Recommendations & Conclusions
25 items
2
Recommendation
22nd Report - Government’s support for …
Deferred
DESNZ has not made clear how its plans to strengthen the sustainability rules might work in practice. In its Biomass Strategy, published in August 2023, DESNZ committed to develop and consult on a common sustainability framework which could be applied to new future biomass policies and schemes across different sectors …
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DESNZ has not made clear how its plans to strengthen the sustainability rules might work in practice. In its Biomass Strategy, published in August 2023, DESNZ committed to develop and consult on a common sustainability framework which could be applied to new future biomass policies and schemes across different sectors of the economy. It also committed to considering whether it should introduce a requirement that, to meet the standards for the land criteria, 100% of woody biomass should be sustainable rather than the current 70%. DESNZ acknowledges that a new approach to assurance is needed and that increasing the stringency of rules around sustainability may need an increase in resources to monitor compliance. Ofgem’s investigation into Drax, together with the detailed follow up work, indicates the level of resources which may be required to provide a higher level of assurance. Ofgem’s ability to provide assurance 4 over higher standards of sustainability will depend on increases in financial support from DESNZ and HM Treasury. Given the significant public concerns raised in relation to the findings of the KPMG review commissioned by Drax into its Canadian supply chain processes and reporting practices, from the forests of Western Canada to the power station in North Yorkshire, the full report should be made available for Parliamentary scrutiny. recommendation a. DESNZ should estimate the cost and test the effectiveness of its proposals for monitoring compliance against an increased threshold for sustainability; b. DESNZ and HM Treasury should, working with Ofgem, consider the resource implications for Ofgem of introducing and then running a new oversight regime. DESNZ should set out, and publish, the steps it is taking to make sure it has the confidence that all the fuel burned at Drax is sustainably sourced; and c. Drax should provide the Committee with the full report as produced following the review commissioned from KPMG of its Canadian supply chain processes a
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Government response AI summary
The government states that providing the KPMG report (requested in point c) is not its responsibility, as the reports belong to Drax and it is up to Drax to release them. The response does not address points 'a' or 'b' of the recommendation regarding cost …
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HM Treasury
3
Conclusion
22nd Report - Government’s support for …
Rejected
We are not convinced the transitional support agreement between DESNZ and Drax provides good value for money for consumers. Government announced in February 2025 that it had agreed heads of terms for a deal to support Drax that will run from 2027 to 2031. The new support package means Drax …
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We are not convinced the transitional support agreement between DESNZ and Drax provides good value for money for consumers. Government announced in February 2025 that it had agreed heads of terms for a deal to support Drax that will run from 2027 to 2031. The new support package means Drax will only be supported to operate for a maximum of 27% of the time, meaning that Drax will be operating less than half as often as it currently does. Government estimates that this will save each household around £6 a year. However, there was no element of competition in reaching this agreement and Drax will receive a higher unit price, albeit for a more flexible type of power, than some renewable power generators that won their contracts through competitive auctions. There have been suggestions that the current contractual arrangements may have allowed Drax to avoid making repayments to the government. The new agreement also requires Drax to source 100% of its fuel from sustainable sources (an increase on the current requirement of 70% which applies to all generators). The government has missed an opportunity to incentivise continued investment in BECCS in its transitional deal with Drax, which includes no mention of BECCS. Indeed, there have been recent press reports that Drax is withdrawing funding from carbon capture. 5 recommendation DESNZ should also consider how it can include clauses into the transitional support agreement to prompt Drax to begin transitioning to BECCS.
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Government response AI summary
The government disagrees with the recommendation, stating the proposed Drax contract prioritized secure, low-cost electricity supply over BECCS transition. It argues that including BECCS contractual requirements would expose the government to unacceptable legal and cost risks before a full assessment is finalized.
