Published 23rd Nov 2023, 16:45 BST

Enviva, which supplies roughly 15 per cent of the pellets burned at Drax’s Selby site, said earlier this month that there was “substantial doubt” over its ability to continue as a going concern, as it announced losses of $85.2 million for the third quarter of 2023.

Drax said it was “monitoring the situation closely,” and that it has a “robust and diversified global supply chain” of biomass wood pellets.

Around 40 per cent of Drax’s wood pellets come from its own mills, located in the US. The pellets are burned in place of coal at Drax’s Yorkshire site.

Drax has said it is “well insulated” in its supply of biomass wood pellets after Enviva, one of its suppliers, announced that its future was in doubt. Picture by Simon Hulme

Bruce Heppenstall, plant director at Drax Power Station, said: “At the moment some of the pellet producers are squeezed between the lumber industry on one side and the people who are using the pellets on the other side.

“Enviva’s business model is different to others, because they have been financing their new plant and growing their business off the back of future sales and those future sales have not transpired, so they have ended up with a lot of extra cost.

“Enviva’s is a very special case, but Drax is very well insulated by having its own self-supply.”

Analysts at Barclays noted that Enviva’s issues could, in fact, create opportunities for Drax, adding that they believe Enviva would likely continue to deliver wood pellets even if it filed for bankruptcy.

In December of last year, Drax announced its plan to develop two new pellet production sites for a total of $300 million. The company plans to develop a new-build pellet plant in Longview, Washington, and to expand its Aliceville site in Alabama.

The company has also previously acquired other pellet manufacturers and sites, including Pinnacle Renewable Energy Inc in 2021.

The production of biomass wood pellets has proved controversial in the US, with campaign groups raising concerns about alleged detrimental health impacts on the communities in which pellet mills operate.

Drax previously told The Yorkshire Post: “Drax is committed to being a good neighbour and the safety of our people and the communities where we operate is our priority.”

A number of US pellet mills have also previously been found to have breached air pollution limits.

In May this year, Amite BioEnergy, which is owned by Drax and runs a pellet plant in Mississippi, was found to have breached emission rules. Amite said it believed it was only non-compliant for a short period in 2021. Drax also said at the time that it had taken “prompt corrective action” in response to the findings, and that it was “committed to environmental compliance”.

Drax says it is ‘well insulated’ as biomass supplier Enviva at risk of collapse