The boss of Spanish energy giant Iberdrola has told the BBC the UK’s energy price cap is not working and the country is now paying the price.
Ignacio Galan, CEO of Iberdrola, the company that owns Scottish Power, was speaking on the sidelines of a government investment summit.
“The decision to impose a price cap was made in a very specific situation to protect the consumer,” he told the BBC.
“But it doesn’t work when the situation changes,” Mr Galan explained.
“We’re paying the price right now.” When you intervene in the market, you can solve a temporary problem, but you can’t change the future.
“The price cap was put in place on a temporary basis, and I’m not sure why it’s still in place.”
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Mr Galan was in London for the government’s Global Investment Summit, which aims to increase foreign investment in the UK, particularly in green technologies.
The energy price cap is intended to protect domestic consumers by limiting the amount of money that energy providers can charge per unit.
However, as global gas prices have risen, a number of businesses have gone bankrupt because the policy requires them to charge less for gas than it costs them to buy it.
When asked if the price cap was a short-term political decision that harmed the market in the long run, Mr Galan replied, “Yes, exactly.”
‘You must exercise extreme caution. The market has its own set of rules, and if you change something in one place, you never know what will happen in another. The world is a global one, and people are affected in various ways.”
Mr Galan stated that it was not the responsibility of the UK regulator Ofgem to examine companies’ profit margins, adding, “If there is enough competition, the market will fix the problem.”
He stated that he believed the current high gas prices were only temporary and that any decisions made to address the energy crisis should be long-term in nature.
“I’ve been in the industry for a long time, and we do face these types of crises from time to time.” The first step is to avoid becoming nervous and making decisions based on a temporary situation,” he added.
“Right now, there is a difficult situation, but it will most likely disappear in a few months.” It’s happening because of a gas supply shortage, but that won’t last forever. As a result, we must be very consistent in our approach.”
Mr Galan urged the UK to be “much more dynamic” in its transition to a low-carbon future, including by expediting the planning process for new power plants.
“Let us take a long-term view, a long-term vision, which I believe the UK has, and accelerate the construction of new green power plants and distribution networks to reduce reliance on fossil fuels and increase reliance on the country’s natural resources.”
Mr Galan’s remarks came as Iberdrola confirmed plans to invest £6 billion in offshore wind farms off the coast of Suffolk, which could create up to 7,000 jobs if the sites are approved.
Mr Galan described the United Kingdom as an appealing place to invest due to its “stability, predictability, rule of law, and a reasonable return on investment.”