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HM Treasury
4
Conclusion
22nd Report - Government’s support for …
Accepted
The deployment of BECCS has been repeatedly delayed, even though it remains a key part of the government’s plans to decarbonise the UK. The Climate Change Committee (CCC) and DESNZ both see BECCS as essential to the UK achieving its decarbonisation goals from Carbon Budget 6 (2033–37) onwards. Government initially …
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The deployment of BECCS has been repeatedly delayed, even though it remains a key part of the government’s plans to decarbonise the UK. The Climate Change Committee (CCC) and DESNZ both see BECCS as essential to the UK achieving its decarbonisation goals from Carbon Budget 6 (2033–37) onwards. Government initially planned for the first BECCS plant in the UK to begin operations by 2030. However, this date will not be achieved and government has yet to settle on a new target date. There are no BECCS projects in the first phase of the government’s Carbon Capture, Usage and Storage (CCUS) programme and no clarity over when or if it will be included in later stages. Currently, smaller scale biomass power generators which primarily use waste wood from the UK are excluded from the CCUS programme. It is not clear if these plants will be helped to transition to BECCS. The most recent advice published by the CCC confirms that BECCS will still be needed to achieve net zero by 2050, but only half the amount of BECCS capacity compared to previous forecasts. recommendation DESNZ should map a critical path showing when BECCS needs to be operational for the UK to achieve its decarbonisation goals and take concrete action to meet it. If BECCS is no longer considered to be viable, DESNZ should put in place robust contingency plans setting out how it will achieve the net carbon removals it requires and what the future of biomass will be.
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Government response AI summary
The government agrees, stating it will publish a report detailing its plan to meet carbon budgets and net zero targets. Additionally, an Independent Review of Greenhouse Gas Removals has been commissioned to assess how technologies like BECCS can assist the UK in achieving these goals.
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HM Treasury
5
Conclusion
22nd Report - Government’s support for …
Accepted
There are number of risks to the supply of biomass that need effective management. DESNZ’s Biomass Strategy identified a number of challenges for its use in the future which it needs to manage, including making sure that it has a secure supply of biomass and that it prioritises its use. …
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There are number of risks to the supply of biomass that need effective management. DESNZ’s Biomass Strategy identified a number of challenges for its use in the future which it needs to manage, including making sure that it has a secure supply of biomass and that it prioritises its use. In 2022, around two–thirds of biomass used in electricity generation, heat and transport was produced from domestic sources, with a third imported. The Department describes itself as agnostic as to whether biomass is sourced domestically or from overseas. However, the Climate Change Committee’s most recent advice, covering Carbon Budget 7, suggests that sustainable biomass will become harder to source on global markets. It therefore expects imports of biomass to have ceased by 2050, with domestic sources providing all the biomass required. But there are competing pressures on land use at home–for example, food production and reforestation. The Department for Environment, Food & Rural Affairs is currently consulting on a ‘Land Use Framework’ which will help inform 6 decisions on how best to use land to meet government’s various priorities. Meanwhile importing biomass involves long supply chains, which makes assuring sustainability criteria are met challenging. Such challenges may be amplified by the USA’s withdrawal from the Paris Agreement. recommendation DESNZ should make sure it has an approach in place for identifying and then mitigating the risks to the supply of biomass, both domestically and internationally. 7 1 Biomass sustainability and supply Introduction
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Government response AI summary
The government agrees and states it continuously monitors the biomass supply landscape, including regulatory changes and market dynamics. It emphasizes ongoing reliance on international pellet supply, primarily from the US, as domestic production at a comparable scale is not possible.
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HM Treasury
1
Conclusion
22nd Report - Government’s support for …
Accepted
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Energy Security and Net Zero (the Department) and the Office of Gas and Electricity Markets (Ofgem) on the government’s support for biomass.1
Government response AI summary
The government agrees and is reflecting on current evaluation and audit processes to incorporate lessons into future plans, including the new Drax contract. This work will be strengthened by the forthcoming appointment of an independent sustainability advisor.
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HM Treasury
6
Conclusion
22nd Report - Government’s support for …
Acknowledged
The Department for Energy Security and Net Zero (DESNZ) has overall responsibility for government’s approach to supporting biomass. In August 2023, DESNZ published its Biomass Strategy setting out the significant role it considers biomass can play in achieving net zero by 2050.6 The Office of Gas and Electricity Markets (Ofgem) …
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The Department for Energy Security and Net Zero (DESNZ) has overall responsibility for government’s approach to supporting biomass. In August 2023, DESNZ published its Biomass Strategy setting out the significant role it considers biomass can play in achieving net zero by 2050.6 The Office of Gas and Electricity Markets (Ofgem) administers the government schemes that provide the majority of financial support for biomass in the heat and power sectors.7
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Government response AI summary
The government acknowledges DESNZ's overall responsibility for supporting biomass.
