The City watchdog has closed an investigation into the owner of the Drax power plant after an almost 10-month review into whether the company's sustainability claims misled shareholders.
The Financial Conduct Authority (FCA) said it had 'reviewed thousands of pages' of 'complex material' relating to the company's sourcing of wood pellets for the Drax power plant in Selby, North Yorkshire, but 'did not find evidence that justified any further action'.
Background of the Investigation
The regulator began the investigation last year into whether Drax's annual reports and accounts between 2021 and 2023 misled shareholders or omitted important information about the origins of its biomass fuel.
Drax imports millions of tonnes of wood pellets from across the Atlantic every year, which it burns to generate electricity. The company claims that its biomass is sourced from sustainably managed forests to provide reliable renewable electricity.
These claims were cast into doubt after a BBC Panorama documentary in 2022 found that Drax had cut down mature forests in Canada to turn into wood pellets. In 2024, Drax agreed to pay £25m to a redress scheme after the energy watchdog Ofgem found the company had failed to put 'adequate data governance and controls in place' when reporting details of the type of wood historically sourced from Canada.
Ofgem's Findings
Ofgem found at the time that there was no evidence to suggest the breach was deliberate, and said instead that it was 'technical in nature'. It also found no evidence that the biomass sourced was unsustainable or that Drax had wrongly claimed renewable energy subsidies.
Recent Developments
The Guardian revealed last year that forest experts believed it was 'highly likely' that Drax had continued to source wood from ecologically valuable forests as recently as last summer. Months later, the company disclosed plans to reduce the amount of Canadian wood pellets it burns and stop burning trees from British Columbia entirely within the next year.
The FTSE 250 energy company has received billions of pounds in government renewable energy subsidies to help meet national carbon-cutting goals. In 2025, it received £999m for generating about 4.5% of Great Britain's electricity from its plant, according to the climate thinktank Ember.
However, campaigners and scientists have persistently claimed that burning wood pellets – regardless of origin – is not sustainable and may be increasing carbon emissions.
Government Action
The government has acted to halve the company's subsidies from 2027 by limiting the amount of electricity that will qualify for support. It has ordered the company to use 100% sustainable wood. The large power plant in North Yorkshire would play a 'much more limited role' in the future, the government said.
FCA Statement
The FCA said on Thursday: 'Our focus was on areas within our remit, specifically whether Drax's annual reports and accounts between 2021 and 2023 contained misleading statements or left out important information investors needed to know.
'Accurate reporting is crucial to the integrity of our markets, and vital so investors can make informed decisions. Where evidence supports proportionate action, we take it. Where it does not, we close cases as swiftly as possible.'
Drax's Response
The Drax chief executive, Will Gardiner, said the company recognised the importance of compliance with its regulatory obligations and that it had 'worked constructively with the FCA throughout this investigation'.
'We are pleased to see the investigation closed with no action being taken,' he added.
