Drax Explores Energy Supply Deals with Data Centres Amid Carbon Capture Investment Shift
Drax, the operator of the UK’s largest biomass power plant, is in talks with data centre companies to explore potential energy supply agreements. The company is considering using two of its four energy-generating units to power data centres, in line with the UK Government’s push to support the growth of artificial intelligence (AI).
The UK Government’s recent AI action plan is focused on improving AI infrastructure and could serve as an incentive for data centres to partner with Drax. The company plans to share more details about these discussions with data centre operators in its upcoming annual report.
Drax’s Role in the UK Energy Landscape
Drax is a major player in the UK energy market, providing approximately 5% of the country’s electricity through its wood-burning power plant. However, the company has faced criticism from environmentalists, who argue that it is one of the UK’s largest carbon emitters. Drax defends its position, claiming that burning wood is a carbon-neutral process, as trees cut down and burned can be replanted, offsetting carbon emissions.
This argument has sparked debate about the accuracy of Drax’s carbon accounting. Some climate scientists question whether its practices are truly sustainable. Last year, the company faced a £25 million ($31.5 million) fine from the energy regulator for submitting incorrect data, further intensifying scrutiny over its environmental impact.
Government Cuts Subsidies After Record Profits
In recent developments, Drax secured a bridging agreement with the UK Government, which included subsidies worth nearly £500 million ($631 million) annually. These funds were intended to help Drax develop a carbon capture project, slated to run from 2027 to 2031. However, when Drax announced record profits of over £1 billion ($1.2 billion) in 2024, the UK Government decided to halve these subsidies. The reason for this reduction was the government’s stance on Drax’s “unacceptably large profits.”
In response, Drax expressed its reluctance to make significant investments in carbon capture without clearer regulatory guidance and assurances of a solid return on investment. Will Gardiner, Drax’s CEO, emphasized that the company had generated over 25% more renewable power in 2024, helping to keep the lights on for millions of homes and businesses while supporting thousands of jobs throughout its supply chain.
Drax’s Future Role in the UK’s Energy Transition
Despite the profit concerns, the UK Government insists that Drax’s wood-burning power generation should only serve as a backup for renewable energy sources like wind and solar. The government has stressed that Drax’s role in the future energy landscape will be much more limited as the UK shifts towards cleaner, renewable energy solutions.
Drax’s exploration of energy supply deals with data centres marks a potential new direction for the company. As the demand for AI infrastructure grows, the company’s role in supporting this technology could become a key part of its future. However, balancing sustainability with the need for reliable power will remain a critical challenge as Drax navigates its path forward in a rapidly changing energy sector.