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HM Treasury
7
Conclusion
22nd Report - Government’s support for …
Accepted
We also received a high number of written submissions from stakeholders.8 Particular concerns drawn to our attention included: a. the impact of biomass production on biodiversity, forest stocks and the environment more generally. b. the terms of the agreement for transitional support to Drax power station from 2027 to 2031 …
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We also received a high number of written submissions from stakeholders.8 Particular concerns drawn to our attention included: a. the impact of biomass production on biodiversity, forest stocks and the environment more generally. b. the terms of the agreement for transitional support to Drax power station from 2027 to 2031 that government recently announced. c. the role played by smaller biomass power stations in the UK in providing heat and power and how they contribute to waste disposal. d. the technical and other challenges in launching BECCS in the UK at the pace and scale assumed by government plans. e. the effectiveness of independent accreditation schemes that confirm whether biomass has been sustainably produced. 4 C&AG’s Report, para 2 5 C&AG’s Report, para 2 6 DESNZ, Biomass Strategy, August 2023 7 C&AG’s Report, para 3 8 Committee of Public Accounts, The Government’s support for Biomass - Written evidence 9 Assuring the sustainability of biomass
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Government response AI summary
The government agrees with the (implied) recommendations, committing to strengthening its sustainability assurance approach, incorporating lessons into the new Drax contract, appointing an independent sustainability advisor by Autumn 2025, and considering publishing sustainability enforcement plans by December 2025.
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HM Treasury
8
Conclusion
22nd Report - Government’s support for …
Accepted
DESNZ has set two criteria—for land use and with respect to greenhouse gases—for all the schemes that support the use of biomass which require biomass users to demonstrate that the fuel they burn comes from sustainable sources.9 Ofgem administers, on behalf of DESNZ, most of the schemes that provide financial …
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DESNZ has set two criteria—for land use and with respect to greenhouse gases—for all the schemes that support the use of biomass which require biomass users to demonstrate that the fuel they burn comes from sustainable sources.9 Ofgem administers, on behalf of DESNZ, most of the schemes that provide financial support for biomass in power and heating, including registering participants on to schemes and monitoring compliance with sustainability and other scheme criteria.10 Generators with a capacity of more than 1 megawatt are required to submit monthly data on sustainability to Ofgem. The generator is not required to share with Ofgem evidence to support its monthly submission (but must hold this evidence). Compliance with one of the criteria—land use—can be shown through a recognised certification scheme.11
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Government response AI summary
The government agrees with the (implied) recommendations, committing to strengthening its sustainability assurance approach, incorporating lessons into the new Drax contract, appointing an independent sustainability advisor by Autumn 2025, and considering publishing sustainability enforcement plans by December 2025.
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HM Treasury
9
Conclusion
22nd Report - Government’s support for …
Accepted
We are concerned that the certification schemes that are intended to prove that biomass used in the UK is sustainably sourced may not be fit for purpose.12 DESNZ told us that they and Ofgem have benchmarked these third–party certification schemes to ensure that they are in line with the sustainability …
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We are concerned that the certification schemes that are intended to prove that biomass used in the UK is sustainably sourced may not be fit for purpose.12 DESNZ told us that they and Ofgem have benchmarked these third–party certification schemes to ensure that they are in line with the sustainability criteria.13 We have also received a written submission from Drax setting out how the Sustainable Biomass Programme (SBP), the largest certification scheme, is underpinned by independent audits which conclude on whether suppliers meet the SBP’s standards.14 However, several stakeholders have written to us expressing concern that such schemes are not robust and do not fully account for changes in forest carbon stocks.15 The NAO report concluded that, in the absence of an evaluation of the effectiveness of these arrangements, the government could not demonstrate that its current arrangements are adequate to give it confidence industry is meeting sustainability standards.16
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Government response AI summary
The government agrees to complete a comprehensive assessment of its approach to gaining assurance around the sustainability of biomass by Autumn 2025. They will reflect on evaluation and audit processes and incorporate lessons learned into plans for the new Drax contract and Common Framework consultation, …
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HM Treasury
10
Conclusion
22nd Report - Government’s support for …
Accepted
Ofgem explained that the level of oversight is dictated by the size of the generator.17 At present, the largest recipient of financial support for biomass is Drax, the largest biomass electricity generator by some distance.18 While Ofgem did find misreporting in Drax’s 2021–22 annual returns, Ofgem told us that these …
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Ofgem explained that the level of oversight is dictated by the size of the generator.17 At present, the largest recipient of financial support for biomass is Drax, the largest biomass electricity generator by some distance.18 While Ofgem did find misreporting in Drax’s 2021–22 annual returns, Ofgem told us that these breaches did not mean that Drax received subsidies 9 C&AG’s Report, para 1.6, 2.8 10 C&AG’s Report, para 1.15 11 C&AG’s Report, para 2.11 12 Q 4 13 Q 4 14 Letter from Drax, 17 March 2025 15 Bio0012, Bio0022 16 C&AG’s Report, paras 12 and 16 17 Q 19 18 C&AG’s Report, para 8 10 to which it was not entitled.19 Ofgem added that the subsidies received by Drax are based on “an enhanced assurance scheme” and that it was “very confident” the funding that Drax received was in line with the current threshold that 70% of woody biomass should be from sustainable sources.20 DESNZ was unable to say whether this would have been the case if a threshold of 100% sustainable biomass, which will apply to Drax and which is being considered more widely, had been in place.21
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Government response AI summary
The government states that Ofgem's investigation into Drax, leading to a £25 million payment, proves the current assurance regime is working well, as breaches are investigated and actions taken.
