European Energy Scene: Papers Presented at the Tenth Consultative Council of the Watt Committee on Energy, London, 21 May 1981

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The views expressed in this Report are those of the authors of the papers and contributors to the discussion individually and not necessarily those of their institutions or companies or of The Watt Committee on Energy Ltd. Published by: The Watt Committee on Energy Ltd 75 Knightsbridge London SW1X 7RB Telephone: 01–245 9238 This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © The Watt Committee on Energy Ltd 1982 Dajon Graphics Ltd, Bushey, Herts. 3–82

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ISBN 0-203-26811-3 (Adobe eReader Format)

THE WATT COMMITTEE ON ENERGY REPORT NUMBER 11

THE EUROPEAN ENERGY SCENE Papers presented at the Tenth Consultative Council of the Watt Committee on Energy, London, 21 May 1981

The Watt Committee on Energy Ltd A Company limited by guarantee: Reg. in England No. 1350046 Charity Commissioners Registration No. 279087 APRIL 1982

Contents

Foreword

v

Units used in this Report

ix

The energy scene in the United Kingdom D.le B.Jones

1

Extracts from discussion

15

The energy situation in the Netherlands G.W.van Stein Callenfels and E.F.Bunge

21


32

Energy and the steel industry in France: present situation and future prospects J.de Pemille

35


49

German experience of the oil price crises G.Meurin

52


62

Danish energy planning after 1973 and its implementation H.Larsen

65


75

General discussion

77

Appendix: Energy intensity in the European scene A.Cluer

82

Member Institutions

92

iv

THE WATT COMMITTEE ON ENERGY List of published Watt Committee on Energy Reports

95 inside back cover

Foreword

Shortly after the formation of The Watt Committee on Energy, Sir Jack Rampton, then Permanent Under-Secretary at the Department of Energy, suggested that when we had established our general policy we should contact like-minded people on the Continent of Europe. This could be helpful to all concerned because their approach to the problems would be different, if only on account of the differences in their resources compared with those of the United Kingdom. The Watt Committee acted on this suggestion about a year ago by writing to a number of individuals who had demonstrated in other connections their enthusiasm and their willingness to discuss their problems with fellow professionals. Most of those whom I wrote to were known to me as major contributors to the work of the International Flame Research Foundation. Potential speakers were asked if they would be willing to present a simple statement at our Consultative Council in May 1981 answering in summary form two questions: (1) How did your country react to the 1973 oil crisis, and what action occurred from then till 1980 to meet the new position? (2) What do you expect your national energy policy to achieve in the period 1980–2000? Four of the five replied that either they would be glad to accept the challenge or they had found a man who was in a better position to answer our questions. The fifth seemed permanently absent from his native country, and was regretfully dropped from the team. It might be expected that the U.K. speaker would have been drawn from one of the 60-plus professional bodies in membership of The Watt Committee; in fact we decided that D.le B.Jones, who had made a most helpful intervention at an earlier Consultative Council, was the right man, and were delighted that he agreed to present such a paper, not as a representative of the Department of Energy, but in a ‘personal capacity’. It was our initial intention to hold a ‘getting to know you’ type of meeting without necessarily publishing either the papers or the discussion. Following the Council meeting, which took place in London on 21st May 1981, our originator,

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Sir William Hawthorne, wrote to say how much he and others had enjoyed this free exchange of views and added that he hoped we would produce a report containing not only the full texts of the papers—which could not be presented at the Council owing to shortage of time—but also a report of the discussion. The Executive agreed, and the authors were asked to let us have complete manuscripts and edit their replies to the discussion. The delay between the meeting and the publication of this report was considerably longer than usual, owing not to the tardiness of any party, but to the need to watch our cash flow. It is my intention in writing this Foreword not to summarise the contents of the report, but rather to quote its findings in a way that will tempt the reader to study the full text, and thereby broaden his or her outlook, and possibly see ways of tackling the energy problem that, rightly or wrongly, have not been adopted by other countries. Even a quick browse will suffice to show striking differences in the problems faced by these five European countries. Equally striking are the differences in the way the challenges have been met and the proposals for the next two decades. The United Kingdom is fortunate in possessing a large amount of coal— sufficient for 300 years at present rates of consumption (see Watt Committee on Energy Report No. 9, Assessment of Energy Resources). In addition it has large supplies of oil and natural gas, and a useful quantity of nuclear power. Given these facts it is not surprising that D.le B.Jones suggests that ‘the market must play a major part in determining the pattern of fuel production and use’. The alternative procedure—that central government should permit optimum allocation —is modestly declined on the basis that the government and its officials are not all-wise and all-seeing. He adds that ‘prices must give both the consumer and the producer reasonably accurate signals about the cost of energy supplies’. The government must of course have an energy policy that includes an investment programme and corporate plans for the nationalised energy industries, e.g. Financial targets for the nationalised industries A pattern of development and rate of depletion for North Sea oil and gas The main nuclear decisions The level of taxation on fuels Energy conservation matters Financial support for research, development and demonstration Special schemes, such as subsidised conversion of equipment from oil to coal firing. The position in The Netherlands, described in the paper by G.W.van Stein Callenfels (presented at the meeting by E.F.Bunge) was radically changed by the

vii

discovery around 1960 of the Groningen or Slochteren natural gas, which is similar to North Sea apart from its content of about 14% of nitrogen. This was quickly followed by the construction of a network of high-pressure (60 bar) pipelines to feed not only Holland but Germany, Belgium and France, and, more recently, Italy. As a result of this major discovery the remaining coalmines in Holland were closed and reliance was placed on oil for the extra energy needed particularly by transport. Nuclear reactors were suggested, but kept to a minimum by public opposition. In 1973 the drop in oil supplies led to a review of the whole energy position. It was decided that certain export contracts for gas should not be renewed and that more coal should be imported. The heavy dependence of Holland on its production of flowers and vegetables for export meant looking again at the heating of greenhouses. That was easy with cheap natural gas, but more efficient gas burning must now be developed, and such techniques as double glazing and blinds used to reduce heat loss during the night. In addition gas-fired heat pumps were developed and are being widely used in both small industries and housing complexes. What, you may well ask, happened to the windmills— almost a national emblem of the country? The sad answer is that few of them turn, because their use would be uneconomic in comparison with other types of energy. Research is, however, proceeding on wind power, and a first large windmill (or should it be an aero-generator) has been built on the sea-coast north of Amsterdam. This first large unit has a 50-m wing-span and a capacity of 300 kW. The position in France, as described by J.de Pemille, is different again. France has a fair amount of coal and a small amount of natural gas, but is still heavily dependent on the importation of oil. The desire to be relatively independent has led to the vigorous pursuit of nuclear energy which already supplies about a third of the electricity demand. Future installations will include fast-breeder reactors. Alternative sources include geothermal energy: parts of Paris are district-heated by hot water pumped from underground wells. There is also a strong emphasis on conservation. It is stated, for example, that in 1980 GDP was increased by 2. 2% while energy consumption dropped by 1.6%. Incidentally, such achievement is often referred to in terms of ‘energy coefficients’. It is the confusion arising from the use of such terms and the non-validity of some cross-comparisons that led Alf Cluer (one of our Executive members) to produce the Appendix to the present Report, entitled ‘Energy intensity in the European scene’. Of Germany G.Meurin says, ‘Loyal to its principle to pursue objectives in energy policy not by regulations but by strengthening the market forces, the Federal government has chosen the way of off-set payments to compensate the differences between the cost of electricity generation from German hard coal and that from heavy fuel oil’. Furthermore, power plants that would burn fuel oil or natural gas were not allowed to be built without special authorisation. Forecasts for future oil requirements have been reduced but not by as much as was hoped owing to public concern about nuclear energy.

viii

Conservation is encouraged by grants by the Federal Government of about 20% for all measures installed in existing buildings, improvements to heating systems, and devices installed to promote the use of renewable energy for space and water heating. The 1979–80 further oil price rise led to the Federal Republic’s trade balance being in the red for the first time in 14 years: that caused, among other things, a determination to use more indigenous coal. This brings me to the last of the papers, in which H.Larsen discusses the almost total dependence of Denmark on imports until 1972. The main import was of oil, only 20% of electricity being produced by burning coal; because there is relatively little heavy industry in Denmark the main consumption of energy is for space heating. The coal usage for space heating is related to district heating, based on combined heat and power (CHP). About 80% of Danish electricity is now produced from coal. Fortunately Denmark expects to obtain natural gas from Germany, and also from its own sector of the North Sea. As the programme for local heating plants has not yet been completed, people still do not know whether they will be offered natural gas or district heating associated with CHP. The main changes, it is stated, have ‘been achieved on a voluntary basis, i.e. more or less solely based on economic arguments’. That would seem to be the right note on which to end this Foreword. Incidentally, The Watt Committee on Energy has embryonic contacts with the British Institute of Energy Economics, with which there might be a future joint meeting. J.H.Chesters Chairman, The Watt Committee on Energy

Units used in this Report

The units used and other matters of style in this Report vary, in some instances, according to the practices common in the authors’ respective countries and languages, although the units of the Système internationale (S.I.) are usually preferred. Conversion factors and approximate equivalents for certain quantities that occur frequently are given below.

*Note. These approximate equivalents are not suitable for accurate calculations, for which accurate conversion factors should be used.

x

THE WATT COMMITTEE ON ENERGY REPORT NO. 11

The energy scene in the United Kingdom D.le B.Jones, C.B., Department of Energy, London

This paper is submitted in a personal capacity. It is not a statement of the views of the Department of Energy. © The Watt Committee on Energy Ltd. 1982 The energy scene in the United Kingdom

Introduction It is a common misconception that energy has become important only recently: November 1973 (the Yom Kippur War) is sometimes regarded as the date from which energy started to matter. It is of course true that the oil price explosion in the winter of 1973–74 caused the Western world to realise almost overnight how dependant it was on continuous and secure supplies of energy. But energy has always played a crucial role in our economic life. In the United Kingdom the Industrial Revolution was in large measure based on cheap and plentiful supplies of energy—first, water power, which provided the energy for the textiles industry, and, later, coal and coke for the iron and steel industries. Some of the problems that we face today are new. Others are old and familiar—but no easier to solve on that account. Historical perspective Coal played a vital role in the British economy throughout the nineteenth century and the first half of the twentieth century. At its peak in 1913 the coal industry employed 10% of manual labour and accounted for 10% of the value of British exports. Output was just under 300 million tons. Shipping was based on coal. There was an important coal export trade until the 1940s. The U.K. was virtually a single-fuel economy based on coal until the 1950s. In 1950 coal provided 90% of primary energy. Nearly all the remainder came from imported oil. Today, coal provides 37% of primary energy, oil 37%, gas 21%, nuclear and hydro-electric

2 THE ENERGY SCENE IN THE UNITED KINGDOM

Figure 1. Total British inland consumption of primary fuels, 1980. Coal equivalent for 1980, 328.0 m.t.c.e.

power together 5% (Figure 1). So the pattern of energy supply and demand has altered dramatically. In the future we are likely to see coal becoming more important again as oil becomes increasingly expensive and scarce. The coal industry in the U.K. therefore has a considerable economic and political significance. Government and the energy sector The twentieth century has seen an increasing involvement of Government in the energy sector—the acquisition in 1914 of a controlling interest in the AngloPersian Oil Company; Government control of the coal industry in the First World War; inevitable Government involvement in the problems of the coal industry between the world wars; and control of the whole energy sector in the Second World War. The 1940s saw the first attempts at co-ordinating energy policy. The Ministry of Fuel and Power was created in 1942. The Ministry of Fuel and Power Act 1945 gave the Minister the general duty of securing effective co-ordinated development of the fuel industries in Great Britain. This general duty, extended to the United Kingdom continental shelf by the UKCS Act of 1964, remains a basic duty of the Secretary of State for Energy. The fuel-supply problems of the late 1940s led to a growing call for a national fuel and power policy. The Ridley Committee was appointed in July 1951 to advise on the best use of the country’s fuel and power resources. Their definition of ‘best use’, quoted below, is still relevant today.

THE WATT COMMITTEE ON ENERGY 3

‘(1) To meet in full the demands of the community for the different fuel and power services, when those services are sold at prices which closely correspond to the relevant costs of production and distribution. (2) To provide for export fuels on such a scale and of such types as can be sold abroad with most gain for the country. (3) To promote the maximum economic efficiency in each use of each fuel. (4) To encourage the use for particular services of the fuel which gives the best returns on the resources consumed.’ (Ridley Report, para 1).* This definition led the Ridley Committee to the view that ‘the best pattern of fuel and power use will be promoted not by the direct intervention of the Government but by the exercise of the consumer’s free choice of his fuel and power services— provided that competition between the fuel industries is based on prices, tariffs and terms of supply which closely correspond to the relevant costs of supply, and that the consumer is enabled to make an informed choice’ (Ridley Report, para 232). The changing energy scene Between the Ridley Report and 1973 there were major changes in the U.K. energy scene. The ready availability, cheapness and abundance of oil in the early 1950s—mainly from the Middle East—was a major factor in this change. The relative cheapness of oil, together with its other premium qualities such as ease of handling and storage, resulted in a rapid increase in demand. Oil’s share of primary energy rose from just under 10% in 1950 to nearly 47% by 1973. Most of this increase was at the expense of coal. With the exception of power stations, all markets (and particularly general industry, railways and gasworks) reduced their consumption of coal. The Clean Air Acts of 1957 and 1968 further encouraged the switch from coal to other fuels. Technical developments such as diesel and electric traction on the railways and oil gasification in the gas industry contributed yet more to coal’s decline. The advent of nuclear power in the 1950s was the other major factor that changed the energy balance of the U.K. Britain’s initial nuclear power programme of 4.5 GW, based on the Magnox design, is still in operation today. The second nuclear power programme of 6 GW, based on advanced gas-cooled reactor (AGR) technology, is partly completed, and last year (1980) work on two further AGR stations (at Heysham and Torness, totalling 2.5 GW) commenced. Gas was discovered in the North Sea in the mid-1960s. Gas now supplies about 30% of the U.K.’s total final energy. The comparison between 1965 and 1980 is given in Figure 2. The flow of natural gas and other primary fuels from home

*Fuel and Power Resources. Report of the Committee on National Policy for the Use of Fuel and Power Resources. Cmd. 8647. Her Majesty’s Stationery Office, London, 1952.


Figure 2. Energy consumption by final users, % (heat supplied basis): (a) in 1965; (b) in 1980. Figures show percentage shares for all final consumers.

production or imports to final uses is shown in Figure 3. Over 75% of the gas supplied comes from the United Kingdom continental shelf (UKCS); most of the balance is imported from the Norwegian sector. U.K. gas production is expected to reach its peak sometime in the 1990s at up to 30% above current levels and it may thereafter begin to decline. UKCS gas and imports are likely to be sufficient for British needs until around the turn of the century. It may then be worthwhile to supplement natural gas supplies with substitute natural gas (SNG) manufactured from coal: the precise timing of that will depend on the development of demand, discoveries of new supplies and import contracts over the next two decades.


Oil in commercial quantities was first discovered on the UKCS in NovemberDecember 1969. In just under 5 years production began. By 1976 production had reached 12×106 (Figure 4). Today production is about 80×106 t per annum — roughly equal to U.K. demand. Last year the U.K. exported about 55.5×106 t of high-quality low-sulphur crude (mainly to countries in the European Community) and imported roughly the same amount of lower-quality heavy crude. The 1973–74 oil crisis and its impact The quarter-century of economic growth that followed the Second World War was at least in major part based on the availability of cheap oil. Those days have gone for good following the oil crisis of 1973–74. The world price of oil increased by 235% in real terms between 1973 and 1974. There was then a fall of 12% between 1974 and 1978; but following the Iranian revolution a further increase of over 100% occurred between the end of 1978 and the end of 1980. The oil price rise was not the only or perhaps even the main cause of the difficulties that have faced the Western economies in the last decade. Inflation was already rising in the late 1960s at a time when, except for the short-lived boom of 1972–73, demand was relatively slack. Some would even argue that the oil crisis resulted from international inflation. But the two price explosions of 1973–4 and 1978–79 have accentuated the trends that were already then leading to the slumps of 1975 and of 1979–80. The OECD Secretariat has estimated that the 1978–79 price increases have directly and indirectly reduced total GNP of the OECD countries between the beginning of 1979 and the end of 1981 by $400×109, or $1000 for every person in the OECD countries. The U.K. suffered in the same way as, but perhaps more sharply than, other Western countries from the 1973–74 price increase. As shown in Figure 5, the total energy consumption of the U.K. on a primary fuel basis has shifted well below the level of 1973—a year of peak energy consumption. But as a proportion of total imports by value British imports of crude oil grew from 9% in 1972 to 17% in 1974. And the oil price increase played its part in the high level of inflation in the mid-1970s and the sterling crisis of 1976. By 1978–79 the growth of U.K. oil production meant that the second oil price explosion no longer had the same effect on our balance of payments as in 1973– 74. Indeed, the high oil price contributed to the strength of sterling. But the U.K. as a major trading country inevitably suffered and indeed still suffers from the effect of the 1978–79 oil price rise on the health of the world economy. It has been calculated that, while the effect on inflation in the U.K. of an oil price rise is slightly less than the effect in the OECD area as a whole, the effect on economic activity is slightly greater. Moreover, U.K. oil and gas reserves only provide the nation with a breathing space. Some time before the end of the century the U.K. is likely again to become a net importer of energy. When lead times in the energy field are as long


as 10 years, this is a fairly short period in which to make the necessary adjustments. Basically, therefore, British interests march with those of the rest of the Western world in avoiding sudden increases in the price of oil and in carrying through as smoothly as possible the transition over the next two decades to a nonoil based economy. Western response to 1973–74 oil crisis The first response of the industrialised nations to the uncer tain oil supply prospects was to establish the International Energy Agency (IEA) in 1974. This brings together all the main OECD countries except France. Co-operative action since then has been taken in the IEA itself, in the European Community and at the Economic Summits of the seven main industrialised countries. Energy was a major topic of discussion at the last three Summits—at Bonn, Tokyo and Venice. The first priority has been to guard against sudden severe disruptions in the oil market. This is done through the IEA emergency oil-sharing scheme and to a lesser extent through Community arrangements. The scheme could become operative if supplies were to fall 7% below demand in either the IEA group collectively or in one or more individual countries. Happily, it has not so far been necessary to put the scheme into operation in a real situation; it has, however, been tested successfully in a number of ‘dry runs’. Second, the effect of sudden sharp increases in the price of oil on the economies of the industrialised world has underlined the urgency of reducing dependence on oil. The Venice Summit set the objective of breaking in the coming decade the link between economic growth and the consumption of oil. To achieve that objective Western countries are committed to the development of nuclear energy, a massive increase in the production and use of coal, the development of new energy technologies and much greater efficiency in the use of energy. Third, since the Iranian revolution Western countries have paid increasing attention to managing what has come to be called the ‘grey area’—a tight oil market but not so tight as to trigger the IEA emergency arrangements. The need is to prevent a minor shortfall between supply and demand leading to an explosive increase in price, as happened in 1979 when the oil price doubled in a period when overall supply was slightly in excess of demand. Happily there are some signs that the lesson has been learned. A combination of stock reduction, lower consumption and higher production by Saudi Arabia and some other OPEC countries prevented the loss of Iranian and Iraqi exports as a result of the war from leading to a prolonged tight market. There were only relatively small increases in oil prices.


