Investment in energy projects across Europe has been hampered by a lack of clear EU policy, according to the House of Lords EU Sub-Committee for Agriculture, Fisheries, Environment and Energy.
The sub-committee’s view has been shaped following an eight-month long inquiry into the state of EU energy policy in which the committee heard views from the likes of the European Commission, the energy and climate change secretary, power companies and various other individuals and organisations.
Commenting on the report, Lord Carter of Coles, committee chairman, said: “It is clear to us that investment is urgently required, notably in a low carbon, interconnected and innovative energy system, that makes us less reliant on imports of highly volatile and dirty fossil fuels.
“Such investment would help to deliver secure and low carbon energy, boost European economic growth and stabilise household and industrial costs.”
The committee’s investigation has determined that €1 trillion of investment will be required over the next decade. However, the committee said investment levels have been much lower than expected due to policy inertia and uncertainty. The investigation has also determined that €13.8 trillion could be invested in developing renewable energy across the EU.
Lord Carter explained: “Europe and member states need to come forward with policies that drive the green agenda, which drive energy security and of course actually drive innovations in a way that gets costs down.”
He added: “We need a target for renewables. We need targets because these are expensive technologies at this stage and we need to prime the pump to make sure that they become cheaper, more available and, of course, help to reduce carbon emissions.”
The committee’s report, No Country is an Energy Island: Securing Investment for the EU’s Future, theorises that Europe is suffering from an "energy infrastructure investment famine" due to the value of energy companies dramatically dropping, which has meant that utility companies are not capable of raising the level of investment required.
Lord Carter, added: “The value of energy companies has slumped since 2008, the public purse is severely constrained, but more than enough money is around in the investment community. This should be a great time to invest in long-term assets, such as energy, but clear policy is needed in order to release it. No country is an energy island, so EU policy is particularly important. We need leadership and direction from the EU and its member states in developing and agreeing an energy policy framework through to 2030.
“At the heart of that framework, we see two core policies. First, a revised EU Emissions Trading System (ETS). The ETS has failed but it is not dead. It needs to include a minimum price for carbon, providing governments and investors with the confidence to support innovation through investment. Second, and contrary to UK Government policy, a target for the proportion of energy to be delivered through renewable energy until 2030 is required.
“There are no easy answers to meeting these challenges and keeping Europe competitive in the global market. But unless we find a way of doing this, our future energy could well be highly polluting, unaffordable and insecure.”
Other recommendations included in the committee’s report include:
- Better use by member states of fiscal policies to unlock investment
- The commission and member states working with large-scale investors, including pension funds, to highlight the investment opportunities within the energy sector
- Development of a regulatory structure for the exploitation of shale gas in the EU
- A greenhouse gas reduction target of 40% compared to 1990 levels, in line with an 80% reduction by 2050
- The development of electricity interconnections between Member States
- Better public engagement on the benefits of new energy infrastructure
- Avoiding excessive reliance on capacity mechanisms, such as that proposed in the UK, to pay companies to guarantee a supply of energy
- UK government to examine the potential for a regulatory framework to increase gas storage.
The report will be presented to parliament today in order to influence policymakers in the EU and its member states. The committee hopes that its proposed suggestions will help Europe produce low carbon, low cost and secure energy.