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HM Treasury
11
Conclusion
22nd Report - Government’s support for …
Accepted
Ofgem told us that there are 104 biomass power generators with a generating capacity over 1 MW, and which therefore receive the same level of oversight as Drax.22 In the last year, Ofgem found that 17 of these 104 had breached the support scheme’s sustainability criteria.23 While these non–compliant generators …
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Ofgem told us that there are 104 biomass power generators with a generating capacity over 1 MW, and which therefore receive the same level of oversight as Drax.22 In the last year, Ofgem found that 17 of these 104 had breached the support scheme’s sustainability criteria.23 While these non–compliant generators accounted for less than 1% of the power generated by biomass as part of the Renewables Obligation scheme, this level of non–compliance is concerning.24 Strengthening the sustainability rules
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Government response AI summary
The government believes the Ofgem investigation into Drax and the subsequent redress payment demonstrates that the current assurance regime is working well, and breaches are thoroughly investigated and action taken.
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HM Treasury
12
Conclusion
22nd Report - Government’s support for …
Acknowledged
In its Biomass Strategy, published in August 2023, DESNZ committed to develop and consult on a common sustainability framework which could be applied to all new future biomass schemes across different sectors of the economy. This consultation has yet to be launched, although DESNZ assured us that it would happen …
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In its Biomass Strategy, published in August 2023, DESNZ committed to develop and consult on a common sustainability framework which could be applied to all new future biomass schemes across different sectors of the economy. This consultation has yet to be launched, although DESNZ assured us that it would happen at some point in 2025.25 The strategy also committed DESNZ to consider whether it should strengthen the land criteria in its support schemes so that 100% of woody biomass would have to be sustainably sourced, rather than the 70% stipulated by the existing government support schemes.26 DESNZ and Ofgem both agree that if the threshold for sustainable biomass moved from 70% to 100%, then the assurance regime would also need to be tighter.27 Any changes will have resource implications for Ofgem. It assured that it could gear up with the necessary skills, “subject [to support from] DESNZ and Treasury “.28 The NAO’s experience of auditing other areas of government highlights how gaining assurance over more stringent rules requires a commitment of more resources to monitoring and compliance.29 19 Q 13 20 Q 13 21 Q 14 22 Qq 18–19 23 Q 18 24 Qq 18–19 25 Q 8 26 C&AG’s Report, para 11 27 Qq 14, 20 28 Q 15 29 C&AG’s Report, para 11 11
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Government response AI summary
The government has been actively assessing its approach to sustainability assurance as part of a commitment to continuous improvement and to learn from international best practice and evolving international regulatory frameworks.