Figure 3. Energy flows in the United Kingdom in 1980, therms×109.


Figure 4. British oil and gas production from the U.K. continental shelf and onshore compared with total British primary fuel consumption.

Objectives of U.K. energy policy The international response to the 1973–74 crisis has been outlined above, as it is important to see U.K. energy policy in its international context. The U.K. has


Figure 5. Total British inland energy consumption (primary fuel input basis) in 1973, 1980 and 1981. Seasonally adjusted and temperature-corrected annual rates.

played a full part in the international discussions in which that response has been developed. But, as with other countries, the main British contribution to the international effort lies in the development of a national energy strategy which offers an effective response to the challenge to move away from an oil-based economy. Basic energy policy objectives in the U.K. are to ensure adequate and secure supplies of energy and to ensure that they are used efficiently and provided at the lowest practicable cost to the nation as a whole. Against the international background of increasing uncertainty over future supplies, there are three strands in the achievement of British objectives: First, to make the best possible use of North Sea hydrocarbon reserves and to prolong self-sufficiency in these fuels; Second, to ensure that all fuels are used appropriately, efficiently, and cost-effectively; and Third, to develop those sources of energy that are necessary to meet longerterm requirements—most notably coal and nuclear power, but also combined heat and power and the less assured sources of supply, such as the renewables. Energy strategy The British energy economy, like the British economy as a whole, is a mixed one. That means, as the Ridley Report emphasised, that the market must play a major part in determining the pattern of fuel production and use. The energy policies of succeeding British Governments have, with different degrees of


emphasis, been market based. Central direction based on central planning might in theory permit optimum allocation of resources; but it presupposes that those in the centre, i.e. the Government and its officials, are all-wise and all-seeing. I have yet to meet an official who is such a model of excellence! Whitehall does not know all the answers and it will come badly unstuck if it pretends that it does. Consumer choice and the market mechanism must be the final arbiter in these matters. Government cannot just leave energy to the market, however. A major part of the energy industry in the U.K. is in the public sector. The coal, gas and electricity industries and the Atomic Energy Authority are all publicly owned. The Government has a major influence in the oil industry through the British National Oil Corporation. The rest of the oil industry is made up of private oil companies, including the international majors and the smaller independents. Most energy consumption is in the hands of the private sector, ranging from major companies to individual householders. The individual industries are concerned with the economic and efficient development of their particular fuels. The private oil companies’ main concern is, quite properly, the interest of their shareholders, although they are by no means unconcerned with the wider interests of the community. The interests of the various industries nevertheless impinge closely upon one another. The electricity industry, for example, is the main customer of the coal industry and takes over 60% of its total sales; it is the sole outlet for nuclear power; and it competes for its sales with the gas, oil and, to some extent, coal industries. The price relativities between gas and electricity determine their respective shares of the market and that in turn reflects back on coal demand. Policies that may be good for one industry may not necessarily be in the overall interests of the nation or make for a rational use of energy. It is therefore the task of Government to provide the framework within which the policies of individual supply industries and individual consumers can contribute to the achievement of national energy objectives. The foundation of this framework is that pricing be based on sound economic principles. Prices must give both the consumer and the producer reasonably accurate signals about the cost of energy supplies. Proper pricing is the most efficient way of allocating scarce energy resources. Under-pricing encourages waste by the consumer and will not produce the proper incentives for industry to invest in new sources of energy. Economic pricing is recognised by the European Community and—unfortunately less clearly—by the IEA and the Summit Nations as a key factor in solving our longer-term energy problems. There is less agreement on what constitutes economic pricing. In the U.K. it has generally been taken to mean the world price for those fuels where there is an international market and the long-run marginal cost—that is, the cost of adding or replacing a tranche of capacity—where there is no such market. International agreement on such definitions is of increasing importance. It is something for which the U.K. is working in both the lEA and the European Community.


Application of economic pricing may of course lead to different prices where costs are different. That is acceptable, and, indeed, likely to lead to the best division of labour between nations. But if some countries, by means of subsidies or in other ways, deliberately hold their energy prices below economic levels, that gives a competitive advantage to their industries which makes it difficult for the majority of western Governments to continue to adhere to economic pricing. The energy-supply industries (other than oil) are public sector monopolies, and the energy market is necessarily imperfect, so Government involvement cannot be confined to laying down principles of economic energy pricing. The Government is inevitably and deeply involved in many ways: they include the following. The investment programmes (totalling £2.5×109 per annum) and corporate plans of the nationalised energy industries are the subject of consultation with the Government. Financial targets for the nationalised industries are set by the Government at a level that can be achieved by economic energy pricing. It is pricing policy that determines the targets, not, as is sometimes thought, the targets that determine prices. The pattern of development and rate of depletion of North Sea oil and gas is a matter for Government decision. The main nuclear decisions are taken by the Government. The level of taxation on fuels is decided by the Government. The Government promotes energy conservation directly in the public sector and through the economy as a whole by means of a strong information campaign. The Government gives substantial financial support to research, development and demonstration in the energy sector. The Government may sometimes support developments that are in the interests of overall energy policy but which for specific reasons might not go ahead. A current example is the new scheme announced in the Budget in 1981 under which £50×106 will be available over the next 4 years to pay grants of 25% towards the costs incurred by firms in the replacement of oil-fired boilers by coal-fired ones. This is a temporary scheme designed to counteract the current cash-flow difficulties of industry which might otherwise delay a trend that in the long term looks thoroughly economic and fully consistent with our international commitments. But in all this there is no attempt by the Government to predetermine market shares. The Government’s role is, in effect, that of strategic management. It sets guidelines, incentives and constraints directed towards the achievement of longterm energy objectives and then allows market forces, competition and the normal activities of energy producers and consumers to work towards the desired results; and in discharging its activities in the energy sector the Government is of course accountable to Parliament.


The energy outlook The projections made by the Department of Energy of the prospects for energy supply and demand provide an important contribution to the formulation of energy strategy generally and of the specific policy decisions that constitute the framework within which the energy market operates. But it follows from the Government’s approach to energy strategy that these projections are not intended to be rigid blueprints or master plans for the future. The best projections are those that prove to be least wrong. The preparation of projections is only a part of energy policy-making—albeit an important part: it cannot replace the judgement of energy policy-makers. Table 1 shows the Department’s projections as presented to the Belvoir inquiry in 1980. They were in the main prepared in 1979; a new low economicgrowth case was introduced in 1980. A new set of projections using improved modelling techniques is now being prepared. But after allowing for all these uncertainties the general pattern is clear. The U.K. is likely again to be a net importer of energy in 2000, although, on the low-growth case, only on a relatively small scale. Oil and gas will still make a major contribution to supply and demand but a somewhat smaller one than now. The gap will be made good mainly by coal and nuclear power. More efficient use of energy is expected to have held demand about 20% below what it would otherwise have been. The main lines of energy strategy are likely to remain those set out above. The task for Government, for the energy industries and for consumers of energy will be to develop those policies effectively in a period of limited resources. That will pose difficult questions in future, as it has in the past. Some of those questions will be highly specific—such as the level of investment in a particular industry in a particular year. Others will be general. Some of the latter which seem to me likely to arise increasingly are: Is the U.K. as a country devoting sufficient—or on the other hand, too great—resources to energy? Is the current balance between investment in energy supply and in energy efficiency right? What contributions are coal and nuclear power likely to make to future U.K. energy supplies? How can the cost of electricity be reduced to bring it closer to that in other major industrialised countries? What should be British policy on the rate of depletion of the nation’s limited resources of oil and natural gas? Should the Government do more to promote the efficient use of energy and to encourage consumers to move away from oil? Is the British RD & D effort on energy adequate? The answers to these questions will have to take into account not only energy but wider economic, political, social and strategic factors. U.K. energy strategy


will have increasingly to be set in its international context. Few areas demonstrate as graphically as energy the interdependence of the world community. One of the major challenges to the world community concerns relations between the oil consumers and the oil producers. Mutual understanding will involve hard and patient effort. Attitudes will need to change on both sides. Consumers need to demonstrate much greater awareness of the facts that oil is in limited supply; that in the long term the general trend of real oil prices is likely to be upwards; and that producers cannot be expected to produce ever-increasing volumes of oil on a short-term basis without regard to their long-term interests. Consuming countries must attack the demand side of the equation by implementing vigorous and effective energy-conservation and oil-substitution programmes. The responsibilities of the producing countries are just as important. In particular, they need to recognise, as many of them already do, the profound effects that movements in the price of oil have upon the level of world economic activity — and especially the disruptive effects of sudden and steep price rises. Producers and consumers alike must face up to the needs of the developing countries, which will suffer most as a result of world recession and inflation. Conclusions The next two decades will be dangerous years. They will be the period of transition from a world economy based on cheap oil to one in which oil is increasingly expensive and scarce. That transition will inevitably be difficult. If it is carried through successfully there is a prospect of overcoming our present energy problems by the end of the century. If, on the other hand, the Western world fails to carry through the transition, energy, directly and indirectly, may become an increasingly severe constraint on the level of world economic activity. The aim of energy policies in the United Kingdom and the Western world generally must be to ensure that that does not happen. Success in devising and sustaining such policies is more likely if the basic issues are widely discussed and Governments can proceed with the help and support of a well-informed public opinion.


Table 1. Energy projections to A.D. 2000

Note: The figures given here summarise the Department of Energy’s 1979 projections. In 1980 calculations were made of the effects of an economic growth rate of only 1 % per year to 2000. These showed total U.K. demand of 400 m.t.c.e., of which coal demand would constitute 115 m.t.c.e. and nuclear and hydro-electric power 65 m.t.c.e. If the nuclear contribution were not to exceed 22 GW in 2000, coal demand would increase to 125 m.t.c.e. From ‘Energy Projections 1979. A paper by the Department of Energy’. Department of Energy, London, 1979.

THE WATT COMMITTEE ON ENERGY


Mr D.C.Ion, Institution of Geologists

Can the speaker add to the remarks in his paper about the possible directions that action might take? Mr D.le B.Jones

In the paper I posed questions to which I do not know the answers at the moment, and do not think that anyone else does. This difficult area cannot be dealt with by over-simplified clarion calls: if that were done, the cost to national economic resources might be heavy. What I was trying to do was to indicate the sort of exercise that will face the British Government, and, I think, all those interested in energy, in the next few years. The object is to promote public debate about these questions as they arise; that will help the Government as it seeks answers. The first question, I said, was whether, as a country, the United Kingdom was devoting a sufficient share, or on the other hand too great a share, of resources to energy. At the moment a very major investment effert in the U.K. is going into energy production. Probably we are investing more in energy production than other countries in the European Community. Is this a sensible thing to do? Are we, for example, over-investing in power stations in the light of the forecasts of likely electricity demand? Should we proceed somewhat more slowly with investment in the development of gas and oil resources? These are the sort of questions to be faced, but I don’t know the answers today! The answers will evolve as policy develops. Consider the balance between investment in energy supply and energy efficiency. Probably investment is going into energy supply that would earn a greater and quicker return if it went into the more efficient use of energy. However, when a whole series of practical problems is involved, like is not really being compared with like. If you invest in energy efficiency, you are not sure that a lower demand for energy will result. The investment may merely be taken out in higher standards of comfort. It is

16 EXTRACTS FROM DISCUSSION

peculiarly difficult to bring about investment in energy efficiency because it is a highly disaggregated activity. Yet the question does arise, should there be some shift in Government policy to move investment towards energy efficiency, and how should this be done? Mr A.M.Anthony, Institution of Mining and Metallurgy

My first question concerns the new meaning of the word ‘economic’, as in ‘economic pricing’. Whenever I purchase an economy fare for the United States, the word ‘economy’ is synonymous with cheap, a bargain, and not with, as appears here, far more expensive! Second, if I can summarise some of the groundswell of opinion, people I talk to on energy policy feel it to be too passive, too general, not quantified sufficiently. They observe that if we are talking about the year 2000, the year 2000 is no longer a hundred years away! It is less than 20 years away, and it would take all that time, in the case of nuclear energy, to locate uranium, to develop uranium resources and to build power stations, etc. We would have to start the task in the very near future. The paper by Bunge and van Stein Callenfels tells us how the Dutch have coped with this problem and prepared a detailed plan. They found in the course of time that that plan was not feasible because there was opposition to a nuclear policy. In fact, that plan may well have to be abandoned. Now, it is possible there will be opposition in the United Kingdom, and, therefore, the sooner we evaluate our nuclear energy policy and decide whether to accept it or not, the better. Those of us involved in British manufacturing industry are aware of some of the difficulties to be overcome. My feeling, to which I would welcome a response, is that energy policy is too passive, too general, and should be considerably more quantified. Mr D.le B.Jones

First, I will comment on the semi-serious question about use of the word ‘economic’. I would have thought that economic pricing is pricing that properly reflects the appropriate costs, which can in certain situations be short-term or marginal costs. Whether cheap fares across the Atlantic do reflect these costs, I don’t know. I can conceive that they may and that this would give a different result from what is appropriate in the energy sector. Turning to your second and, if I may say so, fundamental question, I am always a little surprised that industrialists, who in general are clamouring against Government interference and calling for freedom to develop their own policies and activities in their own way, are also constantly calling for a highly quantified and programmed approach to energy policy, and I do not think an approach of this sort is in fact feasible. One cannot say now, firmly, how much electricity capacity will be needed in the year 2000. It depends, first of all, on the general level of economic activity,


and I doubt if anyone is prepared to project the rate of economic growth between now and 2000 with any degree of confidence! It depends on the way in which the relative prices of different fuels move, and I doubt if anyone is prepared to project that with any degree of confidence. It also, of course, depends on totally unforeseeable events, say in the Middle East, which are outside our control. If we opt for quantified programmes as an energy policy, we are in grave danger of getting into an over-rigid position and a misuse of resources. Of course, where there are long lead times, when decisions are taken the best estimates possible of what is likely to be the situation ten years ahead have to be made. They are estimates; each decision should be taken as it arises in the light of the best information at the time, and not against some sort of rigid quantified programme which will almost certainly turn out to be wrong. The approach to energy policy which I was trying to sketch is not a passive approach. It is a market approach, but it is also a managed market approach. It has great similarity to transport policy, which is also a managed market approach. I would have thought that it would be welcome to industrialists because it enables them to take their own decisions within a reasonably clear policy framework. Professor J.Swithenbank, Institute of Energy

I am concerned that too much may be expected of free market forces and too little attention given to the facts of technology and to the limited understanding among people who are not directly concerned in energy. We who are close to industry know well that a boiler, for example, may be intended to operate at a high efficiency, but it seldom does so. Unless we can follow up on a case-bycase basis, I think that we shall not exploit to the full the conservation policies that you advocate. Could you comment on more specific aspects in the home and in industry? Mr D.le B.Jones

With regard to free markets, I was not saying that one could just leave things alone! The markets in the energy sector are imperfect and there might be substantial Government intervention. Briefly, the approach to energy policy that I think is right is a managed market approach. In this, as far as possible, the Government sees what situations are likely to arise and forms a broad judgement as to whether it would like to see a rather different situation. The Government then takes measures (whether fiscal measures, or measures to influence the use of fuel in the electricity supply system, or something different) that slightly tilt the framework in which the market operates in order to produce different results. You asked for something more specific, and of course a lot is done. For example, for domestic insulation a 50% grant is available (90% for old-age pensioners and those on supplementary benefits). In industry and for domestic


consumers there is a massive campaign of information about energy conservation. But when a firm is said to use boilers inefficiently or a householder to use energy inefficiently, apart from putting the price up even more (I don’t think anyone is calling for that today), what can the Government do about it? The Department of Energy cannot go round every house in the country turning off the lights every evening, nor can it go round every factory in the country seeing that boilers are efficiently used. What the Government can do is to get prices right and see that people are well informed, but then people have to take their own decisions. If they take the wrong decisions and prices are right, those individuals will pay the cost. Dr D.Watson, Blue Circle Industries Ltd.

