposedly sealed) make generating power from gas there more environmentally damaging than from coal. Drax maintains that shipping wood pellets across the Atlantic is less energy intensive than shipping liquified natural gas. A government spokesperson said it persists in its belief that “the UK government only supports biomass which complies with our strict sustainability criteria”.
Since the Russian invasion of Ukraine, energy security has become the name of the game. Drax is keeping its coal-fired power plants operating, while still making those claims about “sustainable biomass” supplying “renewable” electricity. And yet the looming environmental collapse has not gone away.
S&P continues to count biomass generation as renewable generation for the purposes of its index, presumably for locally sourced pellets made from wood that otherwise would be wasted. As MacDonald says: “The onus is now on the biomass industry to be transparent about the true emissions impact of their technology”. Drax says it will be carbon negative by 2030 if Beccs can be perfected. Perhaps then, it might qualify once more for inclusion.
