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COM (84) 087 
 
 
 
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COMMISSION OF THE EUROPEAN COMMUNITIES
COM (84) 87 final
Brussels, 29th February 1984
PROGRESS IN STRUCTURAL CHANGE - THE MAIN FINDINGS  
OF THE COMMISSION'S REVIEW OF MEMBER STATES' ENERGY  
POLICIES
(Communication from the Commission to the Council)
COM (84) 87 final

1
PROGRESS IN STRUCTURAL CHANGE:
THE MAIN FINDINGS OF THE COMMISSION'S REVIEW  
OF MEMBER STATES' ENERGY POLICIES
CONTENTS
Paragraphs
INTRODUCTION 1-2
PROGRESS IN STRUCTURAL CHANGE:
THE COMMUNITY AS A WHOLE 3-4
THE OUTLOOK FOR THE COMMUNITY 5-7
MEMBER STATES' ENERGY PROGRAMMES 8-18
Belgium 9
Denmark 10
Germany 11
Greece 12
France 13
Ireland 14
Italy 15
Luxembourg 16
Netherlands 17
United Kingdom 18
POLICY IMPLICATIONS 19-22
Areas of Concern 20-21
Priorities 22
CONCLUSION 23
Table 1 - (Main Trends in the Community Energy Balance 1973-1990) 
Table 2 - (Main Energy Indicators - European Community)
Table 3 - (Trends in Final Energy Consumption - European Community) 
Table 4 - (Variations among Member States)

-  2 -
PROGRESS IN STRUCTURAL CHANGE:
THE MAIN FINDINGS OF THE COMMISSION'S REVIEW OF 
MEMBER STATES' ENERGY POLICIES
INTRODUCTION
1. In a separate and more detailed Communication to the Council 
(C0M(84)88) the Commission is presenting a full analysis of Member 
States' energy policies, the third major review since the Council agreed, 
in a Resolution of June 1980, on Community energy objectives to 1990. 
The aim of this separate paper is to summarise the main findings of that 
analysis and to outline some important policy conclusions which should 
guide future debates on energy policy at Community and at national level.
2. In its analysis the Commission has taken into account the main 
guidelines included in the 1980 Council Resolution. These are:
(i) to reduce to 0.7 or less the average ratio between the rate of
growth in gross primary energy demand and the rate of growth of
gross domestic product;
(ii) to reduce oil consumption to a level of about 40% of gross primary 
energy consumption;
(iii) to cover 70-75% of primary energy requirements for electricity
production by means of solid fuels and nuclear energy;
(  iv )  to encourage the use of renewable energy sources so as to increase 
their contribution to the Community's energy supplies;
(v) the pursuit of energy pricing policies geared to attaining
Community energy objectives.
The review does, however, look more closely than in the past at the 
relationship between energy and economic activity, using supplementary 
indicators of energy efficiency. It also examines the extent to which the 
guidelines for 1990 are still relevant, given that the fall in energy and 
oil demand during the last four years has been much steeper and more 
sustained than was imagined in thf- immediate aftermath of the second "oil 
crisis".
PROGRESS IN STRUCTURAL CHANGE: THE COMMUNITY AS A WHOLE
3. There have been major changes on the energy and oil markets in the 
Community since 1973, and especially since 1979, as Tables 1 and 2 show:

