The new strategy will set out priorities for 2020 in order to deliver on the EU's energy and climate goals.
This will require the EU to spend €1 trillion over the next decade on infrastructure, new technologies and electricity storage, according to a draft, seen by EurActiv.
"In the next decade, investment in energy, both to replace existing resources and in order to meet increasing energy requirements, will oblige European economies to arbitrate among energy products which, given the inertia of energy systems, will condition the next 30 years," it says.
Energy savings top priority
The draft strategy identifies energy efficiency as its first priority, arguing that it needs to be mainstreamed into all relevant policy areas. The details will be set out in the new energy efficiency plan, which is scheduled to be presented next spring.
The EU has set itself a 20% energy savings objective for 2020, but measuring progress will require the establishment of "a set of fair and measurable objectives," according to the document. The national energy efficiency action plans drawn up by member states will become the annual reporting tool, it explains.
Until now, national efficiency plans have failed to exert the same influence as similar plans on renewable energy, mainly because the targets are not legally binding.
The Commission seeks to tap into the energy savings potential of Europe's existing building stock. Renovation rate should be accelerated by investment incentives and innovative financial instruments like revolving funds, it argues, promising to address the problem of split incentives between tenants and owners.
Energy savings in transport, a sector that emits a fifth of Europe's greenhouse gas emissions, will be harnessed by introducing energy efficiency standards for all vehicles and a "robust car labelling system," the draft states.
The public sector will play a crucial role as energy efficiency criteria should "become conditionality obligations in all spheres, notably for allocating public funds," according to the paper.
Industrial companies, on the other hand, should be encouraged to make use of energy audits. A dedicated support mechanism should be created for SMEs, it adds.
"Efficiency must become a profitable business in itself, leading to a robust internal market for energy saving techniques and practices and commercial opportunities internationally," the paper says.
A European energy market
Another priority for the next decade will be to build an integrated pan-European energy market, as both electricity and gas markets remain fragmented by national boundaries.
"The new challenge to 2020 is, however, to provide the backbone for electricity and gas to flow where it is needed," it argues.
New infrastructure will also be key to integrating renewable electricity to the grid and will therefore be addressed in a separate infrastructure package that the Commission is planning to present later this month.
The Commission has also set its sights on establishing a long-term plan for infrastructure. It will authorise European regulators and transmission system operators to develop a blueprint for European electricity and gas grids between 2020 and 2050, the paper says. The map, to be presented in mid-2011, will be based on the Commission's 2050 roadmap, due next year, which will present a long-term strategy for the energy market.
"What's important now is that all these different projects from the Commission are harmonised, which means that the Energy Infrastructure Package must be in line with the roadmap 2050 and also this short-term strategy," commented Susanne Nies, head of energy policy at EU industry association Eurelectric.
She warned that a single European energy market would require the Commission to condemn developments like the emergence of new national energy taxes which she says are "going in the wrong direction".
Clear finance still missing
The urgency of building new interconnections and developing smart grids to avoid locking Europe into high-polluting imported fossil fuels requires a "broad view of new funding instruments," the Commission states. It also refers to the possibility of getting more money from the EU budget, calling for "the mobilisation of additional resources under the next multi-annual financial framework".
Money will also have to be found to finance the development of innovative technologies. This is another priority as concerns are being raised that China and the US are now pulling ahead of Europe in the solar and wind power markets.
Major planned projects like offshore wind farms in the North Sea or the Desertec initiative to supply Europe with solar power from North Africa will require Europe-wide coordination and different funding sources, the strategy points out.
But it is short on concrete ideas beyond saying that the technologies supported in the EU's Strategic Energy Technology (SET) Plan will "be the cornerstone for the preparation of the next financial framework as regards energy research".
"As the real questions here have always been setting the ambition and finding funding, here as elsewhere we are still waiting for specifics," said Jason Anderson, head of European climate and energy policy at the WWF.
External policy
The strategy also focuses on creating a common EU external energy policy so that the bloc can "effectively project its combined market weight in relations with key third country partners".
Consequently, the draft announces that the Commission will present a communication on the external dimension of energy policy next year, which will identify ways to reinforce the efficiency of EU policies in this regard.
The idea is to diversify supply sources and routes in order to avoid crises like the Russia-Ukraine gas dispute, which disrupted supplies to Eastern Europe in January 2009.
To this end, the EU will sign energy framework agreements with key suppliers and transit countries, covering for instance market access issues like network development, the draft strategy states.