The approach to the question of investment in energy efficiency versus energy supply seemed to be rather woolly. Consider a particular instance, the decisions about whether or not to go ahead with the Vale of Belvoir coalfield. The arithmetic is not too difficult because many figures have been published in the course of the public enquiries. One can say, I have so many millions of pounds of capital and I can either invest it by opening the coal mine, which would produce so many therms of energy per year, or by insulating free virtually every home in the country, which would save so many millions of therms per year. Now, according to my simple sums, investment in home insulation is more worthwhile than investment in the coalfield, both (a) on a simple return-oncapital basis, and (b) on the basis that if you invest in insulation you obtain an immediate return, and if you do not invest in insulation the heat is lost and will never come back! Furthermore, if you invest in the coal mine, it is at least ten years before you start to get any money back and, if you do not make the investment now, the opportunity will still be there in the year 2000 and beyond. On hard issues of this sort I do not believe that the Government can hide behind the industry; there are certain cases where a quite clear comparison can be made. Mr D.le B.Jones

I do not want to talk about Belvoir because it is subject to planning decision. The answer to your question is that the Government has in hand a good deal of work on the respective economics of investment in energy conservation and energy supply for the purposes of general policy formation. We do not, when taking a specific decision, make a comparison with every other possible use of the available funds because that would be impracticable. We are concerned with whether the decision is economic on its own merits. In the case of investment in any new coalfield, the comparison will not necessarily be with energy conservation but will be between investing in new coalfields or continuing to keep open older ones that operate less efficiently. Professor D.O.Hall, Institute of Biology


This morning the three speakers from the Continent of Europe told us something about the substantial sizes of their programmes in renewable energy sources. It would be interesting to hear more of the British programme, which I believe represents a smaller proportion of British expenditure on future energy research and development. Mr D.le B.Jones

The British Government has a programme of research and development on renewable energies; I do not have the figures in my head, but can supply them on request. We are concentrating particularly on those projects that we think have good prospects in the U.K.—wind power, geothermal energy to a lesser extent, solar power and possibly wave power, although the economics of that look increasingly uncertain. A committee under Sir Hermann Bondi has been looking at the technical and economic feasibility of the Severn Barrage. So we are making an effort on renewables, but we do not see them making a major contribution to U.K. energy supply until the next century. You must bear in mind that our position is rather different from that of the other countries that were mentioned, except perhaps Holland, in that we are, for the moment, self-sufficient in energy, and are likely to remain so until the end of the century. That is no reason for complacency, but we are not under quite the same pressure to develop renewable energy as some countries are. Dr J.C.McVeigh, Institution of Production Engineers

The figures for research in the U.K., I think, are something like £10000000 on renewable energy and £150000000 plus on nuclear research and development—a ratio of about 15:1. We heard this morning that in Germany it is about 4:1 or 5:1 nuclear to renewables. The French figure, I think, is even smaller. Now, why are those countries spending, in straight money terms, factors of between 3 to 8 times more on renewables than the U.K.? The answer is not far to seek if you go round the countries where they have good availability of solar radiation. France and Germany are opening up good export markets and are creating job opportunities in their own countries in these areas. The British Government has not taken the opportunity or shown the imagination that it could have done in supporting these developing industries; from the record, over the years of expenditure on the nuclear industry, there has been very little return on massive expenditure. If our nuclear programme succeeds and all the power stations are built to time—which has not been the case in the advanced gas-cooled reactor system—we shall be able to look back to 1965 and see what was being said about the programme then: less than 8% of our end-use energy will be from nuclear power in the year 2000. I think there is a gross distortion in the amount of money that has been spent on renewables compared with nuclear, and that is why you are able to say that we do not think


renewables are going to make much contribution: if you do not spend any money on them, you will not get a contribution. Mr D.le B.Jones

That point of view could be debated. From the work that we have done it appears that nuclear energy is going to be cheaper than energy from renewables. There may be other reasons for going for renewables, but all the economic analyses that we and others have done suggest that nuclear energy is going to be cheaper. As to the comparison with France, the French nuclear programme is on a massive scale. Sir William Hawthorne, Churchill College, Cambridge

In large old-established cities there may be old existing installations that were largely overlooked during the period of cheap energy, and which may provide opportunities for schemes such as combined heat and power schemes if some ingenuity is applied. Similarly, ingenuity is needed to find the best ways of saving energy in existing buildings. It is important to remind ourselves, howeve, that new buildings are being erected all the time, although the pace of new development is slacker in a period of recession. We must not overlook the importance of the energy-saving element in the design of new buildings.


The energy situation in the Netherlands G.W.van Stein Callenfels and E.F.Bunge, Nederlandse Energie Ontwikkelings Maatschappij b.v., Sittard, Netherlands

© The Watt Committee on Energy Ltd. 1982 The energy situation in the Netherlands

The history of the energy pattern in The Netherlands before and after the second world war is not very different from that in other Western European countries, inasmuch as energy consumption was at first mainly based on coal; in the 1950s coal was gradually replaced by imported oil, in addition to a small amount of oil produced in the eastern part of the country. By 1960 about 45% of the total energy used was still supplied by coal. This picture was drastically changed when huge natural gas deposits (about 1 900×109 m3) were discovered in the early 1960s. This reservoir of natural gas (the so-called Groningen or Slochteren gas) was of excellent quality, containing only 14% of nitrogen in addition to methane and with no more than traces of sulphur compounds. In an ambitious building programme, a network of high-pressure (60 bar) pipelines was laid both within The Netherlands and also in Germany, Belgium and France and, more recently, even in Italy. Figure 1 shows the impact of natural gas as an energy source for The Netherlands. As a major consequence of this development, the coal mines in southern Holland were scheduled for closure. It was estimated that production costs would become too high because the coal seams were rather thin and were at everincreasing depths. During the 1960s 11000000 t of coal was produced in Holland with a labour force of 50000 people. By 1974 the last ton of coal was mined; all mining installations have since been demolished. Period 1973–78 Around 1973 the contribution of natural gas to the total Dutch energy consumption was already some 62% overall, with penetration of 93% in domestic heating and 80% in power stations; oil represented some 30%.

22 THE ENERGY SITUATION IN THE NETHERLANDS

Figure 1. Energy sources from 1960 to 1977 in The Netherlands

The first energy crisis in 1973 did not have a great effect on the energy situation in The Netherlands because of the huge reserves of natural gas in the country and the large amounts of gas exported (about 50% of total production). These exports were a substantial gain to the balance of payments; because the state holds a large share in both production and distribution of gas, the Government has a large extra income—Table 1— which governments never have any trouble in spending! Energy-saving efforts were primarily directed to domestic heating, which natural-gas heating had penetrated almost 100%: by means of subsidies for double glazing and wall insulation, which were applied on quite a large scale, some savings were achieved. From 1978 to 1981 More recently, the energy picture for the 1980s has undergone considerable change. The rapid build-up of the gas distribution network and the drive for high penetration of natural gas and for the export of large amounts of gas was based upon the assumption, made in the early 1970s, that nuclear energy would largely


Table 1. Income from natural gas in the Netherlands

GNP gross national product n.a. not available

replace gas in the 1990s and after the year 2000. But so far the build-up of nuclear power stations in The Netherlands has been limited to a single demonstration plant of 50 MW and one industrial plant of 300 MW. Because of public controversies and political considerations, no further nuclear stations are under construction or in the design stage, although three more power stations do appear in the Government’s plans for the coming years. This has caused the gas authorities to reconsider their plans. Their present objectives are not to renew export contracts, but rather to convert power stations from gas to oil and to limit the consumption of gas mainly to use for domestic heating and by small industrial firms, large process industries being expected to change to coal and oil. In this way the reserves of Groningen gas can be made to last well beyond the year 2000. The general trends of supply and demand for gas (Figure 2) are mainly based on onshore gas production, and the picture could be improved and adapted to take account of additional gas finds on the North Sea shelf. So far, a total of 250×109 m3 of gas has been found on The Netherlands’ sector of the shelf, and, in addition, a substantial amount can be imported from the Norwegian sector via a pipeline to Embden in northwest Germany. In addition, negotiations are under way to import liquefied natural gas (LNG) from Africa or Asia. If all these efforts are successful, the export of natural gas via the existing pipeline system could extend over a longer period. Prospects after 1981 Recently the Dutch Government has issued, in three volumes, a White Paper on energy policy for the coming decades. Volume 1 deals with the general energy situation in the world and energy savings in The Netherlands; Volume 2 treats the usage of coal as a major energy source for the future; and Volume 3 gives a


Figure 2. Supply of and demand for gas in The Netherlands

picture of the alternatives for power stations in The Netherlands in two different scenarios.1 A main conclusion of this study is that the use of coal will increase steeply, from the present 7000000 t of coal per year to about 28000000 t in the year 2000. Figure 3 shows how this quantity of coal is planned to be used in the future. This ambitious programme for the build-up cf coal usage was questioned recently in a report by the government-supported, but independent, Energy Study Group, which says that neither the provision of the necessary infrastructure nor the adaptation of power stations to coal can be performed on the scale proposed in such a short time.2 In addition, large capital investment will be required for environmental protection measures with respect to coal dust, coal-ash deposits and waste-gas cleaning, for which technology has not yet completely solved the problems; the same environmental measures tend to limit the application of coal for large installations. For diversification away from oil and gas, the Government proposes National Research Programmes: one for coal, one for solar energy, one for wind energy, one for geothermal heat and one for nuclear energy (which has already run for 25


Figure 3. Use of coal in The Netherlands

years). A considerable sum of money is earmarked for these programmes, which are to be co-ordinated by a steering committee for each of them. All the energy research carried out in The Netherlands by universities and government institutes is to be surveyed by a special advisory committee, the Council of Energy Research (REO), on which all groups and bodies with an interest in energy research are represented. As to energy saving, there are two areas of major importance: one is the application of combined heat and power generation in industry and the other is the use of large amounts of low-temperature waste heat from industry, power stations and municipal waste-incineration plants. A study group has issued a report3 on the former, in which it is stated that it seems possible to increase the power generation by 2000 MWel up to the year 2000. At present, combined heat and power generation accounts for about 1100 MWel; an energy saving of 20– 30% can be achieved, compared with separate generation of the same amounts of heat and power. Considerable attention has been given in this study to the conditions under which this power can be supplied to the main national power grid and also to the reimbursement of industry for this power supply. In order to encourage industry to provide the large amounts of capital that are needed,


several measures for the provision of subsidies have been adopted by the Government; in these particular cases, the subsidies could jointly make up more than 20% (in special cases even up to 30%) of the capital required. The second issue—the use of waste heat—has been the subject of a study by the Advisory Committee on Energy.4 In this study, in which only heat available above 110°C was taken into account, it is stated that the total amount of recoverable heat is equivalent to about 3100 MWth. This saves 5×109 m3 of gas per year. The investment will be about Dfl 23×109. The calculated cost price is 40 c/m3 gas. The present selling price is also 40 c/m3. These figures give an indication of the importance of recoverable heat. Hothouse cultivation of flowers, fruit and vegetables A subject of special interest to The Netherlands is the cultivation of flowers, fruits and vegetables in hothouses, which are nearly all heated by natural gas. It seems a waste of enthalpy to raise the temperature of hothouses by only a few degrees Celsius by means of a fuel that gives a flame temperature above 1500°C. At present the hothouse owners do enjoy a favourable special gas price in order to help them to stay competitive on the European market, since they have to grow their products in a country which is not favoured by much sunshine or agreeable temperatures. However, this special price is under severe criticism from the country’s partners in the EEC, so every effort is being made to reduce the amount of gas burnt in hothouses. There are two lines of approach. The first is the invention of all sorts of clever devices for the insulation of hothouses without impairing the amount of sunshine needed for vegetation, by double glazing, special coatings, blinding off during the night, etc. These experiments are just starting to show results. The second approach is the possible use of waste heat from nearby industries, power stations or municipal waste combustion plants by distributing this heat via warm-water pipelines to the hothouses, which, however, requires quite a capital investment; it calls for a co-operative structure on both the suppliers’ and the consumers’ side in order to find solutions regarding cost, distribution, risk-acceptance etc. that will be satisfactory to both parties. The total amount of natural gas consumed for heating hothouses now exceeds 3×109 m3 per year, which represents 6–7% of the total domestic gas consumption in The Netherlands; so the measures described above have real significance for the total gas balance in the country. In the area of energy saving, there are clearly several options for investing capital; so the immediate question is, which criteria should be used to assign proper priorities to a number of projects. Is the main consideration the total volume of gas to be saved, or the capital investment per cubic metre saved, or is it the actual costs in cents per cubic metre saved? From the graphs (Figures 4–6), quite different ranking can be seen for the different categories where energy could be saved. Because government loans or subsidies are frequently made


Figure 4. Expected energy savings resulting from various measures and provisions

available in these categories to get them off the ground, it is clear that, as there is a limit to such support, a choice must be made. The choice is of course also influenced by other factors besides these cost criteria, such as technical, social or political factors. Mention should be made here of the author’s company, which was specially founded by the Government 5 years ago— The Netherlands Energy Development Company (NEOM). This company seeks, with government capital, to realise projects in which profitability, though not yet sufficient to attract private companies or other bodies, could become so in a few years, when energy prices will have risen still further. NEOM projects Here are a few examples of such projects. (1) An economizer has been developed for gas heating stoves in order to push the combustion efficiency from about 75% to over 90% by making use of the heat of condensation of waste gases; a number of prototypes have been tested, and some manufacturers are now given loans to start production of large series to be built on top of existing stoves or into newly designed high-efficiency heating stoves. (2) In co-operation with two other companies, an enterprise has been set up for installation of gas-fired heat pumps of different sizes and with different heatintake sources. It is expected that these heat pumps will show a rapid expansion for small industries and housing complexes.


Figure 5. Investment per m3 saved

(3) Great efforts have been devoted to the introduction of district heating systems in new housing complexes, in which not only heat but also power is generated in the central firing station. These stations are gas-fired, but they are intended to be switched to coal firing in due course, most probably with fluidised-bed combustion systems, which are more readily available for smallscale systems and also offer an elegant solution to the sulphur problem. At the moment 14 district heating systems are approved and under construction, with a potential of 250000 house equivalents, and a further 20 project studies are under way for evaluation, with a potential of a further 250000 house equivalents. It is estimated that, in total, by 1985 a gas saving of the order of 200×106 m3 per year can be achieved. (4) Whereas coal gasification will probably be limited to very large installations, there is a market for small-scale fluid-bed combustion furnaces to supply local heat. NEOM is engaged in a few projects for such systems with a view to building a small number of demonstration plants to check their feasibility. (5) A major problem in coal-combustion systems is ash disposal. NEOM is setting up a structure, together with partners, to study and actually deal with coal


Figure 6. Cost savings (c/m3)

ash for a number of applications, such as artificial gravel, building bricks, road surfaces etc. The magnitudes and possible benefits of various schemes are compared in Figure 7. Wind energy A paper that describes the energy situation in The Netherlands cannot end without mentioning wind energy, the traditional source of energy in our country. At present a specially designed windmill with a maximum capacity of 300 kW and a wing-span of 50 m is in operation at Petten, north of Amsterdam near the sea. It is hoped that experience with this mill will be sufficiently encouraging for projects for more and more powerful mills to proceed later. For comparison, it should be mentioned that the traditional four-wing windmill, so symbolic of The Netherlands, develops about 40 h.p. (or 60 h.p. with streamlined wings) with a total wing-span of 25–28 m. In addition to this medium-size windmill concept, there is a great variety of mini-windmills on the market, which meet with particular interest amongst ‘do-it-yourself’ people—that may help the energy balance of a number of isolated houses, but it will not contribute in any significant way to a solution of the national energy problem.


Figure 7. Comparative magnitude of costs of various measures

Conclusion In summing up the energy situation in The Netherlands, it can be said that we have made a late start in reshaping our energy strategy, mainly because of the abundant natural gas reserves in the country. Furthermore, The Netherlands, characteristically, will most probably not accept a further growth in the number of nuclear power stations in the coming decade, which means that the country will remain dependent on a large amount of imported oil. On the other hand, many projects are under way, or will start soon, in which either considerable energy savings are aimed at or a switch from gas and oil to coal is the target. After some initial complacency amongst many people, there is now the will not only to plan the future in terms of energy supply, but also to act on the plan. References 1. 2.

White Paper on Energy Policy: Part 1, General; Part 2, Coal, Part 3, Fuel input in power stations. Staatsuitgeverij, Den Haag, 1979 and 1980 (in Dutch). R.Bosma and K.A.Duyves: Coal as industrial fuel. Energy Centre Netherlands, Den Haag, May 1981 (in Dutch).


3. 4.

Report on the combined production of heat and power in industry. Ministry of Economic Affairs, Den Haag, December 1980 (in Dutch). Advisory Committee on Energy: Study on the use of heat as energy source. Staatsuitgeverij, Den Haag, November 1980 (in Dutch).

THE ENERGY SITUATION IN THE NETHERLANDS


Mr D.C.Ion, Institution of Geologists

Where does The Netherlands expect the required 25–35 m.t.c.e. to come from in the year 2000? Ir. E.F.Bunge

In two week’s time a party from the N.C.B. will visit Holland—we have very close contact with the N.C.B. I am also a member of the Dutch representative team that deals with the N.C.B. We are interested in coal from the N.C.B., but not only from there. We believe, first, that all the coal must come from abroad; there is no possibility that in the coming decades Holland might use its own coal again. Apart from our proximity to Germany, we look to Poland, Australia and the U.S.A. At this moment the Dutch Government is not doing too much in this respect, mainly because private industry is quite active. As you know, Shell, being part Dutch, is actively trying to join in the coal business. In addition, a company has been formed by the electric power suppliers with a few industrial organisations to import oil. I believe that private companies are at the moment looking for coal primarily from the U.S.A., Australia and Poland. I deliberately have not mentioned South Africa because I do not know whether it would be politically feasible: that is purely a political debate. Mr W.B.Pascall, Royal Institute of British Architects

I was interested to hear about the considerable Dutch experience of district heating and your high expectations of it —and presumably of combined heat and power in the future. What has your experience been in realising the considerable theoretical potential in practice? I am particularly thinking of the costing of use and the metering of the heat provided to individual homes. Do people just raise their temperature standards, or have you found a way of realistically charging them to dissuade them from doing this so that there is a real saving of energy?