- 3 -
- inland energy demand for the Community as a whole in 1983 was over 6% 
lower than in 1973;
- inland oil demand was down by 27%;
- dependence on imported oil for total primary energy supply has 
virtually halved (from nearly 62% to 32%);
- oil use in electricity generation has fallen by nearly 40%, oil now 
accounting for 13% of total electricity inputs compared with nearly 
32% in 1973.
4. There are five main reasons for these changes:
(i) a very major improvement in the relationship between energy demand  
and gross domestic product.
The ratio between primary energy demand and GDP fell by over 19% 
between 1973 and 1982 and by nearly 12% between 1979 and jL982 
alone. There were even greater improvements in the intensity of 
final energy demand in industry (which fell by 27% between 1973 and 
1982) and in the household and tertiary sectors where final demand 
fell by 23% in the same period. Only in the transport sector has 
there been a worsening of the ratio, with the share of transport in 
final energy demand rising significantly over the period (Table 3).
Changes in these ratios over time are not in themselves conclusive 
proof of greater energy efficiency. The improvement in the 
relationship between GDP and primary energy demand is partly the 
result of a fall in the share of GDP taken by manufacturing 
industry. In industry itself the fall in energy intensity is partly 
due to changes in industrial structure, notably the reduced 
importance of the energy-intensive heavy industries. But even 
allowing for these structural changes there have still been clear 
improvements in the efficiency of energy use, most obviously in the 
household sector. These have been analysed more fully in a separate 
study by the Commission services .
(ii) the coming on stream of North Sea oil. In 1973 practically all 
Community oil was imported. In 1983 the Community was producing 
2.6 mbd or over 30% of its own oil requirements, mainly from the 
North Sea.
(iii) increased use of nuclear power. In 1973 nuclear provided 7.5% of 
the inputs to electricity production and met less than 2% of inland 
energy demand. By 1979 the figures had risen to 13.3% and 3.8% 
respectively. In the past four years there has been a "quantum 
leap". In 1983 nuclear provided over 27% of the inputs to 
electricity and met nearly 9% of inland energy demand.
(iv) greater recourse to natural gas. Natural gas production in the 
Community in 1983 was around the same level as in 1973, having 
declined from its peak during the mid-late 1970s. But natural gas
1. Energy intensity = ratio between final energy demand and output, 
expressed in real terms at 1975 prices.
2. European Economy N° 16, July 1983.

- 4 -
consumption, despite reductions since 1979, was up by nearly 40% 
compared with 1973. Practically all this increase has been met by 
imports, which now.account for 29% of gas demand.
(v) increased use of solid fuels for electricity generation. Solid fuel 
consumption as a whole in 1983 was down by nearly 7% compared with 
1973. But the use of solid fuels in power stations has increased by 
some 22% during the past 10 years and solid fuels accounted for 
nearly 47% of the inputs to electricity generation in 1983.
THE OUTLOOK FOR THE COMMUNITY
5. The latest available projections submitted by Member States for the 
review exercise indicate the following outlook for 1990 in terms of the 
Community guidelines:
- total oil demand will be down to some 43% of gross primary energy 
demand in 1990, compared with 48% in 1983. This is on the high side, 
but not out of line with the Community guideline of "about 40%".
- the combined role of solid fuels and nuclear in electricity generation
will continue to increase, although with nuclear continuing to grow 
much more rapidly ir importance. In 1990 nuclear should be providing 
close to 40% of electricity inputs, and solid fuels and nuclear 
combined over 80%. When hydropower and other renewables are taken into 
account, oil use in power stations could fall to 10% or less of the 
total.
- energy intensity is unlikely to worsen and could improve, although the 
changes that are projected by Member States are much smaller than those  
of the past ten years.
6. These detailed projections for 1990 should be treated with caution, 
particularly since - surprising as it may seem - many Member States have 
not yet fully revised their forecasts since the second "oil shock". But 
the overall trends now seem plausible. Even supposing faster economic 
growth than assumed in Member States1  submissions ,  the movement away 
from oil in the Community as a whole seems more likely to be consolidated 
than weakened during the next few years as new structural investments 
take effect.
On the supply side the growth in nuclear capacity by 1990 is now more or 
less predetermined by construction and commissioning programmes already 
under way. Any plausible growth in electricity demand should be met, in 
most Member States, by nuclear and solid fuel—fired plant without 
recourse to oil; in others the use of natural gas will help to avoid 
significant increases in oil demand.
On the demand side the picture is less certain, but even on pessimistic 
scenarios energy and oil demand seem unlikely to increase significantly, 
in particular:
3. An average of 2.4% a year 1985-1990.