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HM Treasury
13
Conclusion
22nd Report - Government’s support for …
Deferred
In August 2024, Ofgem published the outcome of its investigation into Drax.30 It told us that it had reviewed over 3,000 documents as part of its investigation.31 It also reviewed a report by KPMG, commissioned by Drax, which looked at its Canadian supply chain processes and reporting practices, from the …
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In August 2024, Ofgem published the outcome of its investigation into Drax.30 It told us that it had reviewed over 3,000 documents as part of its investigation.31 It also reviewed a report by KPMG, commissioned by Drax, which looked at its Canadian supply chain processes and reporting practices, from the forests of Western Canada to the power station in North Yorkshire.32 Ofgem concluded following its review of the KPMG report, that it was “content there were no points of illegality raised in there and no evidence that would suggest that Drax was wrong to receive its subsidies”. It also recognised that the report had been the “subject of intense interest”.33 Ofgem’s wider investigation. It concluded that an absence of adequate data governance and controls had contributed to Drax misreporting data and its inability to provide Ofgem with sufficient data to support a number of its submissions.34 Drax has accepted Ofgem’s findings and is making what Ofgem called a £25 million “redress payment”. Drax is also resubmitting its data for the period under investigation and is completing what Ofgem called “the most comprehensive audit of all of its biomass supply chain”.35
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Government response AI summary
The government states that this is not a matter for the government to consider, and it is for Drax to decide whether they wish to release the KPMG reports, adding that Ofgem has already published significant detail.
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HM Treasury
14
Conclusion
22nd Report - Government’s support for …
Acknowledged
In February 2025, the government announced it had agreed heads of terms for a deal to support Drax that will run from 2027 to 2031. As part of this deal, DESNZ has required Drax to source 100% of its fuel from sustainable sources, rather than the current 70%. DESNZ intends …
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In February 2025, the government announced it had agreed heads of terms for a deal to support Drax that will run from 2027 to 2031. As part of this deal, DESNZ has required Drax to source 100% of its fuel from sustainable sources, rather than the current 70%. DESNZ intends to appoint an independent sustainability adviser to support Ofgem and the Low Carbon Contracts Company to ensure that the assurance process is robust and keeps pace with the science.36 DESNZ recognised that if a target of 100% is set, a “tighter” assurance regime will be required which would require “quite extensive changes to the way we do things now”.37 DESNZ is working on exactly what these arrangements might be, and assured us that “they will be robust and we will include disincentives and penalties if sustainability requirements are not met.” 38 30 Ofgem press release Ofgem closes investigation into Drax Power Limited (29 August 2024) 31 Q 80 32 Ofgem statement Drax investigation and renewables obligation subsidies (12 March 2025) 33 Q 80 34 Ofgem press release Ofgem closes investigation into Drax Power Limited (29 August 2024) 35 Q 5; Ofgem press release Ofgem closes investigation into Drax Power Limited (29 August 2024) 36 Statement by the Secretary of State for Energy Security and Net Zero, UIN HCWS424, 10 February 2025 37 Q 14, 28 38 Q 30 12 Securing the supply of sustainable biomass
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Government response AI summary
The government is working with LCCC and Ofgem to develop robust and transparent monitoring arrangements, assessing the cost and resource implications of new requirements, and ensuring Ofgem is appropriately resourced. They expect the independent sustainability advisor to play a role in ensuring the ongoing effectiveness …
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HM Treasury
15
Conclusion
22nd Report - Government’s support for …
Acknowledged
One of the key themes of the government’s Biomass Strategy concerns the future availability of biomass.39 In 2021, the UK imported 9.1 million tonnes of wood pellets for use in energy production. Around 60% came from the US, 18% from the EU and 16% from Canada.40 DESNZ describes itself as …
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One of the key themes of the government’s Biomass Strategy concerns the future availability of biomass.39 In 2021, the UK imported 9.1 million tonnes of wood pellets for use in energy production. Around 60% came from the US, 18% from the EU and 16% from Canada.40 DESNZ describes itself as agnostic as to whether biomass is sourced domestically or from overseas.41 The Climate Change Committee’s (CCC’s) most recent advice for Carbon Budget 7 highlights that supply of sustainable biomass is likely to be limited both in the UK and globally.42 We also received a written submission noting that relying on imported wood reduces the UK’s energy security.43 The CCC anticipates a declining role for biomass imports, with all the UK’s biomass demand being met from domestic sources by 2050.44
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Government response AI summary
DESNZ officials continue to monitor the international and domestic biomass supply landscape, but state that international pellet supply will continue to be vital, as UK biomass pellet production at a comparable scale would not be possible.