Ir. E.F.Bunge

That question is difficult to answer. There is no straightforward answer because we are now in the middle of this battle. We believe that at the moment, in spite of difficulties, the trend is towards continued progress with district heating. We started about three years ago, and there are now around 10–15 municipalities that have taken the decision to change to district heating. I think that is quite a success. There is not much Government money involved—about 10% in total. With stimulation, it seems possible to introduce district heating in Holland and to persuade municipalities to adopt it. With regard to metering, separate studies are in progress to see the effects of personal and private metering compared with combined metering. The trend at the moment is towards individual metering. It is a matter of cost, accurate meters being still rather expensive. This is not a complete answer, but I can only give you the trends as I see them now. Mr N.G.Worley, British Nuclear Energy Society

Your reference to nuclear power was brief. Is it the situation that in Holland all political parties are against extension of nuclear power and can you give us any more background to that topic? You also mentioned very briefly the environmental aspects of coal-burning. Will The Netherlands adopt similar standards to those under consideration in Germany with very low NOX levels and with desulphurisation for power plants and industrial plants? What quantity of coal will you require? Ir. E.F.Bunge

The second question is the easier. The environmental standards in Holland at present are even lower than in Germany. The reason is that we have been using natural gas with the result that we have been spoiled. I find, in discussing this matter with the N.C.B. or British people in Germany, that there is quite a different way of thinking. As a small country which is very densely populated, Holland has a severer problem than the U.K., although you also have the problem. This is one of the reasons why quite a number of people in Holland believe that it will be impossible to increase the coal usage to about 30000000 t per year by the year 2000. The first question is a good question, but I have to give a strange answer! How are we tackling this nuclear energy question in Holland? The Government has started a general discussion and it will continue for two or three years. The idea is that everybody benefits from open discussion and everybody has a contribution to make. First, the Dutch people in general will be given plentiful information, by all kinds of means, about the pros and cons of nuclear energy compared with coal or other fuels. That will take about a year. Special committees have been set up, TV programmes are starting, and so on. I think that


the one year will be extended to two years—they will never make it in one year! After that, the debate will actually start: people will discuss the question. Then the Government plans to decide what to do. At this moment, almost all political parties seem to be against nuclear power, but they are not really outspoken as yet: they are more or less waiting for the debate. In about three or four years, if I am invited back here to give a speech. I hope I shall be able to give a clear answer; I cannot give it now. Mr H.D.Peake, Institution of Municipal Engineers

I suggest that combined heat and power is not economic unless everybody is made to connect to the distribution mains. How do you ensure that? Do you turn off the gas supply, or have legal requirements that once a main is laid everybody must connect to it? Second, I would be most interested to know whether the subsidy was for insulation and included double glazing of windows. Can the speaker explain the amount of the subsidy, say for the cost of double glazing a three-bedroomed house? In the U.K., there are no Government subsidies for this last. There is a subsidy for insulation of lofts or roof spaces, but nothing for cavity insulation or double glazing. The answer would be of much interest because, who knows, we might be able to persuade our Government to introduce such subsidies here. Ir. E.F.Bunge

The Dutch Government subsidy is about 30% of the cost. The programme has run for three years, and is such a success that the Government is planning to reduce the 30% contribution. Regarding CHP, we first started in The Netherlands by using CHP installations in new building programmes for large housing estates. The policy was that the people who went to live in those new houses would not be better off than other people in the country who were using the old methods of heating. That was the starting point. We have tried to work to a plan so that main grids go from a power station to locations where very large estates of new houses are being built: once the main grid is established, interest is generated among the existing built-up areas on the way, wherever there are new buildings or new houses (but in smaller numbers). Finally — we are now working on this section— the third stage is to start connecting the existing houses. This is an entirely different problem because modifications are required inside the houses. We are just at the beginning, but that is the plan.


Energy and the steel industry in France: present situation and future prospects J.de Pemille, Association technique de la sidérurgie française, Paris, France

© The Watt Committee on Energy Ltd. 1982 Energy and the steel industry in France: present situation and future prospects

France, like all European countries, was subjected to two major increases in oil prices, in 1973 and again in 1979. This has led to a profound modification of energy policy and a change in behaviour among the French, from private individuals to company managers. In this paper, we examine, in turn, the energy situation yesterday and today, how it has developed since 1973, and related government policy. We consider the prospects for medium- and long-term development on the basis of the decisions that have been made, and, finally, we refer to the steel industry as an example of an industrial consumer. The Energy Situation in France Yesterday and Today Taking Over From Oil was the title of the final report by the Commission on Energy and Raw Materials set up for the preparation of the 8th Plan; the report was submitted to the French Government a year ago. It was based on an in-depth analysis of the situation to define the lines of action of energy policy until 1990. Since the 1973–74 oil crisis, France has had to face a worldwide energy mutation with no historical precedent. The fact that she has few resources of her own has made her acutely aware of the scale of the risks. She is now making a considerable effort in the field of energy. The two successive waves of increases in oil prices, first in 1973 (a fourfold increase) and then in 1979 (a twofold increase), led to an eightfold rise in the oil bill between 1973 and 1980. The formidable growth of energy consumption was essentially in that of oil (430% increase between 1960 and 1973), bringing French energy dependence up from 38% to 76% during this period (Figure 1). In 1973, compared with coal, gas, and primary electricity, oil accounted for 66.7% of the 175.4 m.t.o.e. consumed (Table 1). By 1979, it accounted for only 57.2%.

36 ENERGY AND THE STEEL INDUSTRY IN FRANCE

Figure 1. Consumption of primary energy in France, 1960–80 Table 1. Total French primary energy needs

Today (1981) this figure has been reduced to 53%, whereas overall growth has not slowed down and has constantly remained at a high level (Table 2). So how did the French economy adapt to this first oil crisis? The new energy policy developed in France since 1974 is based on three main points: energy saving; the use of substitute forms of energy; and reduction in oil vulnerability. Establishment of Energy-Saving Mechanisms Before 1973, energy consumption and the gross domestic product (GDP) had the same average annual growth rate. Immediately after the first crisis, a deliberate


Table 2. Overall growth of energy consumption in France, 1970–79

Table 3. Results of energy-saving policy

energy-saving policy was introduced. The results of implementation are given in Table 3. The basic aim of this policy was to achieve specific reductions in consumption, i.e. to reduce the consumption of energy in France for a given level of activity, without affecting economic development or social progress. The willing co-operation of the consumer was sought through measures that would be profitable for both the community and the private investor. This policy can be summarised as follows: as many specific energy savings as possible were to be made everywhere through independent action and through investment. First of all, there must be fair prices; international increases, but no more, must be passed on to the consumer. The public must be made aware, by explanation, of why energy must be saved and how this is possible. Motivation is essential if the people directly concerned are to make savings that are profitable for the community. Finally, regulations are involved whenever a very large number of consumers are concerned by highly profitable measures. All this is covered by innovations in techniques and equipment suitable for investments in energy saving. Energy-saving bureau At the end of 1974, the Government set up the Energy-Saving Bureau with a large staff (250 people in Paris and the provinces) and budget (FF660×106 in 1981). Its duties are threefold: (a) to organise the energy-saving policy, i.e. to


contribute to preparing it with the government departments concerned, and to implement and execute it; (b) to arouse public awareness; and (c) to encourage projects and innovations. The operation of the bureau is described briefly below. In industry Until the end of 1980, a system of grants by the Bureau, introduced in 1975, together with tax allowances after 1979, resulted in reductions in specific consumption by production units. At the same time, realising that only an appropriate renovation of existing production facilities can lead to the highest savings of energy, the Bureau has been giving financial backing to new processes and equipment and following them up so that their technical and economic efficiency can be assessed. In residential and tertiary sectors The operations of the Bureau are intended to make people in the residential and tertiary sectors aware of the conditions in which heating is used and of home insulation. In this field, it also acts by means of regulations, and finally by training all building contractors who specialise in heating and insulation and by grants for energy saved (measured in tonnes oil equivalent). In the transport sector The Bureau concentrates on private cars, first by trying to change drivers’ behaviour, and secondly by backing manufacturers in energy-saving projects. The consumption of certain models of cars has dropped by over 20% with no reduction in performance. Use of Substitute Forms of Energy It would be dangerous to rely on oil for the completion of the energy balance. Maximum values have therefore been fixed for oil consumption and, in order to observe them, other forms of energy are used as substitutes for hydrocarbons, representing the energy redeployment effort. These alternatives are, first, nuclear energy, then coal, and, finally, renewable types of energy. Nuclear power stations Since 1974, an increase in output from nuclear power stations of approximately 5000 MW per year has been decided on. By the end of 1980, a maximum possible outlet of 14 000 MW had been reached. These installations have made it possible to cover one-third of thermal electricity production and 23% of total


Figure 2. Electricity from nuclear power as a proportion of total electricity generated

production from nuclear power stations, whereas in 1973, with 13 TWh, only 7. 6% was accounted for in this way. At the same time, increased imports of steam coal, together with the conversion of previously oil- or gas-fired plants, have made it possible to cover higher needs while keeping consumption of diesel oil and natural gas down to the level that they had practically reached at the time of the first oil crisis. Coal The share of coal in total energy consumption remained around 16–18% from 1973 to 1979. In 1979 it reached 52 Mt—that is, 35 m.t.o.e. out of a total of 193 m.t.o.e. The biggest consumers of coal (80%) are electricity generation and the steel industry. For the former, conversion to coal of 3000 MW of previously oilfired capacity led to the doubling of consumption in this section—from 14 Mt in 1973 to 28 Mt in 1979. Consumption in the steel industry fell from 18 Mt to 13 Mt. The rest of the coal was consumed by industry, domestic and other fires, and fell slightly—from 14 Mt to 11 Mt.


Figure 3. Coal consumption in France, 1970–79

Renewable forms of energy Renewable forms of energy, that is, all those that cannot become physically exhausted, include traditional forms, such as water power, those which had fallen into disuse, such as wood-burning, and finally completely new forms—solar and geothermal energy. At present, the contribution of renewable forms of energy to total French consumption is approximately 17 m.t.o.e. Water power Hydraulic equipment represented 19400 MW of installed nominal power at the end of 1980. It produced 69.7 TWh (16.1 m.t.o.e.)—8.4 per cent of total primary energy consumption. This form of energy has increased by 50% since 1973, when it contributed only 10.5 m.t.o.e. out of 177 m.t.o.e. consumed (6%). Although the exhaustion of sites is often mentioned, average production has been seen to increase fairly steadily as a result of both new projects and also modifications to existing plants. This annual average production is at present 63. 9 GWh.


New forms of energy Since the first oil crisis, a host of new ideas and several experiments have today led to a fairly clear idea of the relative importance to be attributed to new forms of energy. It is estimated that 3 m.t.o.e. is now contributed by these new forms of energy, among which wood obviously plays the greatest part—1.6% of total annual consumption. Solar energy The most important is solar energy. In 1978, the Solar Energy Commission was set up to initiate research, development and demonstrations in the fields of solar thermodynamics, photovoltaic techniques and domestic heating. Biomass Priority is also being given, in conjunction with the Ministry of Agriculture, to drawing energy from the biomass, energy from wood, straw, alcohols (ethanol and methanol) and methane fermentation. Geothermal energy Grants for research on geothermal energy were multiplied by 6 between 1975 and 1979. The purpose is to obtain better geological and thermal knowledge, and at the same time feasibility studies are in progress on the heating of the equivalent of 15000 homes with 15 drillings that have been made. Substitute energies provided France with 67 m.t.o.e. in 1980; 13 m.t.o.e. from nuclear energy, 16 m.t.o.e. from water power, 3 m.t.o.e. from new forms of energy, and 35 m.t.o.e. from coal—only about one third of this last is produced in France. Reducing the Vulnerability of Supplies The remaining two-thirds of French coal consumption is imported. For coal, therefore, as for natural gas, uranium and oil, France is trying to ensure her security and independence in matters of energy by diversifying supply channels and processes. Coal Of French coal imports, 30% is from the ECSC countries and 70% from other countries, the geopolitical distribution of which limits the risks of cartel. French operators should control a level of production equivalent to import requirements, through investments of FF20×1012—25×1012 covering an intake of 40000000 t


per year. At the same time, the Government is encouraging wide diversification of operators with a view to developing the coal trade at every level. Natural gas Of primary energy in 1973, natural gas accounted for 8.6%; this increased to 12. 3×106 t in 1980, that is, 23.6 m.t.o.e. Domestic production has been stationary at 7.1 m.t.o.e. since 1975, and two-thirds of French requirements are met by imports: the same policy of diversification of supplier countries is being followed, preference being given to the partners of France in the European Community and to nearby countries: the increase in imports has been mainly from the U.S.S.R., Algeria and the Norwegian North Sea. Uranium More than half of French uranium needs is currently met by domestic production. Here again, rights acquired in foreign mines by a number of French operators go beyond the cover that is strictly necessary. Petroleum products Finally, and most important, petroleum products accounted for 66.7% of total French primary energy requirements in 1973 at 117 m.t.o.e. This figure fell to 53. 5% (102.5 m.t.o.e.) in 1980. As for other imported forms of energy—French oil is almost entirely imported, 0.5% being produced in France — the essential goal of secure supplies can be attained through diversification of supplier countries. Over 70% of imports comes from the Middle East because of the large proportion of world reserves that is found there and because of France’s special relations with some of the Gulf countries. Today, therefore, France, with past and present needs that have just been described, faces an international oil energy situation characterised by a high price level per barrel ($32– $36), concerted limitation of production by the oilproducing countries, and a market that no longer follows the laws of supply and demand in a competitive economy. The idea of covering growth with oil has therefore been abandoned, and consumption of coal, gas and nuclear energy must be increased —not forgetting renewable forms of energy, and making the most of the new source represented by energy saving.


Prospects for Medium- and Long-Term Development Total consumption hypotheses The 8th Plan Commission imagined three hypotheses for international development in the energy markets. The first was a black hypothesis: the cuttingoff of supplies as the result of a political and/or military crisis. This was not analysed, as it is a hypothesis of the organisation of scarcity, rationing and sacrifices. Second, the pink hypothesis was for a planned agreement for increases in the oil price of 2% per year until 2000 in constant 1980 francs, i.e. $37 per barrel in 1990 and $45 per barrel in 2000, with coal prices rising more slowly at 1% per year, the CIF Le Havre price reaching $55 per tonne in 1990 and $61 in 2000. Third, under a grey hypothesis, in the absence of any agreement between producers and consumers, a rate of increase of 7% per year would lead to a price of $60 per barrel in 1990, and coal, increasing at 3% per year, would reach $67 per tonne in 1990. It is of course impossible to assign a rate of probability of occurrence to each of these hypotheses, but it was decided to organise our energy policy round the grey hypothesis. The pink hypothesis is associated with a growth rate of 3.5% per year, and the grey one with a lower rate of 2.5%. With these rates, we have a 1990 consumption of between 221 m.t.o.e. (grey, 2.5%) and 266 m.t.o.e. (pink, 3.5%). The goal aimed at is 219 m.t.o.e. in 1985 and 242 m.t.o.e. in 1990, with a growth rate of 3.5%, which is possible through a considerable effort to save energy. Supplies It is predicted that, to meet this need, supplies in 1990 can be analysed as follows. Coal. French production could be between 10 000 000 and 15 000 000 t and the rest—28–33 m.t.o.e.—would have to be imported. Nuclear energy. After the acceleration in 1980 and 1981, the annual rate would return to 5200 MW, leading to an output of 73–76 m.t.o.e. Water power. Production would be 16 m.t.o.e. per year—a level which has practically been reached today. NEW FORMS OF ENERGY. 10 m.t.o.e. should be produced, including 8 m.t.o.e. from the biomass. Natural gas. The cautious objective is 37 m.t.o.e. Oil. The target is 70–80 m.t.o.e. The distribution objective is summarised in Table 4, and it can be stated, in conclusion, that French supplies policy consists of diversifying sources and processes in order to balance the risks inherent in the situation.


Table 4. Projected energy sources in 1990

Consumption in different sectors A great effort to adapt is therefore necessary, as the structure of consumption has been disrupted by further reduction in energy consumption; the growth of energy consumption must not exceed 2.1% per year if the energy-saving goals are to be achieved. The 19 m.t.o.e. saved in 1979 and 24 m.t.o.e. in 1980 must reach 60 m.t.o.e. in 1990—a threefold increase in a decade. Investments of FF25×109— 30×109 per year in transport, heating and industrial sectors will lead to savings in oil in particular and transfers to other kinds of fuel and new forms of energy. For coal, the obstacles that act as a brake on demand will have to be removed: they are handling and storage, the cost of equipment, pollution and guarantees of supplies. The aim is to multiply coal consumption in industry by 5. This return to coal is perhaps the greatest challenge to French energy policy of the current decade. If the planned output of nuclear power is to be attained, there must be a considerable extension of the use of electricity for domestic heating and in industry, which is relatively easy. In industry, it demands modifications to processes, and new technologies which are generally linked with growth and the capacity for innovation. A basic motivation will be the cost of electricity. It has naturally been decided to continue and accelerate research on new forms of energy so that they can be applied as soon as possible. In these fields the State can do no more than guide trends, as these forms of energy apply mainly to the residential sector where they are introduced as substitutes. Henceforth, French energy policy consists essentially of saving energy, and above all that which is imported, then improving the nation’s energy index, and finally reducing the rate of consumption. The change which has taken place is that the proposed use of energy is now considered before the energy is produced. Each need in terms of energy must henceforth be analysed as follows: ‘Is it not possible to limit the quantity, or obtain the same result at a lower energy cost; are we using the best source to give satisfaction?’ The Steel Industry Total energy consumption by French steelworks in 1980 was 12.75 m.t.o.e., which amounted to 6.65% of total consumption of primary energy in France. For an output of 23 832 000 t of crude steel, this gives a specific consumption of 0. 558 t oil equivalent per tonne of crude steel or 809.4 m.t.c.e. per tonne of crude


Table 5. Sources of energy consumed in the French steel industry

Figure 4. Changes in specific consumption of energy related to steel and pig iron production, 1973–80

steel*. This specific consumption has been decreasing since 1975, when it reached a maximum, because of the very great drop in steel production. The observed leakage is partly due to the variation in the ratio of pig iron to steel. This reduction of over 3% per year for the period 1973–78, compared with relative stability, helps to explain a certain irregularity in the course of events. It seems that this decrease in specific consumption amounts to more than 9% between 1975 and 1980, of which 3% occurred in a period of only two years in 1979–80. The relative shares of the different forms of primary energy are also changing. The consumption of solid fuels—coke and coking coal—is gradually returning to the pre-1973 level of more than 60%. At the same time, consumption of petroleum products has dropped by half since 1973, when they accounted for 17% of primary energy. The consumption of gas (natural gas plus oven gas plus oxygen) is increasing steadily, and now accounts for 15% of energy demand in the steel industry, whereas bought electricity (other than that produced in the plant), after a sharp rise between 1975 and 1979, is now relatively stable at around 12%. The development of continuous casting provides an example that illustrates these efforts and changes. This process, which eliminates casting in ingot moulds and slabbing, saves the energy used to reheat the ingots and the electrical energy for rolling, and leads to a considerably higher yield (110 kg of molten steel per tonne of blooms for killed steel). A study at Usinor, Dunkirk, showed a total saving of 700 Mcal per tonne produced in this way. Over 40% of French steel is now cast continuously (Table 6). This means that the total current saving of energy in 1980, compared with what consumption * It is more convenient to refer to the coal equivalent as unity in steel-making than to the oil equivalent.