- 5 -
- in the household/tertiary sector oil demand has fallen by over 30% 
since 1979 as a result of energy saving measures (insulation, more 
efficient heating systems etc.) and substitution - notably a shift to 
gas. Much of this gain will be irreversible. To return to its 1979 
level oil consumption in this sector would have to increase by 6% p.a. 
between 1983 and 1990, two and a half times the projected increase in 
inland energy demand.
- industrial demand for oil would have to experience an even higher 
growth rate, which is improbable.
- transport is the largest oil consumer and the area where the most 
limited change has occurred so far. But major R, D & D programmes to 
improve fuel economy are now beginning to bear fruit and this should at 
the least offset any tendency towards increased mileage.
- in any case, the trends towards improved energy efficiency and oil 
substitution would almost certainly be enhanced by higher rates of 
economic growth since this would in turn accelerate the turnover of 
capital stock.
7. Provided, therefore, that there is no substantial and sustained fall 
in relative oil prices in ECU terms during the rest of this decade the 
Community's dependence on oil is unlikely to grow and could well decrease 
further by 1990.
The major questions now relate to developments in the 1990s and to the  
variations among Member States both in achievements and prospects.
MEMBER STATES' ENERGY PROGRAMMES
8. Member States vary considerably as to their level of economic 
development, economic and industrial structures, geographical situations, 
energy resource endowments and the political and administrative 
frameworks within which energy policy is developed and directed. These 
differences help to explain some of the differences in progress in 
reducing dependence on imported oil. But the different rates of progress 
also reflect both variations in policy and the success with which policy 
has been implemented, notably in electricity generation and in the 
encouragement of more rational energy use.
In general the degree of consistency among Member States' policies has 
grown over the past few years. Throughout the Community there have been 
improvements in pricing policy; in the mix of fuels in electricity 
generation; and greater attention to energy saving and energy R, D & D. 
But much remains to be done and there remain major differences of 
approach and achievement. These are examined fully in Part Two of the 
separate report by the Commission (C0M(84)88). The position in each 
Member State and the key issues of interest in a Community context that 
arise from that report can be summarised as follows. Some of the key 
figures are given in Table 4.

-  6 -
9. Belgium has made steady progress in improving her energy situation 
since 1973, reducing dependence on oil from 62% in 1973 to close to 50% 
in 1982. The main element has been the nuclear power programme which has 
driven down oil demand in the electricity sector. In 1982 nuclear 
supplied some 33% of primary energy inputs to Belgian electricity 
production, the second highest percentage in the Community (after 
France). Belgium expects to reduce her dependence on oil still further 
as nuclear output more than doubles during the rest of this decade, with 
oil dependence projected to fall to 41% by 1990.
Until recently less attention has been given to energy savings policies 
than to management of the supply side. The industrial restructuring of 
the past few years, and especially the decline in importance of the heavy 
energy-intensive industries, together with a policy of relatively high 
energy prices, has led to a considerable improvement in the intensity of 
energy use. But the unrealised potential for energy saving is large and 
the outlook projected by the Belgian government seems less than 
satisfactory in this respect. Recently, however, new emphasis has been 
given to energy savings policy, backed up by Government finance, which 
should encourage greater progress.
Other areas where important issues arise are:
(i) the Belgian coal industry which is the highest-cost producer in the 
Community;
(ii) natural gas demand. At a time when demand expectations were high 
Belgium contracted for increased supplies of natural gas over the 
coming years, including Algerian LNG, which are more than the 
market in the medium term now seems likely to require. Excess 
quantities are being burned in power stations to replace fuel oil.
In addition, final decisions have yet to be taken on the electricity 
ordering programme for the early-mid 1990s, but these are understood to 
be imminent.
The conclusion last year of a long-awaited Parliamentary debate on energy 
should provide a helpful impetus to future policy decisions in these and 
other areas.
10. Denmark has effected an impressive switch away from oil over the 
past ten years by conversion from oil to imported coal in the power- 
station field, vigorous en. rgy saving policies.r^ali stic energy pricing 
and high energy taxation, and development of the tradition of collective 
heat arrangements. Dependence on oil fell from nearly 89% in 1973 to 
less than 66% in 1982; coal in 1982 provided nearly 92% of the inputs to 
electricity-generation compared with less than 40% ten years ago; the 
reduction in energy intensity has been marked, notably in the residential 
and industrial sectors. Further consolidation of progress away from oil 
is planned, bringing projected oil dependence down to 52% by 1990.
The high dependence of the electricity system on imported coal demands a 
correspondingly high level of "risk-spreading" through geographical 
diversification of sources of imports. The Danes have made considerable 
efforts in this direction.

