Profits at Drax, the Yorkshire coal-fired power station that generates more electricity and carbon emissions than any other UK plant, fell by 10% last year, partly due to a slump in power demand.
Dorothy Thompson, the company's chief executive, said demand this winter had been 5% to 6% lower than normal as businesses slashed production.
She said households were also saving energy to cut costs, which helped reduce Drax's margins further.
The generator is planning to build three biomass plants and increase the amount of biomass it burns at the Drax plant. It plans to cut emissions levels by almost a fifth by 2011, which would require 1.5m to 2m tonnes of biomass material annually.
But yesterday Thompson refused to disclose what type of feedstock Drax will use for its £2bn biomass programme. The company is being reticent about revealing what type of biomass it is using or plans to use, citing commercial confidentiality.
Environmentalists said concerns over the sustainability of biomass – which is mixed with conventional fuel such as coal to reduce emissions – could result in a similar furore to the one over biofuels and the environmental damage associated with them. The government has scaled back biofuel targets after it emerged their growing production was accelerating deforestation.
A spokeswoman said the company had drawn up a sustainability policy for its biomass which she said would rule out using imported palm oil – the worst offender for leading to deforestation in countries such as Indonesia. She said Drax would appoint an independent auditor to ensure the policy was followed.Next month Ofgem will request – but not oblige – companies to detail the origins of the material. The government does not require companies to verify the source of the biomass they are using.