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HM Treasury
16
Recommendation
22nd Report - Government’s support for …
Accepted
DESNZ noted that global biomass prices would strongly influence how significant a role biomass would play and in what sectors, given that there are several areas in which it can be used.45 Higher biomass prices could encourage a growth in domestic production, but this could reduce the amount of land …
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DESNZ noted that global biomass prices would strongly influence how significant a role biomass would play and in what sectors, given that there are several areas in which it can be used.45 Higher biomass prices could encourage a growth in domestic production, but this could reduce the amount of land available for food production in the UK.46 The Department for Environment, Food & Rural Affairs is currently consulting on this issue in advance of producing a ‘land use framework’. which will look at how to reduce the risk of competition between biomass production and food production.47 For example, the government has committed to at least maintain current levels of UK food production and to achieve a degree of reforestation by 2050, both of which will reduce land availability for growing biomass feedstocks.48 We heard from stakeholders that there is a need for a more pragmatic approach to promoting domestic biomass production and that biomass can be cultivated on marginal land that is not used for food production.49
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Government response AI summary
The government agrees with the recommendation and will monitor the international and domestic biomass supply landscape, ensuring that the government is abreast of changes to regulatory arrangements, market dynamics, and other factors that drive the supply of and demand for pellets.
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HM Treasury
17
Conclusion
22nd Report - Government’s support for …
Acknowledged
Importing biomass involves long supply chains, which make it difficult to be sure that it is produced from genuinely sustainable sources.50 We are also concerned that recent international developments may undermine the system of carbon accounting that underpins the current supply of 39 C&AG’s Report, para 3.2 40 C&AG’S Report, …
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Importing biomass involves long supply chains, which make it difficult to be sure that it is produced from genuinely sustainable sources.50 We are also concerned that recent international developments may undermine the system of carbon accounting that underpins the current supply of 39 C&AG’s Report, para 3.2 40 C&AG’S Report, para 1.4 41 C&AG’S Report, para 3.3 42 Climate Change Committee, The Seventh Carbon Budget, February 2025, Section 7.7 43 Bio0012 44 Climate Change Committee, The Seventh Carbon Budget, February 2025, page 272 45 Q 49 46 Q 57 47 Q 57 48 C&AG’s Report, para 3.4 49 Bio0003, Bio0005, Bio0008 50 C&AG’s Report, para 9 13 sustainable biomass.51 Under current carbon accounting rules, emissions from the burning of biomass are accounted for by the country from which the fuel was sourced, an approach we were very critical of in our report on the government’s carbon capture usage and storage programme. The bulk of wood pellets burnt in biomass power generation in the UK come from the US, which has removed itself from the Paris Agreement.52 In written evidence received after our evidence session Drax set out that the US remains party to the United Nations Framework Convention Climate Change which requires that countries submit national greenhouse Gas Inventories in line with international standards.53 51 Q 65 52 Qq 62, 63 53 Letter from Drax, 17 March 2025 14 2 Future interventions Transitional support for Drax, 2027–2031
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Government response AI summary
DESNZ officials continue to monitor the international and domestic biomass supply landscape, but state that international pellet supply will continue to be vital, as UK biomass pellet production at a comparable scale would not be possible.
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HM Treasury
18
Conclusion
22nd Report - Government’s support for …
Rejected
In February 2025, the Minister for Energy issued a statement confirming that the government had agreed heads of terms with Drax power station for financial support between 1 April 2027, when current support arrangements end, and 31 March 2031. The Minister set out that the extension of its support for …
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In February 2025, the Minister for Energy issued a statement confirming that the government had agreed heads of terms with Drax power station for financial support between 1 April 2027, when current support arrangements end, and 31 March 2031. The Minister set out that the extension of its support for Drax is necessary, despite their concerns about the continued use of unabated biomass, to secure the UK’s energy supply while alternatives are developed.54
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Government response AI summary
The government explicitly disagrees with the Committee's (implied) recommendation regarding the Drax power station contract, explaining that the agreement prioritised securing electricity supply at the lowest cost and retaining future BECCS optionality, rather than committing to large-scale BECCS adoption which carries unacceptable legal and cost …
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HM Treasury
19
Conclusion
22nd Report - Government’s support for …
Rejected
DESNZ is clear that the agreement is intended to improve on current arrangements. Firstly, Drax will play a smaller role in the power system than it currently does. This means that Drax will receive support for a maximum of 27% of the time in each year, less than half of …