- 7 -
Important decisions have also been taken to develop Denmark's offshore 
hydrocarbon resources. Danish offshore oil now meets 15% of Danish oil 
requirements and by 1990 this could be as high as 40%. Natural gas from 
the Danish sector of the North Sea is planned to play an increasingly 
important role in the domestic and industrial heat supply system later in 
the decade and also to be a limited source of exports.
Energy planning in Denmark has produced highly successful results. The 
Danish experience, notably in energy conservation and district heating, 
should be of considerable interest to other Community members. The 
expertise developed in the planning field now needs to be brought fully 
to bear to help minimise the high costs involved in the major task of 
introducing natural gas into the energy system.
Early decisions are also desirable on the place (if any) of nuclear 
energy in the electricity system in the 1990s. Reports are expected to be 
submitted to the government this year on nuclear safety and waste 
disposal. Rapid follow-up action is needed to facilitate long-term
planning of the electricity supply system.
11.  During the past ten years Germany has consolidated an already 
relatively diversified structure of energy supply and demand by 
significantly greater recourse to nuclear energy, continuing commitments 
by the electricity industry to the German hard coal industry, more 
widespread use of natural gas and important improvements in energy 
intensity. The process of change has been encouraged by a generally
market-based approach to pricing and vigorous policies to improve energy 
efficiency. During the remainder of this decade there should be a further 
major shift towards nuclear power as new stations come on stream, helping 
to reduce projected oil dependence to around 41% compared with 44.5% in 
1982.
There are four important issues for the future:
- the problems of the German hard coal industry which now has to adjust 
to a new and less buoyant market outlook. The speed of phasing out 
excess capacity, a process already under way, will need to be a 
continuing focus of policy attention;
- the electricity ordering programme for the 1990s, and notably the 
respective roles for nuclear and coal;
- the costs of the electricity system. The commitments by the
electricity industry to burn large quantities of German coal, entered 
into a time when demand expectations were higher than today, 
inevitably raise the average costs of German electricity production 
in more depressed market conditions. The new more stringent
environmental legislation will also impact on electricity costs (as 
well as coal-based district heating);
- the continuing need to reduce oil demand outside the electricity 
generating sector. On some scenarios oil consumption could increase 
in volume terms. These scenarios may well be pessimistic, but the 
outlook clearly needs to be kept under careful review and further 
opportunities for reducing oil dependence vigorously sought. It is 
noteworthy in this context that the German government has ceased to

-  8 -
give financial support to energy conservation in the domestic sector 
where, despite a good deal of progress, there appears to remain 
considerable potential for reducing oil demand.
12. During the 1970s Greece made useful progress in reducing dependence 
on oil in electricity generation by some conversion to solid fuels. But 
in other sectors oil use increased. Energy intensity in industry has 
fallen since 1973 but is still high compared with the Community average.
In 1982 Greece depended on oil for 73% of energy supplies. Current plans 
aim to ensure a very major improvement in this situation during the 
remainder of this decade and beyond, bringing oil's share in primary 
energy demand down to 57% by 1990. This will require in particular, a 
very heavy capital expenditure programme to develop domestic lignite 
resources and lignite-based power generating capacity; attention to 
renewable energies; and hydrocarbon exploration.
Key questions for the future are:
- whether adequate financial resources and technical and managerial 
expertise will be mobilised to implement this ambitious programme. In 
this respect it is desirable that Greece should encourage more 
widespread recourse to external experience and resources;
- how far the burden of the investment programme and the long-term cost
of the electricity system could be reduced by greater recourse to 
imports of hard coal than currently planned. The aim of the Greek 
authorities is to develop their indigenous resources in an optimal 
fashion. It is essential in this context that costs are fully
assessed.
- whether or not nuclear should play a role in the power station mix in 
the 1990s. Early decisions will be required if there is to be any 
reasonable expectation of a nuclear contribution by the late 1990s.
- the adequacy of policies outside the electricity generating sector. 
Plans to improve oil substitution in industry and the domestic sector 
are limited and energy saving policy is relatively weak. The 
weaknesses are accentuated by pricing policy.
- the importance of adapting the Greek oil monopoly to Community rules 
as early as possible and in any case by the end of 1985.
13. The clear commitment to nuclear power in France, combined with 
vigorous efforts in the field of energy saving, has brought radical 
changes in the French energy economy since 1973. Oil dependence has 
fallen from 72% to less than 53%. Nuclear now accounts for over half of 
the inputs to power generation, and coal for over one—quarter; energy 
intensity has fallen significantly. The process of substitution for oil 
is likely to continue and indeed to accelerate during the rest of this 
decade as available nuclear capacity doubles, giving France probably the 
highest share of dependence on nuclear energy for electricity generation 
(around 85%) of any country in the world.

