ScottishPower’s traditional energy business improved operating profits by 3.3per cent to £203million in the first half of the year, but faces an annual carbon tax for the year of £150m.

Spanish parent Iberdrola said the tax established in 2013 had triggered an 89 per cent rise in the cost of purchasing carbon and gas fired energy since April 1, from £9.55 to £18.08 per megawatt hour, while electricity margins had fallen due to a 3.3per cent reduction in tariffs since January 2014. It also cited higher non-energy costs due to the higher percentage of renewable energy it must buy, and higher transmission and distribution costs.

Environmental taxes, along with transmission costs weighted against remoter suppliers, were blamed by ScottishPower in March for a decision to close Longannet, which had been expected to survive until 2020. The 40-year-old Fife plant supports 430 jobs and contracts worth £10m a year to 100 small businesses.

A 12-month timeframe was reported in March for the closure, but the company did not specify a date yesterday. It said: “Losses in the generation business continue with carbon taxes jumping by £22m to over £60m, and on course for a £150m carbon tax cost in the full year. This means that the future of Longannet is kept under close review.” A spokesman added: “The likelihood is it will have to close earlier than our previous estimates of around 2020.”

The company reported “a modest rise in the retail division supported by steady customer numbers” and a doubling of investment in customer service, and the business benefited from an 11.1per cent appreciation of sterling.

ScottishPower’s renewable business recorded a 47per cent rise in profit to 231m euros (£135m) largely due to its first offshore windfarm contributing 150MW (megawatts) to take the installed total to 1627MW. That is around a third of the company’s installed capacity from traditional sources of 4835MW, and includes a wave energy contribution of 1MW.

The energy networks business saw its net profit rise 16 per cent year on year to 564m euros (£409m) as base revenues increased following higher levels of investment.

Iberdrola said annual investment in the UK had more than doubled since the integration of ScottishPower, up from £600m in 2006 to £1.2bn in 2015.

Ignacio Galán, chairman , said: “Iberdrola is now beginning a new cycle of growth with investment set to be around four billion euros per year focused on regulated networks and renewables. Our strong financial position has enabled ScottishPower to invest more than £2m every day in the first six months of 2015 to help keep the lights on, cut carbon and keep energy affordable in the UK.”