The head of ScottishPower’s parent company, Iberdrola, has called for a united European energy strategy to bring investment into utilities and help pull the continent out of its economic crisis.
Ignacio Galán, chairman and chief executive of the Spanish giant, told an energy industry summit in London that the sector could be key to returning ailing economies to growth, with investment of €50 billion (£40bn) a year needed to maintain and upgrade infrastructure. Energy already accounts for 5 per cent of European economic output and employs 750,000 people.
But he said the lack of clear energy policy in the eurozone, added to uncertainty of member states’ regulatory frameworks, meant investors currently preferred to put their money into the UK, US or emerging markets.
He said a single European market for energy should involve increased interconnections between countries, harmonising tax policies and liberalising tariffs.
“In order to achieve all this, the Union should also work towards the creation of a single regulator with sufficient authority to ensure that the harmonisation becomes a reality”, he said.
Galán, who earlier this year supported a move by the Spanish government to cut subsidies for new renewables, said some European countries have in recent years paid high subsidies to “immature renewable technologies” such as solar power, which were far from economically viable. Such policies are strangling conventional energy producers by cutting their market share and revenues, and even forcing them to finance these new competitors.
He said the current framework was in stark contrast to the EU’s goal for no member state to be an “energy island” after 2015. The EU is also theoretically committed to tariff liberalisation involving total transparency so that customers can rationalise consumption.
Share prices of continental utilities firms have fallen behind their UK and American counterparts in relation to profits. Last week Iberdrola turned to the bond markets instead to raise €250 million. Galán said a common approach would bring investors back. “The right signals from policies will help decide an adequate balance between costs and emissions reductions, and thus the future energy mix,” he said, adding that each technology – natural gas, clean coal, nuclear and renewables – has a role to play. Galán praised the UK’s recent review of renewables pricing for the next five years as the right balance for supporting developers at affordable costs for the system. Iberdrola is projecting investments totalling £12bn in the UK in the current decade.
But he called for clarity on plans for new nuclear and gas-fired plants, especially as a quarter of the UK’s current power plants will have to be replaced by 2020.
At the same summit, Scotland’s First Minister Alex Salmond pledged to work with the international energy industry to grow Scotland’s economy and create jobs. He said: “We must plan for the decades to come now, by continuing the clear, consensual and consultative approach to energy policy that will see us best placed to attract further investment and create more jobs in the years to come.”