- 9 -
Together with Denmark, France can claim some of the most impressive 
achievements in the engineering of structural change in the energy 
sector. But the changes in the energy situation of the past few years and 
a more conservative view of likely rates of economic growth are posing 
difficult problems, notably in the electricity sector and in the coal 
industry. There is also uncertainty about the future role of natural gas. 
One option for the electricity industry for the longer-term is a 
sustained policy of net exports of nuclear electricity to other Member 
States: this is obviously of considerable interest in a Community
context. In the coal industry there has been a good deal of uncertainty 
about the direction of future policy, but recent decisions imply a 
gradual reduction in output during the remainder of the decade. On some
scenarios there could be a significant potential excess supply of natural 
gas later in the 1980s. Important decisions will be required in each of 
these areas in the next few years.
France has ambitious objectives for the contribution of new and 
renewables and for further improvements in energy efficiency, to be 
promoted in both cases by a special coordinating agency, the Agence 
Française pour la Maîtrise de l'Energie (AFME). These programmes are 
supported in part by investment aids from a special fund financed by a 
tax on motor fuel. The operations of the AFME and the financing 
arrangements should be of particular interest to other Community members 
where less vigorous programmes are in force. It is notable that in 
contrast to some other Member States with a good record on energy saving, 
France shows no signs of reducing financial incentives in this field and 
apparently sees further potential still to be exploited.
14. Ireland has made considerable progress in reducing dependence on 
oil. Key elements have been, first and foremost, the development of the 
Kinsale Head gas field which has allowed natural gas to substitute for 
oil on a large scale in the electricity generating sector; the 
development of indigenous peat; and the switch to solid fuels (mainly 
imported coal) for domestic heating. Dependence on oil has fallen from 
79% in 1973 to less than 56% in 1982. Current forecasts assume further 
improvements in this situation but at a slower pace than in the last ten
years. The major change will be the shift from natural gas to imported
coal in power stations, although oil use in power stations is expected to 
increase in volume terms. Oil and gas were discovered in the Celtic Sea 
Basin in autumn 1983, which could change substantially the longer-term 
energy outlook.
Other main issues for the future are :
- energy saving policy, where the rôle of regulatory measures and 
financial incentives has been particularly weak;
- the development of premium markets for natural gas. Agreement has
been reached on the construction of a gas pipeline for supplying 
Northern Ireland with natural gas from Kinsale. This will provide an
export outlet to help reduce gas use in power generation. Natural
gas from Kinsale is now also available in Dublin. But continuing 
efforts are needed to ensure more widespread access to gas by 
domestic consumers.

-  1 0  -
15. Progress in Italy so far has been disappointing in a number of 
respects. Oil dependence has fallen since 1973 but proportionately less 
than in all Member States apart from Greece (which is at a rather lower 
level of development) and Luxembourg (where oil use was already 
relatively low). Italy still depended on oil for over two-thirds of her 
energy supplies in 1982 and solid fuels, nuclear, hydro and other 
renewables played together a smaller role in electricity generation than 
in almost all other Community countries.
There has been some improvement in the relationship between energy and 
GDP and the intensity of final energy demand in industry fell by 27% 
between 1973 and 1982. But these improvements have been heavily 
influenced by structural change in the economy. Conservation policy as 
such has been limited. Progress has been made in recent years in 
developing a more realistic approach to electricity and oil product 
pricing than in the 1970s but much still remains to be done.
While specific geographical and economic factors help to explain the 
limited progress that has been made, the lack until 1981 of a clear 
political and parliamentary consensus on energy policy prevented rapid 
and sustained action.
In its last report on Member States' programmes, the Commission welcomed 
the 1981 Italian Energy Plan as a major step forward, offering the 
prospect of a radical improvement in the situation over the coming years. 
Discussion of the Plan appeared to demonstrate a general recognition of 
the need for a more coherent energy policy and, specifically, progress in 
the fields of electricity generation and energy saving. But progress in 
implementing many aspects of the 1981 Plan has been slow and many of the 
objectives have now been scaled-down or re-timed. This applies 
particularly to the power station programme for the longer-term where 
some projected investments have been put back by several years. The 
major Energy Conservation Law of 1982 has only been partially implemented 
and as yet there has been no commitment of expenditure. Problems have 
also arisen in the introduction of natural gas into the Italian energy 
system because of the fall in gas demand and difficulties in distribution 
to premium markets; there has been consequent pressure to burn natural 
gas in power stations.
These elements taken together suggest considerable uncertainty about the 
rate of future progress in oil substitution and more efficient energy 
use. Even if current energy projections are realised, nearly half of 
Italian electricity will still be produced from oil in 1990 and Italy 
will remain dependent on oil for 57% of her energy supplies. The outturn 
could be even less satisfactory. It is essential that the planned switch 
to nuclear and coal in the power-generating sector should not be further 
delayed by continued problems over siting or the interim use of natural 
gas in power stations; and that the provisions of the Energy Conservation 
Law are fully enacted. There is a major risk that, unless the outstanding 
logjams are broken, Italy's energy position vis-à-vis the other larger 
Member States will further deteriorate between now and 1990.
Luxembourg1  s small size and the domination of the economy by the 
steel industry have set a special framework for the development of energy
POdlCy‘  d / pendenCe was relatively low in 1973 and it has since been
reduced still further through the diversification of inputs (electricity, 
natural gas) to heat-raising in the steel industry and in the domestic