Table 6. Development of continuous casting in France, 1973–80

Table 7. Oil and fuel consumption in a blast-furnace

would have been with the processes used before the 1970s, can be estimated as 500 000 t oil equivalent. The lower consumption of oil is due to a number of factors, one of the most important of which is the very large reduction in injection of fuel oil in blast furnaces (Table 7). At the beginning of 1981, fuel oil consumption was less than 10 kg/t. Several plants have completely stopped these injections, which are of course compensated for by higher coke consumption. For the reheating furnaces that supply the four French strip mills, average consumption, which remained stable at around 500 Mcal/t between 1973 and 1977, was reduced by a quarter to 400 Mcal/t between 1977 and 1981. This result was attained with comparatively small investment simply by reducing heat losses, continuous monitoring of the oxygen content of the fumes, reducing fume temperatures—achieved by better furnace monitoring—and reducing withdrawing temperatures of slabs. The aim for 1985 is to bring this average consumption down to 350 Mcal/t and will require substantial investment for the installation of very efficient recovery and automation systems. For large integrated steelworks, current trends in the prices of different forms of energy are leading to a reconsideration of the use previously made of the gases that are by-products of coke, blast-furnace iron and steel. Surplus blastfurnace gas has traditionally been used to product electricity. It will now rather be used for reheating semi-finished products, after being enriched or mixed with other gases, as a substitute for fuel oil. This is because the low average price per kWh of nuclear electricity (and its ready availability) will mean that in general it will no longer be worthwhile for plants to produce their own electricity.


The recovery of gas from the oxygen converter in a steelworks, which requires heavy investment, is becoming a profitable operation and its use is likely to be more widespread. Gas from this new source, its emission being an inevitable part of the process, will therefore be added to the existing quantities of oven and blast-furnace gas. Energy balance can be achieved and even exceeded using coal alone; because of technical constraints and the investments required, however, this substitution is not always possible. The plant must also be provided with an emergency supply of energy. Highly complex studies are accordingly being carried on so that the best possible use can be made of surplus gas in the specific case of each plant with, of course, the aim of reducing or even eliminating purchases of energy from outside. Another problem that the steel industry currently faces is the restructuring of the price of electricity by the French Electricity Authority. The purpose of restructuring is to encourage intensive use of electricity at cheap rates during offpeak periods in order to promote the nuclear kWh to the maximum. As a result, much effort is being applied to studies of the increased use of electricity in plants. Through a permanent dialogue with the electricity supplier and detailed knowledge of price formulae and levels, new operating patterns and conditions are being simulated that do not involve any important changes in the processes. Partial applications will probably follow fairly soon under the commercial pressure of the Electricity Authority. A second stage, which will no doubt be reached between 1985 and 1990, will be that of technical innovations. The plasma torch in blast-furnaces and arc furnaces has been mentioned, among other things. Many other examples exist in the steel industry, those mentioned being among the most important: this industry, the biggest industrial consumer of energy in France, as has been seen from a few very limited examples, provides a typical illustration of the energy situation in France and its present development. There is an active spirit of emulation among the steel-producing countries, in which the part played by energy in steelworks has become of prime importance, accounting for more than 30% of the cost price. To the coke rate factor, traditionally familiar to the steel producer, which is always vital, is now added the whole series of transformations and uses of energy of all forms. Within the framework of government directives, the energy saving reflex now appears at every level, from the design department through maintenance to the operator. Real efforts will probably have to be made soon; imagination should rise to the occasion, provided there are no further financial crises in years to come. The changes in the energy situation in France, of which those in the steel industry form a part, already give grounds for hoping that eventually the goal of independence will be attained.


Bibliography 1. Summary of energy balances published by the French National Committee of the World Conference on Energy. Annales des mines, Paris, September-October 1980. 2. F.de Wissocq: La politique française de l’énergie: Director-General for Energy and Raw Materials, Paris. 3. J.Zyss: Le programme national d’économies d’énergie 1973–1980 (extract from Energétique industrielle, volume II). Paris, 1981. 4. C.Palvadeau: Economies d’énergie, p. 45–46. Pétrole Informations, 5 March 1981. 5. Abstract of report by Commission on Energy and Raw Materials set up for preparation of the 8th Plan. La Documentation Française, 29–31, pages 313 and 342, Paris, 1980. 6. J.Y.Faberon: La politique française de l’énergie. La Documentation Française, 394, 1 August 1980. 7. A.G.Bureau: Les choix énergétiques—Le cas du charbon. Chambre Syndicale de la Sidérurgie Française, Rapport no. 21.648, Paris, 1981. 8. Programme for developing technologies in the use of coal. Service des relations publiques et d’information, Ministère de l’Industrie, Paris, 16 December 1980. 9. Gas. Symposium held 17 February 1981. Association technique de la sidérurgie française. Paris, 1981. 10. The steel industry. Annual report of Chambre syndicale de la sidérurgie française. Paris, 1980. 11. Electricité de France 1980. Direction de la production et du transport, Paris. 12. Gaz de France, Paris. 13. A.Robin: Bulletin no. 351. Association des cadres dirigeant de l’industrie pour le progres social et economic. January-February 1981. 14. Energie à tous prix, Le Nouvel Economiste, No. 280, 6 April 1981. 15. Economies d’énergie—Les resultats en 1980. Techniques de l’Energie, April 1981. 16. F.de Wissocq: Energie et indépendance nationale. Revue de la defense nationale, April 1981.



Dr J.V.Butcher, President, Society of Dyers and Colourists

In France the reduction in the dependence upon oil has been very impressive, the swing towards the use of electricity has been enormous and my impression is that Government has given a very strong lead. There seems to be an interesting difference between the approach in France and that in the United Kingdom. Here, we carry out audits and work by exhortation. I believe that in France the Government has set targets and used incentives for the achievement of those targets. I believe I am also correct in saying that, lower targets having been set for oil consumption, penal taxation has been used to ensure the achievement of those targets; similarly, in encouraging nucleargenerated electrical power consumption, pricing strategy has been determined to make the use of electricity more attractive than it otherwise would have been in the short term. I think that sort of concept needs to be adopted by other countries within the EEC, because it has been particularly effective. M.J.de Pemille

I agree that the policy objectives could only be attained by persuading all consumers (domestic and industrial) that they must accept them. The prices of the different forms of energy are the basis of the methods that have been used. The commercial electricity supply services in France are, as I have indicated, in fact preparing a new tariff structure for sales (based on consumption in kilowatt-hours). Discussions are in progress with all the large industrial consumers so that they will appreciate the reasons for the change and will follow the new practices that are proposed. The object is to weight the national curve of charges as much as possible by means of a differential—as much as a factor of 10— between a kilowatt-hour consumed in the height of winter and one at the depth of summer; this should exploit the benefits from the important nuclear-based generating plants to the maximum.


Consumers who agree to modify their arrangements in this way will be able to benefit from a substantial discount on their energy costs. It does not follow, however, that the additional costs to other consumers arising from such discounts will completely outweigh the very considerable economies. Mr H.Brown, Institution of Plant Engineers

Would M. de Pemille confirm that by law industrial boilers on domestic premises and commercial premises in France have to be tested by an official body, and that failure to meet certain standards laid down results in certain requirements by law to improve operation and in some cases can indeed preempt the next quarter or half year’s fuel being available for use on that boiler? M.J.de Pemiile

In France we are indeed obliged by law to have all our industrial-type boilers of more than a given capacity tested periodically by specified official bodies. If they do not meet the specifications, the owner is obliged, on pain of legal proceedings, to carry out the necessary works, up to complete replacement of the boiler. There is no power to withhold the fuel supply; however, even if there were, it would be ineffective when the equipment was out of use. Dr J.C.McVeigh, Institution of Production Engineers

I understand that in France the spending on research for solar energy and renewable energy is about US $100000000 this year. Could you tell us the figure for spending on nuclear research in France so that we can get an idea of the proportions of expenditure on these programmes? M.J.de Pemille

For solar energy, geothermal energy and new forms of energy, the financial resources available for research from the Industry Minister were of the order of FF 300000000 for the year 1980. As to nuclear energy, in 1980 Electricité de France invested FF 17.8×109 in thermonuclear production. At the same time, the total disposable power in 1980 reached 6400 MW. For research in France on nuclear power, the annual budget of the Commissariat à l’Énergie Atomique, with a staff of 18000, is FF 7.8×109. Research within this area is very diverse, ranging from chemistry to medicine, physics etc. The proportion of this that can be attributed to energy-linked questions would be of the order of FF 5×129. Mr P.P.Sanders, Society of Business Economists

Does the speaker think that we might expect changes in French energy policy as the result of the election of a new President and Government? M.J.de Pemille


I knew that this question would be asked! It is impossible to answer today because it is so soon after the event. From what the Prime Minister has said so far, it is understood that the main energy programmes, including that on nuclear energy, will remain largely unchanged. What the position might be in a month or a year, I do not know. (Note. After the meeting, the author added the following written answer.) It is now clear that the target for total primary energy consumption in France in 1990 has been reduced from 242 m.t.o.e. to 230 m.t.o.e. To meet an annual growth rate of at least 3.5%, allowing for a reduction in the nuclear power programme from 73 to 48 m.t.o.e., it is foreseen that a growing effort in energy savings, as well as in research and development on new sources of energy, will be required.


German experience of the oil price crises G.Meurin, Rheinisch-Westfälisches Elektrizitätswerk A.G., Essen, West Germany

© The Watt Committee on Energy Ltd. 1982 German experience of the oil price crises

When, in October 1973, the attack by Arab States on Israel initiated the Yom Kippur war, which was to result in unimaginable consequences for the whole world, the first Energy Programme ever submitted by a Federal German Government was only a few weeks old. Western Europe was in a state of general economic and industrial prosperity, and the general expansion induced fears of possible bottlenecks in energy supply in the 1980s or the 1990s at the latest. The Energy Programme for the Federal Republic of Germany was prepared with the intention of supporting and securing strong economic growth by means of adequate long-term energy supplies. It is from that situation that the prognoses—which now appear ridiculous— should be regarded. The forecast was for energy consumption of 610×106 t of coal equivalent (m.t.c.e.) for 1985, of which 330 m.t.c.e. were planned to be covered by mineral oil—so cheap, and in ample supply, until 1973. Revision of German Energy Programme How much the energy world has changed since then can be realised by comparison with the latest objectives that appear obtainable in 1985: namely, 430 instead of 610 m.t.c.e. of total primary energy consumption, and 190 instead of 330 m.t.c.e. of oil. Its contribution to the steeply decreased total consumption will thus have dropped from 55% to 44%. These figures seem to describe a logical and simple reaction to the completely changed situation. But even a country like the Federal Republic of Germany, which has to cover 60% of its demand for energy by imports and has even to import more than 95% of the necessary mineral oil, needed many tentative, sometimes painful, steps to adapt its actions and planning, to some extent, to the new situation.


This process of adaptation was largely determined by the Federal Government’s attitude. Similarly, as it did during the crisis of the most important domestic energy resource—that is, the German hard-coal mining industry in the late 1950s— the Federal Government has again largely renounced an active role in energy policy and has left the necessary structural change in the field of energy mainly to the dynamic forces of the market. The Government’s own activity was limited to the provision of frameworks and objectives in the form of revisions of its Energy Programme, financial incentives for energy saving and rational energy use, legislation and other political measures for the increase of the use of German hard coal and the prevention of the construction of further power plants that would burn fuel oil or natural gas. The original Energy Programme of 1973 allowed a very modest role for domestic hard coal which, in 1955, still made a contribution of 159 m.t.c.e., or 72%, to the total primary energy supply of the Federal Republic; it was now scheduled to contribute only 50 m.t.c.e., or 8%, to the total supply in 1985. The first revision of the Energy Programme, issued in October 1974. changed that figure to 79 m.t.c.e., equal to 14% of the total supply in 1985. At the same time, the total primary energy demand forecast for that year was lowered from 610 to 555 m.t.c.e. The most striking change, however, was the reduction of the contribution of mineral oil from the former prognosis of 330 m.t.c.e. to 245 m.t.c.e. in 1985. These new goals were deemed to be achievable because of the somewhat lower overall economic growth expectations, as well as by means of faster growth in the use of nuclear energy and natural gas, and, finally, some energy conservation. Increased Use of Coal In order to enhance the achievement of the goals set by the revised Energy Programme, the Federal Government took several legislative, administrative and organisational measures. Its most effective instruments in energy policy comprise the different laws for securing the use of domestic hard coal in power plants, the so-called Verstromungsgesetze—which may perhaps be translated as ‘Electrifaction Laws’ (analogous to coal liquefaction). Two laws of this kind were already in force before the 1973 oil crisis, but their range was rather modest, as was their scope in time. The Third Electrifaction Law, of December 1974, passed in connection with the first revision of the Energy Programme, aimed at securing the annual use of 30–33 m.t.c.e. of domestic hard coal at German power plants. As German coal was at that time much more expensive than imported coal or mineral oil, its use to such an extent could not be effected without the use of controls or subsidies. Loyal to its principle to pursue objectives in energy policy not by regulation but by the strengthening of market forces, the Federal Government has chosen the way of offset payments to compensate for the difference between the costs of electricity generation from German hard coal and from heavy fuel oil. These

54 GERMAN EXPERIENCE OF THE OIL PRICE CRISES

payments are not borne by general taxation but by a fund created by means of a special 3.24% levy on all electricity sales. At the same time, the Government maintained the restrictions, established several years ago, that protect domestic coal by limiting the import of coal from Third Countries to 5.5 m.t.c.e. per annum. Furthermore, the Third Electrifaction Law laid down that power plants burning fuel oil or natural gas should not be allowed to be built without special authorisation: in practice, this signified that there would be no new plants of these types. Owing to the economic recession of 1974 and 1975, as well as the structure of electricity generating equipment then in operation and coming into operation, even the goal of 30 m.t.c.e. per annum was missed, by a wide margin, in 1975. The Federal Government, therefore, increased the levy to 4.5% in 1976, thus increasing the fund by DM 700×106 per year. Since this measure was likewise not fully successful, the Government then put pressure on the utilities by threatening them with regulations. In consequence the utilities, the electricity producing industries and the German railways on the one side and the German hard-coal mining industry on the other side came to an agreement to guarantee the annual use, for electricity generation, of 30–33 m.t.c.e. of domestic hard coal during the years 1978–87. The Third Electrifaction Law was amended accordingly. As a consequence of stronger economic growth in 1979 and the corresponding steeper increase in electricity consumption, the levy had even to be raised to 6. 2%, so the fund rose to DM 2.3×109 for that year. Government Response to the Energy Situation Before the Electrifaction Law is further discussed, the evolution of the energy situation and the general policy of the Federal Government must be described. Only a few years after the oil price crisis of 1973–74 it became evident that the consequences of that drastic change in the conditions of the world energy supply had been largely underestimated. Thenceforth, average economic growth would be slower in all oil- or energy-importing countries, and an even slower increase in energy consumption would be necessary to reduce dependence on insecure and expensive energy imports from abroad. As early as 1977 the Federal Government found itself compelled to make a second revision of its Energy Programme. This time the estimate of total primary energy consumption in 1985 was again lowered by 13% to 483 m.t.c.e., whereas the contribution of oil, though it was itself the reason of the bleaker prospects, could not be reduced by more than 9%— from 245 to 223 m.t.c.e. This still high estimate of future demand for oil seems rather paradoxical in view of a policy of drastic reduction in the use of oil, but it was mainly caused by markedly decreased expectations relative to nuclear energy— the German reactor programme suffered from steadily increasing delays owing to the lack of public acceptance. Between 1973 and 1977 the estimated contribution by nuclear


energy had to be reduced, therefore, from 90 to 50 m.t.c.e. in 1985; it has had to be decreased even more since 1977, as will be seen below. In 1977, the second revision of the Energy Programme set out clear general objectives with the following well established order of priority. (1) Limitation of the increase in energy consumption by means of energy saving and the rational use of energy. (2) Reduction of the contribution of mineral oil to energy supply. (3) Priority for the use of domestic hard coal and lignite. (4) Diversification of the sources of imported primary energy. (5) Use of nuclear energy only to the degree necessary for a secure and adequate electricity supply. The last of these objectives largely reflects the unhappy story of the German Nuclear Energy Programme. It took just three years, from late 1974 to mid-1977, for the ‘anti-nukes’ to make German politicians change their attitude from favouring a massive use of nuclear energy, as provided for by the two earlier versions of the Energy Programme, to attributing only last-resort role to this promising energy source. This amounted to a lack of political leadership: the attitude adopted by certain politicians was not due to real concern but rather to opportunism, which then itself led to enhanced public concern. Energy Conservation Policy The repeated downward revisions of forecasts and goals regarding future energy consumption were accompanied by supporting measures by the Federal Government as well as by the governments of the Länder (the provinces of the Federal Republic) in order to support the realisation of the objectives set by the Energy Programmes. There were campaigns to educate the public on matters such as the waste of energy and the possibilities of conservation or saving energy, especially in the field of heat insulation of dwellings. Subsidies of 20% or tax relief were granted for all measures for insulating existing dwellings, for the improvement of their heating systems and for the installation of devices for the use of renewable energy for space and water heating. These subsidies gave the name to the DM 4.35×109 Law of 1978. Two years previously, a law had already been enacted, and a year after that a decree had been issued, setting higher standards for the heat insulation of new dwelling-houses. The new values, however, are still lower than those recommended for many years by German utilities to those customers who wished to install an electric-storage heating system. The space- and water-heating sector presents substantial potential for conservation of energy, especially oil, because it stands for about 40% of the total energy consumption, the share of gas oil is more than 50%, and avoidable energy losses are estimated, with present technology, to be about 25–35%. As to the smaller potential with regard to energy saving in the industrial sector, as early as 1975 a law was amended to grant 7.5% subsidies for all investment that would


result in saving primary energy or improving rational energy use. From January 1975 to December 1978 investments subsidised according to this law amounted to about DM 57×109 and realised energy savings of 8.4 m.t.c.e. per annum. Other major Government measures to enhance energy conservation, reduce oil consumption and secure the energy supply are: (1) Subsidies of DM 6×109 per annum for the German coal mining industry; (2) Financing of research and development in the fields of nuclear fuel cycle technology, light water reactor safety, development of advanced reactors, nuclear fusion, use of renewable energies (solar, geothermal) and coal gasification and liquefaction; (3) Financial support for search for and exploration of gas and oil resources by Germany companies; (4) The promotion of the merger of the two most important domestic oil companies; (5) Subsidies for the installation of district heating schemes; and (6) Federal stocks and prescribed industrial oil stocks equal to more than 100 days’ consumption, to prevent supply crises. Price changes and their policy implications The second great increase in the oil price, in 1979 and 1980, caused the greatest concern, with respect to not only dependence on insecure energy imports, but also the ability to pay for them. For the first time for 14 years, the currentaccount balance of the Federal Republic ran into the red in 1979. In 1980 those negative figures tripled, and a current-account deficit of that order is expected to persist for some years. With mineral-oil import prices now more than 8 times those of 1973, there is a still greater incentive to foster energy conservation and to use domestic fuels—or such fuels as are less expensive than oil and capable of being substituted for it. Owing to the failure of Government policy in the field of nuclear energy to provide constructive leadership and achieve success, it had no choice but to fall back again on the increased use of coal. In 1980 a new agreement was concluded between the electricity producers and the domestic coal mining industry, extending the previous agreement from 1987 to 1995. Instead of 33×106 t of domestic coal per year, steadily increasing quantities are to be burnt in power plants, reaching 47.5 m.t.c.e. per annum in 1995. The Third Coal Electrifaction Law was accordingly amended once more, and provision was also made for a slow stepwise increase in the limit imposed on coal imports. As a last measure in response to the 1979–80 change in energy supply conditions, the Federal Government is at present elaborating a third revision of its Energy Programme which is to be issued, it has been announced, in the second half of 1981. It should be stated expressly that no price-control measures have been taken by the authorities except on one occasion, when some utilities


