Drax Group has signed a new 'low-carbon dispatchable' contract for difference (CfD) with the UK government’s Low Carbon Contracts Company, covering all four of its biomass units at Drax Power Station from April 2027 to March 2031.
The agreement, largely unchanged from terms announced in February, sets a strike price of £109.90 per MWh (2012, real) and includes a generation 'collar' of 6 TWh per year, allowing Drax to generate flexibly and sell additional output on merchant terms.
Chief executive Will Gardiner said the deal would “support UK energy security into the 2030s” and deliver savings for consumers compared with other dispatchable sources.
The company said the strike price was adjusted to reflect favourable exchange-rate movements that reduce biomass costs, leaving earnings expectations unchanged.
The CfD also introduces stricter sustainability rules, requiring all biomass to be “sustainably sourced and independently verified” through enhanced audits and reporting.
However, the agreement comes as Drax faces sustained criticism over its biomass practices.
The company was fined £25 million by Ofgem in 2024 for data governance failures and is under investigation by the Financial Conduct Authority over past disclosures on wood sourcing.
Environmental groups and academics have long questioned the carbon neutrality of burning imported wood pellets, warning that emissions from harvesting and transport undermine Drax’s 'green' credentials.
The government, which recently halved future subsidies for Drax’s biomass generation, insists that stricter sustainability conditions will ensure the technology’s role aligns with the UK’s net-zero goals.
Drax signs new ‘low-carbon CfD’ with UK government