-  11  -
sector. Practically all Luxembourg's energy is imported and the planning 
of future imports of gas and electricity from neighbouring countries will 
continue to be a key element in energy policy. Other important areas of 
policy for the future are:
- the need to introduce a more comprehensive energy saving policy 
(policies in the domestic sector and transport have been particularly 
limited so far);
- further progress in bringing the post-tax prices of motor fuels more 
into line with those in other Community countries;
- improving and extending the natural gas distribution network so as to 
give wider access by domestic consumers to gas as an alternative to 
oil for heating.
17. The energy economy of the Netherlands is dominated by natural gas, 
and gas revenues (like those from oil in the United Kingdom) are a major 
element in the financing of the government budget. The availability of 
large supplies of indigenous natural gas helped in itself to reduce Dutch 
dependence on oil during the 1970s. But it has also affected the pace at 
which substitution by other non-oil fuels has occurred, notably in the 
electricity sector.
In 1982 the Netherlands was still dependent on oil for nearly a quarter 
of the inputs to electricity-generation. A programme of conversion from 
oil to coal in electricity generation is underway and the projections 
indicate that by 1990 solid fuels could provide over 40% of the inputs to 
electricity. In the meantime, however, natural gas is expected to 
substitute increasingly for oil in this sector under new arrangements 
between Gasunie and the electricity industry. Even if the programme of 
conversion is completed total inland oil demand will increase by 15% 
between 1982 and 1990 and oil dependence will increase. The completion 
of the conversion programme is therefore of major importance.
The pace of restructuring on the demand side has been faster. The 
Netherlands has had one of the most wide-ranging energy conservation 
programmes in the Community, with a high level of government budgetary 
expenditure. The government is now reexamining aspects of this programme 
against a background of budgetary stringency and a general policy of 
"deregulation". Account must be taken in this review of the constraints 
on investment in efficient energy use in a generally depressed investment 
climate.
Other policy issues of particular interest in a Community context are:
- gas export policy. The Dutch government has indicated a change in gas 
export policy which could release larger quantities of Dutch gas for 
sale in other Member States in the 1990s.
- nuclear policy. A long Public Debate on (Nuclear) Energy has reached a 
turning point with the recent publication of the final report by its 
Steering Committee. It is important for the planning of the 
electricity supply system in the 1990s that early decisions should now 
be taken by the government about the future role of nuclear power.

