The energy sector in the European Union is facing an investment crisis because of political inertia and complacency, a House of Lords report has warned.
The report found that sufficient funds are held by institutional investors to construct the infrastructure required for Europe's future power needs, but it is held back by the lack of a clear policy from the EU and member states such as the UK on how to deliver secure, affordable and low-carbon energy.
The cross-party House of Lords EU Sub-Committee on Energy criticised the UK Government for failing to set a target for the proportion of energy to be delivered from renewable sources by 2030, and called for the establishment of a greenhouse gas reduction target of 40% compared with 1990 levels, rising to 80% by 2050.
Following an eight-month inquiry, the committee said it had a growing sense of "alarm at the degree of uncertainty and complacency about affordable, secure and low-carbon energy supplies". Some one trillion euro (£845 billion) of investment is needed in the EU's energy network over the coming decade, the peers said.
Committee chairman Lord Carter of Coles 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 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."
The committee said that the European Commission and member states should work with large-scale investors, including pension funds, to highlight the investment opportunities within the energy sector. Governments across Europe should make better use of fiscal policies to unlock investment and should develop regulatory structures for the exploitation of shale gas in the EU.