Figure 1. Development of gross national product, consumption of primary energy and electricity consumption

sought an increase in their electricity tariffs applicable to households, services and commerce—and that increase was only partly granted. The reactions of German energy users to the changes in oil prices between 1973 and the present will now be described. As will be seen below, it is extremely important to include the years 1979 and 1980 in the discussion of these developments. Detailed analyses for these two years, however, are hardly available; thus the argument is restricted here to a more global analysis. Figure 1 shows the gross national product, the primary energy consumption and the electricity consumption from 1960 to 1980. A marked slowing down and/ or decrease in all three in 1974 and 1975 is an expression of the overall economic recession following the tripling of the oil price. The greatest part of the decrease in energy consumption was simply due to the economic recession and not to principal changes in consumer attitude, as can be seen from the recovery in 1976 and 1978–79. The second jump in the oil price, that of 1979–80, produces, as can be seen, lines for 1980 of a similar shape to those of 1974. In 1981, if present forecasts


Figure 2. Changes in consumption of energy from primary sources

are believed, the shape will have followed the example of 1975, at least as far as gross national product and primary energy are concerned. The difference in respect of electricity may result from some temporary substitution of electricity for very expensive oil and gas by means of small direct heating devices. Figure 2 shows the development of total primary energy as well as of individual primary energies from 1960 to 1980. A clear reaction by consumers can be seen: oil consumption, always steeply increasing and thereby driving out hard coal until 1973, decreases more steeply than hard-coal consumption during the 1974–75 recession, though still cheaper than hard coal. Since then, oil consumption has never reached its 1973 peak level of 143×106 t, equal to 208.9 m.t.c.e., and it is very likely never to reach it again. Signs of Improvement Hard coal, whose consumption was in a nearly permanent condition of decrease before 1974, shows a certain recovery after the 1974–75 recession. This was mainly a result of hard-coal promotion measures and appeals by the Government, which led to a reduction in the use of fuel oil in electricity


generation from more than 14% in 1973 to less than 5% in 1980, and also to partial replacement of fuel oil by hard coal in blast-furnaces. It is interesting that the consumption of natural gas, which increased constantly before 1980, shows a slight decrease in that year, certainly because natural gas prices joined the rally in oil prices. Since industry must constantly aim at being competitive, the specific energy consumption of the industrial sector has always shown a marked downward trend. An event like the oil-price crises, therefore, cannot effect large rapid changes of this trend, major modifications to which need investments or changes in production methods or even in production structure: all that takes time. The household, commercial and service sector offers a rather larger potential for improvement in energy efficiency, but apparently the first jump in the oil price in 1973–74 was not big enough to present a sufficient incentive to most individuals to save energy in space heating or road transport or to invest in measures for the more rational use of energy. The second stage in the rise of the oil price seems to have changed this fundamentally, as gas oil savings of about 17% in 1980— a year with a normal winter—demonstrate. Petrol consumption increased much more slowly, and it is even predicted that it will have decreased in 1981, probably as a result of savings achieved by travelling less and driving more economically, and also because of the growing market penetration of petrol-saving cars and diesel-powered cars. Future Pattern of Energy Supply and Consumption Will these trends continue, or are they, once again, merely the result of the present recession, which is expected, in 1981, to effect a decrease in the gross national product of at least 1.5%? During the last three years many prognoses were published by different institutes, companies and ideologies. The last official forecast dates from 1977: it was the second revision of the Federal Government’s Energy Programme, which predicted a total primary energy consumption of 482. 5 m.t.c.e. for 1985. This is to be compared with 408 m.t.c.e. in 1979 and, more important, with 391 m.t.c.e. in 1980. There is a real probability that the forthcoming third revision will reduce the 1985 figure from 482.5 to 430 m.t.c.e. per annum. The level of oil consumption is likely to remain at its 1980 level, about 190 m.t.c.e. per annum; the contribution of nuclear energy will be doubled, from 15 to 30 m.t.c.e. per annum, and the consumption of natural gas will probably grow by 20% to reach about 80 m.t.c.e. per annum in 1985. As to the year 2000, the last revision of the Energy Programme prognosticated a total primary energy consumption of 600 m.t.c.e. per annum. Later forecasts, mentioned above, vary between that value and the much lower one of 435 m.t.c.e. per annum. There is even a scenario of extreme energy saving, which was by, among others, the Enquête-Commission, established in 1979 by the Federal Parliament with the task of investigating whether the Federal Republic would need and/or should use nuclear energy. This horror scenario presented a


figure of 346 m.t.c.e. per annum for the year 2000, 15% less than the primary energy consumption of 1979, by using extremely unrealistic assumptions. The probability that this last figure might be realised is as small as the probability of reaching, in the year 2000, the highest value adopted by the Enquête-Commission —equal to the 600 m.t.c.e. per annum of the last Energy Programme. Not very long ago, I made a personal forecast (Figure 3) that covered the past from 1960 and the future to the year 2000. Using the figure of 430 m.t.c.e. per annum for 1985, and on the assumption of average annual growth of 1.5% from then onwards, primary energy consumption would reach 530 m.t.c.e. per annum in 2000. This growth figure must be compared with an average annual increase between 1960 and 1973 of 4.6% per annum in the gross national product as well as in primary energy consumption. I now tend to assume, however, that the third revision of the Federal Government’s Energy Programme will include a still lower figure—about 500 m.t.c.e. for the year 2000, with proportional shares of the different primary energy sources rather similar to those in Figure 3. Such a low figure would mean that the total primary energy increase between 1980 and 2000 would amount to an average of not more than 1.23% per annum, and would even be as low as 1.0% per annum between 1985 and 2000. In order simultaneously to achieve economic growth of 3.5–4% per annum, which is deemed to be necessary to reduce unemployment, an elasticity coefficient of less than 0.3 would have to be achieved—compared with 1.0–0.6 during the last 20 years. Conclusion To conclude, it can be said that the Federal Government and other authorities have, indeed, taken various measures, and that users also have shown certain reactions to those measures as well as to increases in the oil price. Neither, however, after the first great change in the energy scene, has adopted the attitude of someone who thinks that a new crisis like that of 1979–80 is possible or even expects it. The second leap in the oil price has awakened even those who slept obstinately, but there seems still to persist a considerable minority that does not or is not willing to understand the scope of the energy problem and which prefers to be tranquillized by the illusion that the energy savings of others will do the job. The issue of the continuing controversy about nuclear energy will determine whether the Federal Republic of Germany, which mainly relies on expensive hard coal as the source of domestic energy, will remain a country suitable for industry and leading technology, or whether persistent red ink in the current account balance will compel it to become a beggar who asks the Arabs: ‘Please, give me three cans of oil— and $4.50 to pay for them!’


Figure 3. Primary energy consumption in the German Federal Republic, actual and projected, 1960–2000

GERMAN EXPERIENCE OF THE OIL PRICE CRISES


Dr J.C.McVeigh, Institution of Production Engineers

What is the expenditure on nuclear energy in Western Germany this year, compared with expenditure on renewable energy? Dr G.Meurin

In the Federal Republic of Germany, the last four-year plan for energy research spending amounted to about DM 2000000000 for the four years. Of this, about DM 400000000–500000000 was for renewable energy sources, including subsidies for space-water heating systems and a further amount for energy conservation measures. There was about DM 1200000000, if my memory is correct, for nuclear energy. These funds were allocated to areas mentioned in my paper—fuel cycle technology, light-water reactor safety research, and development of advanced reactors —in addition to several hundred million deutschemarks to the subsidised projects, like the two advanced reactors (the 300-MW fast breeder reactor SNR 300 and the higher-temperature gas-cooled reactor THGR 300) as well as to the building of more capacity for the uranium enrichment plant. Mr H.Brown, Institution of Plant Engineers

My point is similar to the one that I put to the French speaker. In Germany, is it a legal requirement that domestic, commercial and industrial users have their boilers tested each year against government-approved standards, and, further, does every chimney have to be cleaned once per year by law? I make this point, because we hear so much about the need for subsidies and grants from all quarters. We should remember that the U.K. does not have these legal obligations which can at times be such a nuisance and of doubtful value. Dr G.Meurin

In Germany it has been a legal requirement for a long time that chimneys must be cleaned once per year. This official role for the chimney-cleaner was not for


the sake of saving energy, but for security against soot deposits catching fire in the chimneys. After the oil crisis of 1973–I think in 1976 or 1977– there was a new regulation, requiring that the heating plant, which means the whole-house heating system, must be certified every year by the same chimney-cleaner. That was for two reasons: first, for the protection of the environment, i.e. pollution control; and, second, for energy-saving purposes. As far as industrial plants are concerned I am not so well informed, but certainly their regulations are much more stringent than those for individual houses. Dr J.H.Chesters, Chairman

What training was given to the chimney sweeps when they had to learn about boiler efficiency? Dr G.Meurin

They were trained to use equipment for the measurement of CO2 and other things. Mr J.M.Solbett, Institution of Chemical Engineers

One of the most impressive things about the German energy scene is the enormous amount of practical large-scale work that is being done on coal conversion. There is quite a number of large pilot plants—demonstration plants— in operation or under construction, and everywhere one goes there is a big notice which says that the Federal Government is contributing x per cent or so many millions of deutschemarks. This is in spite of the fact that it is unlikely that a very large coal conversion programme will take place in Germany based on German coal, because of the high cost of the coal itself. How did this happy development come about in Germany, compared with certain other countries, particularly the United Kingdom? Dr G.Meurin

During the Second World War Germany was compelled for a period to be rather self-sufficient concerning liquid fuels. It was then that the Germans became the first in the world to develop plants for liquid fractionation of brown coal. The same process has now been used in South Africa for many years, but is not used in Germany, because actually it is not economical. It is reasonably economical with cheap South African coal mined by cheap labour under favourable geological conditions, but not at all economical with German coal prices (even with imported coal). Newer processes have better efficiency. However, I am of the opinion that for as long as another 20 years oil-based products will be cheaper for Germany than to gasify or liquefy coal—even imported coal from the U.S.A. or Poland.


There is much publicity about the German research programme concerning coal liquefaction and gasification. This is mainly due to the situation of the Government—its psychological situation; it is pro-nuclear itself, but the two parties that form the ruling coalition are split over the future of nuclear energy. In order to hide its efforts to promote nuclear energy, the Federal Government always speaks about its programme of spending on coal. In reality, as can be seen, more than half— I would even say, two-thirds—of Government energy spending goes into nuclear energy, nuclear research and development, and this in spite of the very shaky state of their programme.


Danish energy planning after 1973 and its implementation H.Larsen, Risø National Laboratory, Roskilde, Denmark

© The Watt Committee on Energy Ltd, 1982 Danish energy planning after 1973 and its implementation

In the early 1970s the situation in Denmark with regard to energy was still the same as during the 1960s: it was characterised by an ample and cheap supply of oil, and the subject of energy did not attract much public attention. During that period, Danish energy supplies were based on imported oil to a very great extent, and little attention was given to other primary energy sources because of the lack of economic incentive. The energy crisis in 1973–74 changed that picture dramatically. Since that period no single subject, apart from the economic crisis —to a large extent itself a consequence of the increased energy bill—has received as much public attention. Development of Danish energy consumption Before embarking on a presentation of measures that were taken in Denmark in the light of the energy crisis in 1973–74 and the increase in energy prices since then, I would like to dwell for a little while on Danish energy consumption and its development during the 1970s and to present a few facts about the Danish energy system. In 1972, the year before the first energy crisis, the gross energy consumption amounted to 760 PJ or 19 m.t.o.e. As can be seen from Figure 1 the total energy need was supplied predominantly by oil, all of which was imported. In fact, in that year the contribution from coal was the lowest for a long time. Only about 20% of Danish electricity was produced from coal—indeed, all coal in Denmark has to be imported. On the consumption side, space heating accounts for the largest amount of energy, owing to the Danish climate. The consumption of coal for space heating is related to district heating based on combined heat and power

66 DANISH ENERGY PLANNING AFTER 1973 AND ITS IMPLEMENTATION

Figure 1. Gross energy consumption in Denmark in 1972. The figures are corrected for weather conditions and net import of electricity. ‘Non-substitutable electricity’ excludes electric space heating; ‘space heating’ does not include heating of industrial and agricultural buildings; ‘Production’ includes space heating of industrial and agricultural buildings but excludes electricity for production; ‘transport’ includes international air traffic (25 PJ in 1980).

Figure 2. Development of gross energy consumption in Denmark, 1960–80, corrected for net imports of electricity.

production (CHP). As far as the production sector is concerned, Denmark characteristically has very little heavy energy-consuming industry. The development of gross energy consumption from 1960 to 1980 can be seen in Figure 2. From 1960 to 1970 the gross energy consumption almost doubled. The amount of energy coming from oil trebled in that period, whereas the amount of coal decreased in both relative and absolute figures. In 1972 a minimum level of coal imports was reached—the whole Danish energy system had been switched to oil. From consideration of the period from 1970 to 1980 a very


Figure 3. Gross energy consumption in Denmark in 1980. Definitions as in Figure 1.

unstable picture emerges. After the first energy crisis in 1973–74 a dramatic decline in energy consumption became evident; however, in the following years energy consumption recovered and the percentage increase in these years was almost equivalent to that during the 1960s. During the last couple of years, after the price increase in 1979–80, the gross energy consumption has declined again. During the whole decade 1970–80 a steady increase in the proportion of energy that came from coal could be recognised, with a corresponding decrease in theuse of oil. From Figure 3 it can be seen that the gross energy consumption in 1980 was 790 PJ, compared with 760 PJ in 1972—an increase of less than 5%. In detail, major differences between 1972 and 1980 can be observed. The amount of imported coal increased by a factor of 5. Electricity consumption has increased by 50%, and about 80% of electricity production is now based on coal, compared with 20% in 1972. A remarkable decline in energy consumption for space heating is apparent. As to production and transport, only minor changes are observed. In 1980 alternative fuels, i.e. urban waste, biomass, sun and wind, contributed 10 PJ to the supply of primary energy. In 1980 a small proportion of oil was supplied from the Danish sector of the North Sea, about 0.5 Mt coming from the DAN field. Energy planning Why have these changes taken place, and what was done in Denmark during the 1970s with respect to energy planning? After the energy crisis it was realised that something must be done in order to avoid more or less complete reliance on imported oil. For that reason various studies were carried out with regard to developments in energy consumption, the possibility of formulating a national


Table 1. Natural gas and oil reserves in the Danish sector of the North Sea

heat plan, etc. In 1976 the Ministry of Commerce issued a report ‘Danish Energy Policy 76’, outlining the main goals of the Government’s energy policy. In this plan the targets of energy policy for the years to come were formulated as follows: to reduce the vulnerability of Denmark with regard to energy supplies and, in particular, her dependence on oil supplies as quickly as possible; to establish a versatile energy supply, through which every effort can be made to utilise indigenous sources of energy; to cut the growth in energy consumption, with special emphasis on measures that can be implemented relatively quickly. These targets were to be achieved by creating a diversified energy-supply system, i.e. by spreading Danish energy consumption over several types of fuels, such as coal, natural gas and uranium, and in particular by making use of indigenous resources and by various conservation measures, such as better building insulation. In order to ensure the most rational use of energy for heating purposes a heat plan for the whole country should be formulated, indicating approximate geographical areas in which specific heating methods should be given priority. Finally, research and development in the energy sector was to be intensified. Some detail is given below concerning the content of the 1976 energy plan with respect to establishment of a diversified energy supply and formulation of a Danish heat plan. As to diversified supply, a natural gas network was to be built throughout Denmark with the purpose of utilising the natural gas from the North Sea for heating purposes. Table 1 shows the amount of oil and natural gas found in the Danish sector of the North Sea. About 100 PJ (2.5×109 m3) should be supplied from natural gas in 1985. For electricity production in power plants, oil should be replaced by coal to a greater extent. Furthermore, nuclear power should be introduced; the first unit should be ready by 1985 and four more in the period 1987–95. All units should be rated at 900 MW. Combined heat and power production should be intensified by making use of the waste heat from power plants for district heating purposes. New energy technologies should be utilised as far as possible. It was envisaged that in the year 1995 solar collectors, wind power etc. could contribute about 35 PJ to the Danish energy supply.