-  12  -
18. The United Kingdom has enjoyed a uniquely favourable set of 
circumstances in the energy field since 1973 in comparison with other 
Member States - an already diversified energy supply structure, the 
advent of North Sea oil, and powerful tools of government intervention. 
The harnessing of North Sea oil resources is one of the major success 
stories of the 1970s. In 1973 the United Kingdom depended on imported 
for nearly 50% of her energy demand. In 1982 she was a sizeable net 
exporter of oil.
A large share of oil exports from the UK has gone to other Community 
members. But access to North Sea oil and gas has reduced pressures to 
develop a more integrated gas market, in particular, with continental 
Europe. A limited cross-Channel electricity link exists with France; but 
there is no direct gas link with continental Europe. It could be of 
interest both to the UK and to other Community members to encourage 
better links with the continent, exploiting the scope for cost savings 
all round and improving energy security.
A second effect of access to large-scale indigenous resources has perhaps 
been to circumscribe the role of energy saving policy. The United 
Kingdom has made progress in reducing energy intensity but a slower pace 
than in many other Community countries, and in the industrial sector the 
scope for improvement appears to be particularly great. Successive 
policies of restraint on energy prices in the 1970s undoubtedly 
discouraged improvements in energy efficiency. During the past four years 
pricing policy has been put on a sounder footing, and the financial 
situation of the gas and electricity industries is now much healthier. 
But there are uncertainties about the future direction of energy pricing 
policy and specific weaknesses in gas pricing. The recent creation of an 
Energy Efficiency Office is intended to reflect a new priority for energy 
savings policy. It has a major job to do in ensuring that the potential 
for energy saving can be exploited.
The available data suggest that oil dependence in the United Kingdom 
should have fallen to 38/39% in 1990 compared with 40% in 1982. The main 
element will be the coming on stream of new nuclear stations. Demand for 
coal is expected, at best, to stabilise. A difficult process of 
structural adjustment is now under way in the UK coal industry and will 
be a continuing focus of policy attention. There are also important 
decisions to be made in the coming years about the "new generation" 
nuclear programme in the light of the results of the ongoing enquiry into 
the construction of a PWR at Sizewell. The results of this enquiry 
should be acted on in a timely fashion so as to reduce uncertainty for 
the nuclear and electricity industries.
POLICY IMPLICATIONS
19. One overriding lesson from the review of Member States' policies is 
that vigorous energy policies bring clear rewards. Those Member States 
with the most active policies in encouraging substitution for oil in 
electricity generation and the more rational use of energy have achieved 
the biggest gains.
A second lesson is that the existence of political commitments, 
agreements and programmes at Community level has helped to influence and 
reinforce energy policy at national level: in particular, the Community's

- 13 -
long-term objectives have provided a valuable framework for the 
development of national energy policies. The Council (Energy) has 
already recognised this point in its report on Community energy policy of 
4 November 1983.
Areas of Concern
20. But although progress to date and the outlook for the rest of the 
decade are relatively comforting the review has identified some major 
areas for concern :
(i) even if progress is sustained, the Community as a whole will still 
be dependent on imported oil for one third of its energy supplies
at the end of this decade as Community oil production begins to 
fall. The OPEC producers will probably supply a larger share of 
those imports than today. Given the continuing political tensions 
in the Middle East the risk of of a further major oil crisis 
cannot be ruled out particularly if there were to be major 
increases in oil demand in developing countries or other major 
industrialised countries.
(ii) some Member States will be much more vulnerable than others. The
coming years could well see a widening of the gap between the 
Member States which are the most and least dependent on oil. The 
differences are particularly likely to show up in the electricity 
generating sector. According to the latest projections, five 
Member States will still depend on oil for around 50% or more of 
their energy consumption in 1990 (Italy, Greece, Netherlands, 
Ireland, and even Denmark despite the considerable progress that 
has been made).  These differences could have very serious  
implications for the cohesion of the Community if a major oil  
crisis were to occur;
(iii) much remains to be done to create a real common market in energy  
supplies. There is considerable scope for improving transport 
infrastructure. The importance of adequate transnational gas 
interconnections (including a link between the UK and the 
continent) will be discussed further in the Commission's separate 
report on Natural Gas Supplies to 2000 which will be transmitted 
to the Council shortly. The Commission is also studying the scope 
for reinforcing transnational electricity systems;
(iv)  there are short-term and possibly medium-term surpluses of
capacity in the coal, electricity and natural gas sectors as a 
result of reduced growth in energy demand. The existence of these 
surpluses could delay the decisions needed to ensure further 
restructuring and diversification in the 1990s. In particular, 
the burning of additional quantities of natural gas in power 
stations in some Member States could, if existing contracts are
prolonged, slow down the introduction of solid fuels and nuclear 
energy ;
(v) the guidelines for 1990 are likely to be broadly met, but at a 
much lower level of demand than envisaged four years ago. The 
absolute level of availability and use of alternatives will in 
fact be much lower in 1990 than expected. This has implications

