The retail arm of ScottishPower, which has launched the biggest recruitment drive in the company’s history, suffered a 60 per cent collapse in profits in the first half of this year as it continued to absorb the cost of higher wholesale energy prices not yet passed on to consumers.

Earnings at the retail business, which supplies gas and electricity to 4.8 million households, fell by £81 million from the same period a year earlier to £54.3m. However, that represented an improvement from the first quarter when the business made a loss of £12m.

Other divisions of the Glasgow-based group fared better, with overall earnings 2.6% higher at £924.6m. This included a particularly robust performance by the renewables division, the catalyst for ScottishPower’s recruitment drive.

In a brief statement, ScottishPower said the reduction in earnings was primarily down to a deterioration in profit margins: “The inability to pass on the high energy costs due to the price cap mechanism continues to lead to a strain on earnings.”

Introduced in 2019, the energy price cap is a limit on the maximum amount energy companies can charge for each unit of gas and electricity, as well as the maximum standing charge for being connected to the grid.

The cap is currently set every six months, in April and October, and is calculated by the regulator Ofgem based on the change in wholesale prices in the preceding months. At that point suppliers are allowed to adjust prices to cover any increase in their costs.

READ MORE: Profits fall at ScottishPower as wholesale prices bite

Dozens of UK suppliers went bankrupt after gas prices began surging last August in line with increased demand as the global economy emerged from pandemic lockdowns. Prices have been further inflated by the Russian invasion of Ukraine in February, with Russia earlier this week cutting the flow of gas into Europe via its Nord Stream 1 pipeline to 20% of capacity.

To reduce the time lag between changes in wholesale and retail prices, Ofgem has proposed that the price cap be reviewed four times a year instead of twice a year. The regulator says these reforms will ensure resilience across the supply sector, and will also be of swifter benefit to consumers when wholesale prices eventually ease.

In addition to the issues around the price cap, ScottishPower said margins in its retail business were also hit by lower overall volumes due to a milder winter than in 2021. While electricity volumes edged up 0.4% on a year earlier, gas volumes were down 21.3%.

The company’s energy transmission division, which operates the high-voltage electricity network across central and southern Scotland, posted a 4.5% increase in earnings to £464.9m during the first half of the year.

Earnings in the renewables division – which benefits from increases in wholesale prices – rose by 27% to £386.7m, aided by increased production from its wind farms.

READ MORE: ScottishPower, Storegga hydrogen plant due in 2024

ScottishPower, which is owned by Spain’s Iberdrola, said it has secured contracts for a record 16 renewable energy projects during the past year. This will almost double the company’s green energy generation capacity and is expected to trigger up to £4 billion of investment.

As part of this expansion, ScottishPower said it will create “at least” 1,000 new jobs in the next 12 months. The programme is said to be the company’s biggest-ever recruitment drive.

“The future of energy in the UK has become a critical issue,” ScottishPower chief executive Keith Anderson said. Our climate change ambitions, the importance of energy sovereignty and the cost-of-living crisis all point to a need for speed in delivering more green, more secure and more affordable energy.

“The momentum of the first six months of 2022 and our record of achievement now gives us our biggest-ever investment pipeline of green energy assets to help deliver the Government’s energy strategy and net zero for the UK.

“As a direct result, we now need at least 1,000 people to join us in new positions over the next 12 months to design, build and operate this green energy infrastructure, and that’s why today we’re issuing our biggest ever call for green recruits right across the country to fulfil our ambitions.”

READ MORE: ScottishPower boss warns bills could rise by almost £1000

The roles will be directly employed across all areas of ScottishPower’s businesses and at all stages, from trainees to time-served trades and supporting roles. The company said this will also provide a boost to the UK supply chain, with the creation of potentially thousands more indirect jobs.

In May, ScottishPower announced a partnership with low-carbon developer Storegga to build and operate green hydrogen production plants across Scotland. The projects are expected to deliver hundreds of megawatts of green hydrogen production capacity before the end of the decade to be used in whisky distillery processes.

The first plant is expected to be operational in 2024, producing up to 20 tonnes of hydrogen a day from just north of Inverness in Cromarty.

Hydrogen emits no CO2 when burned. Green hydrogen is produced through the electrolysis of water to split its components into hydrogen and oxygen atoms.

Blue hydrogen is made from natural gas, and must incorporate what is known as carbon capture, utilisation and storage [CCUS] to be classed as low-carbon.