Green laws and regulation risk energy crisis, say Europe's power companies

· Major projects cancelled because of uncertainty
· Planning problems will stall wind-farm growth

Europe is facing an energy crisis because of green-influenced legislation and regulation, and difficulty in obtaining planning approval for key projects, energy companies warned yesterday.

Europe needs to spend €2tn (£1.5tn) on upgrading power networks in the next 25 years but leading energy companies have cancelled investments in new power plants worth billions of euros because of increased regulatory uncertainty, a senior executive claimed yesterday.

Johannes Teyssen, chief operating officer at E.ON, Germany's biggest energy group, blamed the European commission's plans to make companies pay for all their pollution permits from 2013, huge delays in approving planning applications and confusion among national regulators for the cancellations.

Teyssen, vice-chairman of the World Energy Council (WEC) Europe, said: "We see now every week a new investment project being cancelled across the EU." He cited at least four multibillion-euro projects to build power plants in Germany and said thousands of kilometres of new power lines were "lying on the table" because of planning delays.

The pan-European industry lobby, Eurelectric, says the EU will need about 520 gigawatts (GW) of new capacity by 2030. But the WEC, in a report handed to the commission yesterday, said investments had slowed in recent years and Europe was now twice as vulnerable to external shocks as it was in the 1960s. It would be 70% dependent on imports by 2030 without a change in policy.

Teyssen said the commission's plans to scrap free emission permits and move to a full auction system would further blight investment decisions. He also said it took longer to approve planning applications than to build a nuclear power station. "I hardly know of any EU nation where it's easy to build a high-voltage transmission line or new gas pipeline."

Centrica, owners of British Gas, said delays in planning applications were holding up projects for onshore wind farms and new gas-storage facilities. But, officials said, the group backed commission plans to auction pollution permits, creating greater regulatory clarity and offering incentives to invest in new low-carbon or carbon-free plants.

Teyssen urged the EU to avoid putting all its eggs into the renewables basket, arguing that they could cause more harm than good if national and cross-border grids were incapable of meeting the growth in their use.

"You need a broader picture; you can't just say green is good," he said.

However, the British government rejected the suggestion and said its energy market was the most competitive and liberalised in the EU and G7, encouraging investment from firms such as E.ON.

John Hutton, the business secretary, said: "We are legislating to speed up the planning system and to put in place incentives for energy companies to bring forward the investment we need. This will mean a dramatic expansion in renewables, new investment in nuclear power and technologies to clean up how we use fossil fuels."

Companies are also resisting the commission's drive to open the EU energy market to more competition, saying that uncertainty put them off investing in new projects. Eight countries, led by France and Germany, have attacked the central pillar of the commission's liberalisation package. This involves forcing the big continental players to "unbundle", or sell their gas and electricity transmission networks/pipelines to independent operators and allow new players to enter a more competitive market.

The eight, backed by big groups such as E.ON, France's EDF and GDF, and Italy's Eni, have formed a "blocking minority" within the council of ministers. They are proposing instead, in a letter to the EU energy commissioner Andris Piebalgs and MEPs, that national regulators draw up 10-year investment plans that the companies would be obliged to follow.

In the letter, seen by the Guardian, they say the "unbundling" plans are unconstitutional and inappropriate to "guarantee an adequate level of investment in the networks and foster the integration of our national networks".

The Piebalgs plan faces growing internal opposition within the commission itself, with one senior official saying that it would break up big companies capable of competing in global markets and force the EU to be more dependent on huge foreign players.