The heat plan One of the more important ideas in Danish Energy Policy 76, as far as the general public is concerned, is the idea of the formulation of a Danish heat plan. The formulation of a heat plan is fundamentally different from the other measures included in the 1976 energy plan, as it has the character of systems planning. Priority is to be given to different forms of production and distribution of heat for specific geographical areas. The basic principles for the choice of heat form in different areas are as follows. Natural gas is best suited for use in urban areas; however, it should not be used in areas where it would be more reasonable to use residual heat from power plants, industrial processes etc. Piped energy in the form of natural gas or hot water requires a relatively high degree of utilisation of the costly transmission and distribution installations and therefore demands a dense urban or metropolitan area; about two-thirds of Denmark’s buildings are located in such areas, and in the remaining one-third of the country, i.e. the rural areas, a number of other forms of heating are available or can be expected to become available—including electricity, heat pumps, firewood and waste and by-products from agriculture, and renewable energy sources such as solar heat and wind-power. In 1977 a heat planning committee was appointed. In its first preliminary report the committee dealt with the delineation of the geographical areas in which specific heating methods should be given priority, as shown in Figure 4. In its second preliminary report, proposals for the organisation and control of the heat plan were put forward. Finally, in the third report, problems of rural areas were dealt with. The work of the national heat planning committee was to be followed by regional and local planning by the local communities. It is expected that by 1995 approximately 60% of Denmark’s total heat requirement can be covered by natural gas and heat from power plants. The heat planning Act was passed through the Danish parliament (the Folketing) in 1979. The situation today The situation as it looks today (1981) will now be summarised. Nuclear power was included in the 1976 energy plan as one of the more important options of diversifying fuel supply in Denmark. However, the decision to introduce nuclear power has so far not been taken. The Government has initiated various studies that are to be undertaken before a decision can be made. First, a study was carried out on the safe disposal of nuclear waste, and this year a safety assessment study has been initiated on nuclear power plants. The study is to be completed by the end of 1982. The earliest possible year in which the Government could consider a decision on nuclear power is 1983; if this happens, it is the intention to hold a referendum in advance on the parliamentary decision.


Figure 4. Geographical priorities for heating methods.

Consequently, 1993 is the earliest possible year in which a Danish nuclear power plant could start operating. Natural gas as a substitute for oil in the Danish energy system was included in the 1976 energy plan. This project is going ahead; the construction of the transmission network began in 1981. The natural gas network in Denmark will be connected to the German network, from which the first gas will be supplied in 1982. In 1984 gas will start flowing from the Danish part of the North Sea. During an initial period of some years the amount of gas will gradually be increased to 2.5×109 m3 per year. Later this might be increased to 4.0×109 m3 per year. The heat plan was dealt with in some detail above. The situation at present (1981) is that the overall national plan has already been worked out, whereas the regional and local plans are in the process of being worked out. In Figure 5 an example is shown of a local heat plan. As the work on the local heat plans has not yet been completed, people do not yet know who is going to use natural gas and who is going to have district heat from CHP production. This lack of precise knowledge of the future form of heat to be used for individual houses naturally creates a great deal of public confusion and uncertainty. As mentioned above, the utilities have switched from oil to coal to a very great extent. In 1980 about 80% of Danish electricity was produced by burning coal. All this has been achieved on a voluntary basis, i.e. more or less solely


Table 2. Danish coal imports in 1980

based on economic arguments. Danish imports of coal actually constitute a fairly large proportion of the world trade in coal. In Table 2 the amount of coal imported from various countries is listed. Altogether 10000000 t of coal was imported in 1980. One of the cornerstones in the 1976 energy plan was research and development in the energy sector. A comprehensive programme is being carried out; since 1976 about Dkr 500000000 has been allocated to various projects, from research on wind generators to the utilisation of uranium from Greenland. With regard to energy conservation, a new building code was enforced in 1977 demanding improved insulation in new houses. With respect to houses built before 1977 legislation is still lacking, in the sense that it has not been possible to reach agreement regarding the demand for improved insulation in these houses. However, various government grants to cover some of the investment cost have been offered—typically the grant is 30 or 20% of the cost—both for investments in connection with insulation and for investment in renewable energy devices. Production from the GORM oilfield has just started; its output is likely to total about two Mt in 1982. Consequently, total Danish oil production is likely to reach 2.5 Mt in 1982. In order to increase the pace of exploration and development of the North Sea, the terms of the concession have been renegotiated with the exclusive licensee, Danish Underground Consortium (DUC). DUC, which comprises A.P.M ller (operator), Shell, Chevron and Texaco, was awarded the offshore concession in 1963 for a period of 50 years. The new concession terms resemble those of the United Kingdom. It is the Government’s intention to bring in other consortia to increase the speed of exploration.


The Future Finally, the work that is in progress in Denmark on the formulation of a new revised energy plan, to be presented to the Folketing later this year, must be briefly mentioned. In his statement to the Folketing on the Danish energy situation in February 1980, the Minister of Energy stated that owing to the postponement of the decision on nuclear power it was necessary, from a planning point of view, to lay down realistic plans for a future without nuclear power. During the summer of 1980 work was initiated by the Ministry of Energy on a new revised energy plan dealing with the period 1980– 2000. However, the period 2000–2030 will also be dealt with to some extent. This new energy plan (EP-81) is expected to be completed in the autumn of 1981. The work on EP-81 has been organised in the following way. Several working parties have been set up with representatives from various ministries together with relevant research institutes—among which is the Energy Systems Group at Ris. These working parties are analysing indigenous resources, imported fuel, development in electricity consumption, transport etc. One working party is dealing with the technical supply system, including the choice of scenarios to be investigated. As can be understood from the way the work has been organised, it is the intention of EP-81 to investigate various scenarios and calculate the consequences rather than choose a specific energy plan. The scenarios to be included are: basic alternative; increased use of natural gas; increased use of renewable energy sources; and increased use of decentralized CHP. These four possibilities are to be investigated with and without nuclear power—altogether eight scenarios. With regard to the overall targets of the new energy plan, more attention is given to the balance of payments and the economy in general than was the case earlier. This is due to the fact that the fuel bill is becoming increasingly important for the national economy. At this point, it is too early to disclose any details of the plan. However, in January 1981 a so-called ‘Half-way Report’ was published: it contained the preliminary results of the various working parties, but not the results of the consequences calculations, as these have not yet been completed. Although it will be interesting to see the final result of the new energy plan, most of what is to happen in the energy sector in Denmark in the short term has already started—for instance, the introduction of natural gas and the implementation of the heat plan. The importance of the new plan primarily affects what will happen after 1990. Bibliography Danish Energy Policy 1976. Report from the Minister of Commerce to the Danish Parliament, Copenhagen, May 1976.


Figure 5. An example of a local heat plan. Energy Policy Report 1979. Report from the Ministry of Energy to the Danish Parliament, Copenhagen, March 1979. Heat Planning in Denmark. Ministry of Energy, Copenhagen, 1980.


Energy Plan 1981. Report from the Ministry of Energy to the Danish Parliament, Copenhagen, November 1981 (in Danish). Energy Systems Group, Annual Progress Report 1980. Edited by Gordon Mackenzie and Hans Larsen, Ris National Laboratory, Ris-R-436, Roskilde, Denmark, 1980.

DANISH ENERGY PLANNING


Mr N.G.Worley, British Nuclear Energy Society

How do you implement these combined heat and power schemes in areas where you have already considerable urban developments? My impression of Roskilde was that you intended to make combined heat and power almost compulsory in certain areas where buildings are already established. Dr H.Larsen

That is a good question. We do not know the answer, to be quite frank. In Denmark we have a well developed history of existing district heating systems. In some areas on the outskirts of towns there is oil-fired district heating today. In Roskilde there would not be much problem as far as natural gas is concerned, because most houses have oil-fired central heating and they need only make minor changes; they have a water-based system in the house already. I think the Government’s expectation is that in ten years, or something like that, about 90% of the people who live in an area will be connected to the system that they are supposed to have. The installation of the natural gas network presents the Government with a financial problem. A company run by the Government has been established; and operates a transmission network and a pipeline from the North Sea to Jutland. It will sell gas to various distribution companies which are more or less owned by the local councils and communities. Dr J.H.Chesters, Chairman

Where hot water is supplied to houses, do you charge the occupiers with the amounts that they use by means of some sort of meter, indicating the amount of heat used, or is there a standard charge? Dr H.Larsen


In some places the meter measures delivery temperature, but in others it just measures the number of cubic metres which are delivered to your house. In my opinion, combined heat and power production and distribution by district heating systems is today absolutely the most economical energy supply in Denmark— even better than natural gas!


General discussion

Professor A.J.Smith, The Geological Society of London

The meeting has now gone on for five sessions, with five contributions, and, in my opinion, we have not really penetrated to the heart of the matter at all. We are supposed to be Europeans concerned with future energy. I am not as old as some members in this room, but I have been brought up through a period when such things as steam locomotives were said to be inefficient, ships of 5000 and 10000 t were said to be inefficient and gas made from coal was said to be inefficient: we now find ourselves in a situation where we are reacting to a new set of prices brought about by the Arab nations’ sudden realisation that we have become dependent upon oil. I think we owe a great debt to the Arabs. We have suddenly found that conventional power can last us for at least a century if we use it wisely. Where we seem to be making a mistake, in every one of the speeches I have heard so far, is in moving towards some new system of distribution. For example, district heating requires large capital investment to make it work. We talk about nuclear energy: that requires very large capital investment to make it work. We have dispensed with a whole system of relatively low capital investment and we are going for high capital investment. We tell people nightly that they should have low energy-consumption motor-cars, but outside I saw a man who has done more for energy than anybody else, and he was driving a 20year-old motor-car. He may have been using a lot of petrol for his miles, but that car has lasted 20 years. Every time someone buys an economy motor-car, he uses a tremendous amount of energy. If I can make any point at all, it is: go home and make things last a lot longer, and do not look for innovation quite so much! Professor J.Swithenbank, Institute of Energy

My question is directed particularly to the German and perhaps the U.K. representatives. In the near future, transport will continue to be a major consumer of oil, and it perhaps represents the main irreducible requirement for

78 GENERAL DISCUSSION

oil consumption. We heard earlier that it would not be economic during the next 20 years to convert coal to oil; equally it is not economic to convert all the barrels of oil into diesel fuel. The German Government, we hear, had a large number of diesel vehicles on the road, including cars. In the U.K., certainly for private cars, the use of diesel fuel is being discouraged. The question, then, to the German side is: is there a policy to control the proportion of diesel-powered vehicles and how would that be implemented? To the U.K. side, the question is: how would the British Government justify its policy of discouraging diesel vehicles? Dr G.Meurin

Those responsible for making the decisions do understand more and more that transport and the chemical industry are the sectors whose ability to replace oil is the least. Dr R.G.F.Skipper, Department of Energy

The position in the U.K. is very similar. Clearly, transport and chemicals are the areas where it will be most difficult to replace liquid hydrocarbons. We happen to have a tax differential between diesel oil and gasoline—perhaps for reasons other than immediate policy. I would think that in our discussions and in international discussions our view is very similar to the German view. Transport is the most difficult area: it is the area where liquid fuels will be needed for the longest time, and which probably will be able to pay the highest premium for the use of liquid fuels. Dr G.Meurin

Much diesel oil will become available when gas oil is no longer required for water heating purposes and space heating. That is the policy of most countries, and it will make more gas oil available for conversion to transport fuels. Mr A.Cluer, Institute of Petroleum

From the overall viewpoint of making the best use of crude oil, research has been carried out, and more has been proposed, on types of engines such as the stratified charge spark-assisted diesel, in which only one kind of fuel would be required. The fuel would be a wide-range petroleum fraction including petrol and diesel components, and it would mean that the production of high-octane petrol would not be necessary. This is a very long-term goal, first, to confirm expectations from research work, and, second, because of the enormous capital investment already made for production of petrol engines and diesel engines which would be displaced. However, if realised there would be substantial refinery energy savings and higher yields of such a wide-range fuel from a given amount of crude oil. Professor N.Borg, The Royal Society of Health


In each of the national contributions, there is a degree of calculation, spoken or unspoken, about safeguarding supplies of energy against disruption from various sources. We have an opportunity this afternoon to ask a number of informed persons to indicate the functions that they would foresee for a unified European policy in terms of the contribution, responsibilities and assurances that ought to be apportioned to the various European states. A few minutes spent on this here might save a great deal of time when it comes to be discussed, as it will have to be, by the Community bodies. Can we ask for some brief personal views? Dr J.H.Chesters, Chairman

Did the question concern the extent to which we should share whatever is available? Professor N.Borg

I asked if the speakers could give a view on the relative responsibilities, contributions and assurances that ought to be given to the individual member states in the formation of a coherent European policy. I did not try to talk about shares, although that is implied to some degree. As a preliminary opinion, I should have thought that it would be possible for somebody to say that the following is a possible process and perhaps it has already started. The major part of the nuclear contribution to a European energy system could continue to be made in France. The major part of the reprocessing and ‘dustbin end’ of the process can be carried on in the U.K., where it has already started. The German contribution could be, in spite of the difficulties and costs, to continue as the main developer of processes for the liquefaction and gasification of coal. There can be a degree of assurance of movement towards a European pool of energy—with common access in times of difficulty, but not necessarily at a common price for energy equivalence. The question refers to many of the points that Mr Cluer raised. Is it not possible to admit a policy of that sort? Are there no views from the platform? I would be surprised if there are no views from the platform although not astonished if it is a difficult thing to begin to talk about. Perhaps it might be suggested as a theme for another meeting. Dr G.Meurin

There are various problems such as those mentioned which the EEC finds it difficult to take hold of because it is not that sort of community! It is an association of very independent countries, and therefore it would be most difficult to share the common problem in such a specialised manner. You would feel the difficulty if you ask yourself whether the U.K. would be prepared to put

80 GENERAL DISCUSSION

its oil at the disposal of the Community in a crisis. The European Coal and Steel Community has many difficulties. Dr J.H.Chesters, Chairman

Keen as I am for European co-operation, and eventually World Government, I appreciate sufficiently the difficulties to be faced and the endless compromises that will have to be made. At the moment even the optimist must admit that the world is in a mess. There has, however, been progress within countries and between them. We have seen today that selected individuals can approach energy problems in an objective manner, but it will be a long while before we have a European energy policy, let alone worldwide agreement as to how we can best use our resources. When the Watt Committee started I was warned, even by close friends, that ‘you can’t expect such a large number of societies to cooperate or individuals to go on giving their services free of charge for more than say one year’. Yet they have done and will do. I hope that the contacts made today between different nations will have added to our understanding, and therefore our willingness to co-operate. Commander M.B.F.Ranken, Institute of Marine Engineers

I think we are beginning to touch on the question of strategic vulnerability. Take for instance the problem of natural gas. Germany is becoming more dependent on Soviet-produced gas—obviously an important development. Another point is that much gas is leaving Holland for distribution in Germany and other places. If gas were in short supply—which I think is the implication— given a state of emergency, who would get preference? The natural gas question will get worse because of the amounts that come from the East, quite apart from the time, which is approaching, when there will be reduced resources in the West. I would have thought that this theme requires much discussion, quite apart from the question of future developments, which is another issue altogether. Sir William Hawthorne, Churchill College

I too wanted to ask about the dependence of European countries on Russian gas. I will make two other points. First, as to the costing of combined heat and power. I am not clear that we have really understood how the various organisations that provide CHP to customers handle their whole billing arrangements. I do not think it will be possible to say anything much about it now. Our approach has been, really, that the customer pays for the whole system; you charge the customer for the consumption of electricity and heat on that basis. Heat obviously must not cost too much; if it did, everyone would want to switch to something else. Of course, in some municipalities part of the capital cost may be borne in a different way. Just as a bus company or transport system


may be run at a loss, one may decide to run the district heating at a loss because it saves energy. The second point concerns the question of regulations on the control of heating in buildings. In the U.K. we were contemplating building regulations that would imply that you had to have certain kinds of controls.