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DESNZ is clear that the agreement is intended to improve on current arrangements. Firstly, Drax will play a smaller role in the power system than it currently does. This means that Drax will receive support for a maximum of 27% of the time in each year, less than half of the time it currently does (which DESNZ estimates will save each household around £6 a year). This reduction also accords with CCC advice that unabated biomass should not be supported at high load factors after 2027. Secondly, DESNZ expects the agreement to reduce the amount of subsidy that Drax receives each year by £170 million compared to the alternative of procuring gas and includes a claw–back provision for profits over a certain level.55
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Government response AI summary
The government explicitly disagrees with the Committee's (implied) recommendation regarding the Drax power station contract, explaining that the agreement prioritised securing electricity supply at the lowest cost and retaining future BECCS optionality, rather than committing to large-scale BECCS adoption which carries unacceptable legal and cost …
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HM Treasury
20
Conclusion
22nd Report - Government’s support for …
Rejected
Despite the new terms of the agreement, there are risks that the support will not offer consumers value for money. The agreement was reached through bilateral negotiations with Drax and included no element of competition.56 While the government claims that the new arrangements will reduce consumer subsidies to Drax, it …
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Despite the new terms of the agreement, there are risks that the support will not offer consumers value for money. The agreement was reached through bilateral negotiations with Drax and included no element of competition.56 While the government claims that the new arrangements will reduce consumer subsidies to Drax, it will be paid £113 per megawatt hour (in 2012 prices) for the electricity it generates–far more than will be paid to offshore windfarms and other renewable generators under recent Contracts for Difference.57 After our evidence session, we received correspondence from Drax stating that it considers the strike price is justified because it provides dispatchable power which is available at any time, rather than the intermittent power provided by most renewable generators. As 54 Statement by the Secretary of State for Energy Security and Net Zero, UIN HCWS424, 10 February 2025 55 Statement by the Secretary of State for Energy Security and Net Zero, UIN HCWS424, 10 February 2025; Q74 56 Q 43 57 Qq 10– 11 15 biomass generators also have to pay for fuel, Drax argues that a fairer price comparison would be gas–fired power stations, which are markedly more expensive.58
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Government response AI summary
The government disagrees, stating that the proposed contract with Drax was intended to secure electricity supply at the lowest cost without the cost of procuring this via the Capacity Market auction, and the CfD framework cannot bind generators to investment decisions beyond the 2027-31 contract …
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HM Treasury
21
Conclusion
22nd Report - Government’s support for …
Accepted
An investigation conducted by Bloomberg in 2022 concluded that Drax may previously have gamed its support to the detriment of consumers. It found that Drax shut down power generation and sold wood pellets on the open market to avoid paying back £639 million of subsidies as wholesale electricity prices spiked. …
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An investigation conducted by Bloomberg in 2022 concluded that Drax may previously have gamed its support to the detriment of consumers. It found that Drax shut down power generation and sold wood pellets on the open market to avoid paying back £639 million of subsidies as wholesale electricity prices spiked. Although DESNZ reassured us that the new arrangements will be more robust, it did not offer any explanation of how it had made sure that there would be no loopholes that allow Drax to continue to game the system.59
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Government response AI summary
The government agrees with the recommendation and is considering options to publish the plans for sustainability enforcement under the new Drax contract by December 2025, also working closely with Ofgem and LCCC on sustainability assurance roles.
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HM Treasury
22
Conclusion
22nd Report - Government’s support for …
Accepted
There are other factors which cast doubt on whether the government has reached a good deal. The new support agreement with Drax reduces the level of allowed supply chain emissions for the fuel it burns, from 55.6 grams of CO2 per megajoule to 36.6 grams.60 While DESNZ said that this …
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There are other factors which cast doubt on whether the government has reached a good deal. The new support agreement with Drax reduces the level of allowed supply chain emissions for the fuel it burns, from 55.6 grams of CO2 per megajoule to 36.6 grams.60 While DESNZ said that this is in line with international best practice, historically Drax has achieved supply chain emissions below this new level so it is not clear if this change will have any effect.61 We also note that the agreement does not appear to include any incentives or requirements for Drax to continue investment in BECCS.62 This is particularly concerning given recent news reports that Drax is ceasing investment in a company that is intended to speed up the development of carbon capture and storage.63 ‘DESNZ told us it made the agreement with Drax principally to ensure security of supply, following the advice of its national energy system operator.64 The future of BECCS in the UK
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Government response AI summary
The government agrees with the recommendation and will work with LCCC and Ofgem by Autumn 2025 to develop robust, transparent monitoring arrangements for new sustainability criteria, ensuring Ofgem is appropriately resourced.
