European leaders today renewed their vows to create a single European energy market in which gas and electricity flows freely across the continent and no country is left without vital supplies.

But whether public money is needed to kickstart the €1 trillion of investment that is estimated will be needed to build energy grids and pipelines is to be decided another day.

At their meeting today in Brussels (4 February), the European Union’s leaders agreed that “major efforts” were needed to update Europe’s outdated energy infrastructure, such as building interconnectors to transfer gas and electricity across borders, and upgrading the electricity grid system to cope with a big influx of renewable energy in the next decade.

The final communiqué issued by Herman Van Rompuy, the president of the European Council, does not state what all this would cost. However, the European Commission puts the bill for energy infrastructure at €1 trillion by 2020, mostly from private sources.

The Commission has been asked to report with more precise figures by June and to look at how to overcome possible obstacles to finance. One big problem is that private investors have little incentive to build new facilities and pipelines in countries that are 100% dependent on Russian gas, the EU’s “energy islands” – the Baltic states and Slovakia.

The Commission would like public money to help stimulate investments and is studying new ways of financing energy projects, beyond grants and subsidies.

However, northern European countries are uneasy about signalling that public money is needed. “Can we do it by regulatory means, or do we want to do it with public funding?” asked one diplomat. “We do not want to prejudge in either direction.”

Although the final language in the Council conclusions was left unchanged on this point, the finance issue is certain to be contentious when the EU discusses its future multi-annual budget.

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REACTIONS

“Despite its grandiose billing, this summit has left EU energy policy at a standstill,” said Rebecca Harms, a German Green MEP. “We urgently need to upgrade our energy infrastructure and this will require new and innovative sources of financing. We regret that EU leaders have failed to grasp the nettle on this key issue.”

Noting that many European governments are having to tighten their belts, Jorgo Chatzimarkakis, a German Liberal MEP, said: “New infrastructures should not solely be financed via subsidies. We need to have the right mix of loans and merge them with existing subsidies – this is how we create innovative forms of financing for large infrastructure projects.”

The Council added “next to nothing” to existing commitments on energy-efficiency, said Amanda Afifi, the secretary-general of the European Alliance for Companies for Energy Efficiency in Buildings (EuroACE). “What we need is a major retro-fitting programme for all buildings across the EU. This would bring huge energy savings and would kick-start our economies, generating millions of new jobs.”

Darek Urbaniak at Friends of the Earth Europe said: “The European Union’s decision to assess the potential of unconventional fossil fuel sources within Europe, notably shale gas, is the wrong way to address import dependency. Shale gas poses unacceptable risks to the local environment and will lock us in to the continued use of fossil fuels.”

Competition

The leaders of the national governments also re-affirmed pledges to comply with EU law on opening up their energy markets to competition, meeting a March 2012 deadline for separating companies responsible for generating power from those responsible for transmitting it.

The communiqué also re-affirms the EU’s climate goals, including the target to reduce greenhouse-gas emissions by as much as 95% by 2050. However, green campaigners were alarmed by the late addition of supportive language on fossil fuels. Citing security of supply, EU leaders said that Europe’s potential for extracting all kinds of fossil fuels, including shale gas and oil gas, needs to be explored.

Campaigners and some business groups were also disappointed that the acknowledgment of poor progress on energy efficiency did not translate into tougher measures.

The EU has set a target to save 20% of its energy use by 2020, but is on course to deliver half that amount.

Günther Oettinger, the European commissioner for energy, described the meeting as “a breakthrough for European energy policy” that would “be our benchmark for the years to come”.

“For the very first time, we have set ourselves a clear deadline for completing the common energy market. By 2014, power and gas should be transported as easily throughout Europe as goods and services.”