Appendix: Energy intensity in the European scene A.Cluer Institute of Petroleum

© The Watt Committee on Energy Ltd. 1982 Appendix: Energy intensity in the European scene Introduction When discussing the policies and achievements of individual European countries to cope with increasing costs and supply problems of various forms of energy, there is inevitably a wish to compare results, and to try and benefit from the experience of others. It therefore seems timely, in a Report devoted to the European scene, to consider the ways in which such performance can be expressed, and to recapitulate some of the factors involved and the pitfalls in interpretation of the figures. In the light of this understanding, better judgements of past records can be made, leading to better decisions about future action. European Community energy targets and performance In a recent document of the European Economic Community on European energy policy,1 the objective of the Community’s energy conservation policy was re-stated, viz. ‘to reduce to 0.7 or less by 1990—for the whole of the Community—the average ratio between the rate of growth in gross energy consumption and the rate of growth in the gross domestic product’. (This ratio is defined in the United Kingdom as the energy coefficient). The EEC document quotes on page 2 actual figures for the Community for the past few years: ‘Between 1973 and 1978 energy consumption in the Community remained practically stable although GDP increased by 12%’. That would be an energy coefficient of almost zero—apparently highly satisfactory in relation to the target. ‘In 1979 it increased by 5% while GDP rose by 3.3%. This is because of the unusual situation caused by a hard winter and a certain upturn in economic activity. But this also shows that the effort to be expended to dissociate the

APPENDIX 83

growth in energy demand from economic growth will be long and exacting’. The energy coefficient in 1979 would be 5/3.3 or 1.52, which would be considered decidedly unsatisfactory compared with the target of 0.7. The EEC document refers also to a study that was commissioned from a team of experts headed by Mr. Jean Saint Geours6 in connection with the rational use of energy and energy savings. Table 1 is reproduced from that study, in which the energy elasticity (defined almost exactly as the U.K. energy coefficient, i.e. the annual rate of growth in energy consumption divided by the annual rate of growth in gross national product) is recorded for each of the nine member states year by year from 1967–68 to 1977–78. The wide variations from year to year are immediately apparent. Sudden increases in the coefficients, positive or negative, e.g. in Denmark in 1973–74 and France in 1974–75, may be occasioned by a GNP growth rate very close to zero for that year; in the extreme case, zero growth gives an infinite coefficient. In the words of the Saint Geours report, ‘A further conclusion must be that the extreme instability of annual energy elasticities makes them of dubious value as a pointer to changes in long-term trends’. The energy/GDP ratio (energy intensity) Over longer periods, of 5 years or more, the energy coefficient or elasticity tends to be more stable,2 but the limitations to its use on an annual basis became very apparent in the U.K. following the sharp increases in energy prices after 1973, which coincided with a reduction in economic activity. The coefficient displayed considerable instability which has persisted as a long-term feature since 1973, and an additional parameter, known as the ‘energy ratio’ or ‘energy intensity’, was adopted after 1976, viz. the ratio of energy consumption to GDP. Table 2 shows the U.K. energy ratio for the period 1955–79 expressed as tons of coal equivalent per £1000 of GDP. Taking these figures at face value, an improving, or not worsening, trend is seen over the 24-year time span. However, there are numerous complicating factor’s which must be appreciated in the interpretation of the figures, including the following: (a) The consumption of primary energy has been temperature-corrected, but is also affected by weather conditions other than temperature changes. (b) The final consumer utilises energy as useful heat (or work equivalent), and the consumption of primary energy is therefore affected both by the efficiency with which this energy is converted to useful heat or work and by that with which it is used by the final consumer. Thus the increase in electricity consumption, with its generation efficiency of only 35–40% in thermal power stations, has tended to increase the ratio of primary energy to heat supplied. Conversely, the substitution of oil and gas for coal has tended to reduce the primary energy consumption for a given amount of useful heat, since oil and gas, particularly in the domestic sector (which accounted for nearly 27% of primary energy consumption in the U.K. in 1979 on a heat supplied basis), has generally

84 APPENDIX

Table 1. Energy elasticities (or coefficients)*

*Saint Geours Report DG XVII–235 (79) EN.6

been utilised at higher efficiency than coal. It is necessary, therefore, to recognise any differences in the mix of fuels supplied when comparing energy ratios for one country over a period or for different countries at a particular time. (c) There may be changes in the distribution of GDP between more or less energy-intensive uses, for example, between manufacturing industry and services. Figure 1 shows how the GDP for the U.K. was made up in 1979 and the percentage share of energy consumption. It will be seen from Figure 1 (a) that the total industrial production provided only about 42% of GDP including 27% from manufacturing industry, whereas services (comprising the distributive trades, public sector services, banking, insurance, professional and scientific services, tourism and a variety of miscellaneous services) made up no less than 47%. From Figure 1(b), industry and other consumers contributing to GDP can be seen to have absorbed half the primary energy, the balance going to the domestic and transport sectors. Of this 50% share of primary energy, industry took 37%, i.e. 74% of all energy sent out to non-transport GDP; therefore the energy intensity of industry is more than 3 times that of the services (i.e. 74/42:26/47=3. 2).* Furthermore, within the whole range of manufacturing industries there are considerable variations in the intensity of energy usage. A notable example is the iron and steel industry which is highly energy-intensive; but a reduction in the output of iron and steel, leading to a drop in the U.K. energy ratio, is not

*Making plausible assumptions about the allocation of transport energy to GDP and leisure pursuits and the further split of GDP transport energy between industry and services, the ratio of industry energy intensity to services energy intensity may be reduced to between 2 and 3.

APPENDIX 85

Table 2. Primary energy consumption, G DP and energy ratio for the United Kingdom, 1955–795

m.t.c.e. million tons of coal equivalent

necessarily a matter for the U.K. to rejoice. Thus, when considering the reasons for changes in energy ratio, it is essential to know what the mix of GDP component parts is in any time-span of primary energy consumption, and likewise to have similar information when comparing the performance of different countries. (d) The energy ratio may be affected by price changes, strikes, supply shortages and under-utilisation of manufacturing plant capacity due to general trade recession and hence reduced offtakes. It becomes increasingly evident that to make valid comparisons of the efficiency of energy usage, it is necessary to be absolutely certain that one is comparing like with like; otherwise the information may be misleading and result in delayed or incorrect action being taken. Energy Consumption in Petroleum Refining A particular instance of an industry which, while producing primary fuels for transport and a wide range of other industries, is very conscious of its own energy consumption in so doing is the petroleum refining industry. This operates worldwide, but the prominent position of Western Europe as a major petroleum refining area is demonstrated in Table 3. The overall energy consumption in refining may average around 6% of the crude oil processed, so that in Western

86 APPENDIX

Figure 1. Percentage share of (a) GDP output (b) energy consumption.8

Europe a 1979 refinery energy consumption of perhaps 40000000 t of oil equivalent was involved—a very sizable quantity indeed. The need to compare like with like when studying energy intensity is well understood in the refining industry. Of particular interest in mid-1981 is the current situation whereby many European refineries are under-utilised in terms of reduced offtake for heavy fuel oil (as for example in the U.K. where it is being replaced in power stations by coal), but are having to install secondary processing equipment to convert heavy fuel oil into more volatile products for transport fuels and chemical feedstocks. Such secondary processing equipment operates under more severe conditions of temperature and pressure and is more energy-intensive. Comparison of the energy consumption of different refineries must, therefore, take into account the type of processing involved. Quoting from a paper by a major international oil company,3 ‘Energy performance can be measured in various ways. Simple relationships of energy consumption per barrel of crude processed have been found to be inadequate and sometimes misleading, when process unit operating conditions are changing. Other systems are based on a standard or fixed energy consumption per unit of feed rate to individual processes. They are better but not good enough. An ideal system really needs to reflect differences between the actual plant energy performance and that of an energy efficient plant doing the same job… Energy requirements achievable within reasonable economic criteria, were defined for

APPENDIX 87

energy efficient process units, in which energy input is minimised and energy recovery is maximised… The resultant energy required to operate the process unit, expressed as fuel oil equivalent barrels per barrel of feed, became the Energy Guideline Factor for each process unit. Factors were developed for over 40 types of process units in order to cover 95%—100% of most refineries’ total energy consumption. For most of the units, correlations were developed to quantify energy requirements with operating severity…’ For this company, energy utilisation efficiency in the period 1973–77 improved 5–27% depending on the type of processing facilities. Most of these improvements were achieved through better operational and maintenance practices. By 1981, further planned improvements involving cost-effective capital expenditures were expected to double the average savings level of 15% achieved by 1977. Projections of the European Energy Outlook A recently issued publication4 by Esso Europe Inc. provides an analysis of the central facts and assumptions bearing most directly on Europe’s energy outlook for the next two decades. Europe is defined as all the non-Communist countries plus Yugoslavia. In presenting these projections, it is noted that ‘business cycles and energy supply disruptions have been recognised in framing the analysis, but no provision has been made for major political upheavals, deep economic depression, or substantial new barriers to world trade and investment’. Some of the information and charts in the Esso Europe booklet are recorded here as of especial interest to the Watt Committee. (a) Energy demand (Figure 2) Between 1979 and 2000, total European energy demand is projected to grow at less than one third of the 1965–73 growth rate (at 1.5% per year compared with 5% per year). Even this relatively low growth rate in energy demand means that the total energy demand will increase by about 36% in the period, from 1326×106 to about 1800 m.t.o.e. per year. This growth in energy demand is based on a real growth rate in G DP of about 2.4% per year between 1979 and 2000, which is about half that experienced in the decade prior to 1973. Figure 2 also demonstrates the sensitivity of energy demand to variations in GDP growth. The shaded area represents an annual variation of ±100 m.t.o.e. in total energy demand in the event of the GDP growth rate projection being in error by ±0.25%. (b) Energy/GDP ratio (energy intensity) (Figure 3) Europe1 reduced its energy intensity by about 6% between 1973 and 1979, from a 1965–73 average of roughly 720 kg oil equivalent for every $1000 of GDP (at 1975 prices and exchange rates) to 675 kg oil equivalent per $1000 GDP in 1979. This trend, brought about by energy-efficiency improvements (performing the same tasks with less energy), energy conservation measures (doing with less), and changes in the mix of goods and services produced by the European economy in favour of less energy intensive output, has been driven by rising energy prices, government

88 APPENDIX

Table 3. World petroleum refining industry

Adapted from BP Statistical Review of World Oil Industry 1979

Figure 2. European energy demand, 1965–2000. Source: Esso Europe.4

policies and consumer attitudes favouring energy savings. Assuming that these factors continue to be operative, energy savings versus the pre-1973 period could reach 12% (double those of 1979) in the second half of this decade, and 20% (three to four times those of 1979) by the end of the century’.4

APPENDIX 89

Figure 3. European energy: GDP ratio, 1965–2000. Source: Esso Europe.4

This is illustrated in Figure 3, which indicates also the effect on the energy ratio or intensity of variations in energy savings between now and 2000 compared with the 1965–73 average. The distinction between energy efficiency and energy conservation is interesting to Watt Committee members, as is also the reference to the allimportant mix of goods and services. These must have been analysed individually, the changes estimated and the information recombined into a global total for production of the overall figures. Whilst it is not practicable to give such detailed breakdowns in the Esso booklet,4 these details would be essential to any valid comparison between the individual countries that make up Europe as defined. For example, the energy ratio for all Europe in 1979, calculated from the figure of 675 kg oil equivalent per $1000 of G DP, and converted to tonnes of coal equivalent per £1000 of G DP at 1975 prices and exchange rates, works out at about 2.5, compared with 3.5 for the U.K. in Table 2. (c) Energy supply (Figure 4) The composition of total European energy supply is expected to undergo major changes over the next two decades. The share of oil, which has declined from 60% in 1973 to 55% in 1979, is projected to decline further to 40% in 1990 and 34% in 2000. In terms of volume, oil use is forecast to decline steadily from its 1979 level of 722 million tonnes (m.t.e.) to 610 m.t.e. in 1990 and remain at this level until 2000. This represents a major step towards reducing Europe’s dependence on oil, as other contributors to this Report mention, but even so oil remains Europe’s most important fuel until beyond 2000. European oil production is expected to grow from an annual figure of 115

90 APPENDIX

Figure 4. European energy supply, 1965–2000. Source: Esso Europe.4 Table 4. Average growthof European energy supply, 1965–2000

See Figure 4.

m.t.e. in 1979 to 160–170 m.t.e. in the early 1980s, mainly from Norwegian and U.K. fields in the North Sea, and to stay near this level through the 1990s. This means that Europe’s dependence on oil imports will fall from 84% of total oil demand in 1979 to about 70% in the 1990s. Natural gas is expected to increase its share of energy supply to 18% by 1990, from a production peak around 1985, thereafter depending on increasing imports. By 1990 40% of the gas requirement will have to be imported, and by 2000, 50%. Figure 4 and Table 4 show that nuclear power is expected to become the most important contributor to the growth in European energy supply, covering more

APPENDIX 91

than half of incremental energy needs in the remaining years of the century. Coal should be the second most important source of Europe’s energy growth, comprising 40% of the additional energy needs up to 2000. These coal projections assure a substantial growth in imports, which could account for about 45% of European usage in 2000 compared with 20% in 1979. Summary and Conclusions (a) The use of energy coefficient or elasticity (ratio of annual energy growth to annual G DP growth) is no longer considered a reliable pointer to energy performance. (b) The use of the energy ratio or intensity (ratio of actual primary energy consumption to actual GDP) can give valuable guidance concerning energy performance, provided due regard is given in a complete economy to the various factors that can affect the figure. (c) At industry or plant level, it is essential when estimating improvements in energy performance to compare results on an identical basis—e.g. two plants doing the same job—for the comparison to be valid. An example of such methodology in the petroleum refining industry is given above. (d) A recent projection of European energy outlook estimates improvements in the energy ratio of 18–23% by 2000 compared with the 1965–73 average, assuming present trends in energy performance are continued. Nevertheless, an increase in energy demand of 36% is expected in the period, and, in spite of the projected growth of nuclear power, Europe would still need to import about 43% of its fossil fuel requirements in 2000. Acknowledgement The assistance of the Department of Energy in preparation of this paper, particularly of Section 3 on the energy: GDP ratio, is gratefully acknowledged. References 1.

2. 3. 4. 5. 6. 7.

Energy policy in the European Community: perspectives and achievements. Communication from the Commission to the Council, COM(80)397, final, p. 5. 10 July 1980. R.I.G.Allen: The energy coefficient and the energy ratio. Economic Trends, 78–84. Central Statistical Office, London, August 1976. F.D.Dennstedt et al.: Management of energy conservation in refineries. Proceedings 10th World Petroleum Congr. 1979. PD 20 (1) 101–107, 1980. Energy in Europe—looking forward to the year 2000. Esso Europe Inc., London, January 1981. Digest of Energy Statistics, Table 13. H.M.S.O., London, 1980. Saint Geours Report DG XVII–235 (79) EN. National income and expenditure 1980, H.M.S.O., London, 1981.

92 APPENDIX

8. 9.

Digest of U.K. energy statistics 1980, H.M.S.O., London, 1981. BP statistical review of world oil industry, 1979. British Petroleum Co. Ltd., London, 1980.

Member Institutions March 1982

*Association of Home Economists British Association for the Advancement of Science British Ceramic Society *British Nuclear Energy Society *Chartered Institution of Building Services Chartered Institute of Building *Chartered Institute of Transport *Combustion Institute (British Section) Geological Society of London Hotel Catering and Institutional Management Association *Institute of Biology Institute of British Foundrymen Institute of Ceramics *Institute of Cost and Management Accountants *Institute of Energy Institute of Food Science and Technology Institute of Foresters Institute of Hospital Engineering Institute of Internal Auditors (British Chapter) *Institute of Marine Engineers Institute of Mathematics and its Applications *Institute of Petroleum *Institute of Physics Institute of Management Services

APPENDIX 93

Institute of Purchasing and Supply Institute of Quantity Surveyors Institute of Refrigeration Institute of Solid Wastes Management Institution of Agricultural Engineers *Institution of Chemical Engineers *Institution of Civil Engineers *Institution of Electrical and Electronics Technician Engineers *Institution of Electrical Engineers Institution of Electronic and Radio Engineers Institution of Engineering Designers *Institution of Gas Engineers *Institution of Mechanical Engineers Institution of Metallurgists *Institution of Mining and Metallurgy Institution of Mining Engineers *Institution of Municipal Engineers *Institution of Nuclear Engineers *Institution of Plant Engineers *Institution of Production Engineers Institution of Public Health Engineers Institution of Structural Engineers Institution of Water Engineers and Scientists International Solar Energy Society Metals Society Operational Research Society *Plastics and Rubber Institute *Royal Aeronautical Society

94 APPENDIX

Royal Geographical Society *Royal Institute of British Architects *Royal Society of Chemistry Royal Society of Health * Royal Institution *Royal Institution of Chartered Surveyors Royal Institution of Naval Architects Royal Meteorological Society *Royal Society of Arts *Royal Town Planning Institute *Society of Business Economists *Society of Dyers and Colourists Textile Institute *Denotes present and past members of The Watt Committee Executive


GENERAL OBJECTIVE The objective is to promote and assist research and development and other scientific or technological work concerning all aspects of energy and to disseminate knowledge generally concerning energy for the benefit of the public at large. TERMS OF REFERENCE The Watt Committee on Energy, being a Committee representing professional people interested in energy topics through their various institutions, has the following terms of reference: 1. To make the maximum practical use of the skills and knowledge available in the member institutions to assist in the solution of both present and future energy problems, concentrating on the U.K. aspects of winning, conversion, transmission and utilisation of energy and recognising also overseas implications. 2. To contribute by all possible means to the formulation of national energy policies. 3. To prepare statements from time to time on the energy situation for publication as an official view of The Watt Committee on Energy in the journals of all the participating institutions. These statements would also form the basis for representation to the general public, commerce, industry and local and central government. 4. To identify those areas in the field of energy in which co-operation between the various professional institutions could be really useful. To tackle particular problems as they arise and publish the results of investigations carried out if suitable. There would also, wherever possible, be a follow-up. 5. To review existing research into energy problems and recommend, in collaboration with others, areas needing further investigation, research and development. 6. To co-ordinate future conferences, courses and the like being organised by the participating institutions both to avoid overlapping and to maximise cooperation and impact on the general public.

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EXECUTIVE COMMITTEE as at March 1982: Chairman Dr J.H.Chesters, O.B.E., F.Eng., F.R.S. M.Anthony, Institution of Mining and Metallurgy H.W.Baker, Institution of Civil Engineers C.W.Banyard, Treasurer, Institute of Cost & Management Accountants H.Brown, Institution of Plant Engineers Professor I.C.Cheeseman, Chartered Institute of Transport A.Cluer, Institute of Petroleum Professor A.W.Crook, Institution of Mechanical Engineers Dr W.C.Fergusson, Plastics and Rubber Institute R.S.Hackett, Institution of Gas Engineers Professor D.O.Hall, Institute of Biology Dr P.Hutchinson, Combustion Institute Dr A.F.Jackson, Institution of Electrical Engineers Dr J.D.Lewins, Institution of Nuclear Engineers G.K.C.Pardoe, Royal Aeronautical Society W.B.Pascall, Royal Institute of British Architects Dr J.M.W.Rhys, Society of Business Economists Dr P.A.A.Scott, Royal Society of Chemistry J.M.Solbett, Institution of Chemical Engineers Professor J.Swithenbank, Institute of Energy G.Victory, Institute of Marine Engineers J.G.Worley, British Nuclear Energy Society J.G.Mordue, Secretary Note: 1. A part of the executive rotates on an annual basis at 30th April each year. The following institutions were members of the executive for the years shown:

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1980/81 Institution of Electrical & Electronics Dr G.F.Reynolds Technician Engineers Institution of Production Engineers Dr J.C.McVeigh Royal Institution Sir Peter Kent Royal Institution of Chartered Surveyors K.W.Bailey Royal Society of Arts T.Cantell Royal Town Planning Institute F.J.C.Amos 2. Professor J.E.Allen, Royal Aeronautical Society, is Adviser to the Business Planning Committee. Sir Peter Kent, Royal Institution, is a member of the Business Planning Committee.

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Passive Solar Energy in Buildings: Watt Committee: report number 17 (Watt Committee Report No 17)

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European Energy Scene: Papers Presented at the Tenth Consultative Council of the Watt Committee on Energy, London, 21 May 1981

World Energy Council Survey of Energy Resources

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Evaluation of Energy Use: Watt Committee: report number 6

Domestic Energy and Affordable Warmth (Watt Committee on Energy, Report Number 30)

Passive Solar Energy in Buildings: Watt Committee: report number 17 (Watt Committee Report No 17)

Development of Energy Efficiency Indicators in Russia (IEA Energy Papers)

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The Energy of Nature

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Optimization in the Energy Industry (Energy Systems)

Geothermal Energy: Renewable Energy and the Environment

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