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HM Treasury
23
Conclusion
22nd Report - Government’s support for …
Deferred
Combining power generation using sustainably sourced biomass with carbon capture and storage (CCUS) has the potential to generate ‘negative emissions’–i.e. it could reduce the overall amount of CO2 in the atmosphere.65 Both the government and the Climate Change Committee (CCC), which advises the government on how best to achieve its …
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Combining power generation using sustainably sourced biomass with carbon capture and storage (CCUS) has the potential to generate ‘negative emissions’–i.e. it could reduce the overall amount of CO2 in the atmosphere.65 Both the government and the Climate Change Committee (CCC), which advises the government on how best to achieve its decarbonisation goals, believe that BECCS will be essential for the UK 58 Letter from Drax, 17 March 2025 59 Q 42 60 Q 3 61 Q 3 and Drax Power, Response to CCC Bioenergy Review: call for evidence, December 2018, p 1 62 Q 71 63 Q 1 64 Q 71 65 C&AG’s Report, para 2 16 to achieve its decarbonisation goals from Carbon Budget 6 and beyond.66 The CCC recently provided new advice to government, which set out a reduced role for BECCS in 2050 compared to its earlier forecasts, but does still see BECCS as an essential part of the UK’s decarbonisation efforts by generating 25 million tonnes of negative carbon emissions per year (roughly half the amount suggested in its previous advice).67
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Government response AI summary
The government agrees that BECCS is important and states that a forthcoming report, compliant with a High Court Order and the Climate Change Act 2008, will address policies and proposals to meet carbon budgets. They have also commissioned an Independent Review of Greenhouse Gas Removals …
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HM Treasury
24
Conclusion
22nd Report - Government’s support for …
Deferred
The government had initially planned for BECCS plant to begin operating at scale in 2030 as part of its broader CCUS programme.68 However, as the first phase of the CCUS programme (known as Track 1) does not include a BECCS plant, this target date will not how be achieved.69 DESNZ …
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The government had initially planned for BECCS plant to begin operating at scale in 2030 as part of its broader CCUS programme.68 However, as the first phase of the CCUS programme (known as Track 1) does not include a BECCS plant, this target date will not how be achieved.69 DESNZ has not set a revised target date and it is not clear whether a BECCS plant will be supported in a later phase of the CCUS programme.70
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Government response AI summary
The government acknowledges the lack of a revised target date for BECCS and states that a forthcoming report, compliant with a High Court Order and the Climate Change Act 2008, will address policies and proposals to meet carbon budgets. They have also commissioned an Independent …
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HM Treasury
25
Conclusion
22nd Report - Government’s support for …
Acknowledged
While much of the debate around biomass has focused on Drax, we received several written submissions outlining the important role played by smaller biomass generators in the UK. There are at present 54 regional biomass power stations that are primarily fuelled by waste wood from household waste recycling plants. These …
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While much of the debate around biomass has focused on Drax, we received several written submissions outlining the important role played by smaller biomass generators in the UK. There are at present 54 regional biomass power stations that are primarily fuelled by waste wood from household waste recycling plants. These provide enough electricity to power 1.5 million homes.71 The government support for these power stations will begin to phase out from 2027 and it is not clear what support government will make available for them to convert to BECCS.72 Any conversion to BECCS would also require the government to set out clear plans for enabling carbon capture in ‘dispersed sites’, which are sources of carbon emissions that cannot access pipelines to transport the carbon dioxide. Only four of the 54 power stations are within 10 miles of a carbon capture cluster and are therefore likely to utilise a pipeline.73 66 National Audit Office, Carbon capture, usage and storage, Session 2024–25, HC 120, July 2024, para 1.4 67 Climate Change Committee, The Seventh Carbon Budget, February 2025, p 272 and fig 7.12.1 68 Q 67 69 Committee of Public Accounts, Carbon Capture, Usage and Storage, Eighth Report of Session 2024–25, HC 351, February 2025, para 22 70 Q 67 71 Bio0017 72 Q 58 73 Bio0017 17
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Government response AI summary
The government notes smaller-scale biomass generators can continue to be supplied by a variety of domestically sourced feedstock, but these are not suitable for the technologies currently used by larger-scale generators.
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HM Treasury