- 14 -
for the longer-term, since lower availability of supplies means 
that there will be less flexibility in the Community's energy 
economy.
21. Against that background a new horizon for energy policy coordination 
is now needed at Community level. The Commission intends therefore later 
this year to put forward for discussion with Member States scenarios for 
the development of energy supply and demand in the Community in the 
1990s. It will then propose new guidelines for monitoring progress into 
the middle of the next decade, taking account of the concerns expressed 
above.
Priorities
22. The review has also provided a clear picture of the policy areas to 
which priority attention should now be directed at national and at 
Community level. These are specified under the following general headings 
(the particular order is not intended to indicate any hierarchy):
(i)  Energy Pricing
Changes in the price of energy relative to other prices and in the price 
of oil relative to other sources of energy have played a major rôle in 
producing the structural changes summarised above. Energy prices will 
continue to be a very major determinant of action by consumers and 
investors. Pricing policy is generally on a sounder footing than in the
1970s but there are weaknesses. It is essential that progress should be 
sustained in the development of more rational energy pricing within the 
framework of an agreed Community approach, despite the relaxed conditions 
on the energy markets. The Commission will be submitting shortly to the 
Council a separate report on Energy Pricing Policy.
(ii) Energy Efficiency
A considerable potential for improved efficiency of energy use remains to 
be exploited, especially through the development and application of new 
technologies. Micro-electronics and advances in computer and materials
science offer the possibility of significant improvements in the 
management of scarce energy resources. In the transport sector, for 
example, where - despite technical progress - final energy consumption 
has significantly increased, the scope for improvement should be 
particularly great. But in other sectors too, much remains to be done, as 
the wide variety in achievements by Member States clearly indicates. The 
Community's programmes of R, D & D are particularly relevant. In a 
separate Communication the Commission is indicating possible avenues for 
additional action.

- 15 -
(iii) Oil Supplies
The continuing vulnerability of the Community can be reduced by four key 
forms of action:
- promoting exploration and development of oil world-wide and especially 
within the Community itself;
- intensifying relations with oil exporting countries;
- encouraging the more widespread introduction of dual-fired capacity in 
industry so as to give consumers greater flexibility among fuels;
- enhancing contingency arrangements for dealing with emergencies.
(iv) Solid Fuels
Solid fuel consumption is stagnant. Outside the power station sector 
solid fuels have made only limited inroads during the past few years 
despite their clear price advantage. Even in electricity generating
itself the use of nuclear power is rising much more rapidly than that of 
solid fuels and further progress by solid fuels here and in industry is 
likely to be affected by growing concern over the environment. The 
priority here must be the development and introduction of the more 
efficient and environmentally acceptable technologies required to make 
solid fuels attractive to industry. Support for these technologies is 
already an important element in the Commission's proposal for a third 
energy R & D programme and in the programme of Community demonstration 
projects.
On the supply side the main requirements remain to put the Community coal 
industry on a sounder footing so that it can contribute in a more cost- 
effective manner to the security of Community energy supplies, and to 
encourage the economic exploitation of lignite ^and peat. The Commission 
has already made specific proposals to this end .
(v) Electricity
There are three essentials:
- to encourage greater electricity penetration. The share of electricity 
in final energy demand increased from less than 12% to over 15% 
between 1973 and 1982 and is projected (from the submissions of Member 
States) to increase to only 17% by 1990. Increased use of electricity 
which also raised demand for oil would clearly be undesirable; but 
there is scope for greater electricity penetration where this raises 
the headroom for nuclear and solid fuels. The Commission is currently
4. COM(83)447 final, Draft Council Regulation concerning Community 
financial support for industries producing solid fuels.

- 16 -
studying where greater penetration can be achieved in an economic and 
efficient manner in substitution for oil and the most appropriate 
means of encouraging it;
- greater integration of the electricity transmission systems between 
Member States. The review has indicated the potential for increased 
intra-Community trade in electricity. The Commission is already 
engaged on a study of the scope for encouraging further extension of 
the transnational electricity network so as to facilitate these 
exchanges and to improve the economy and security of electricity 
supplies;
- to lay the foundations for an adequate and cost effective mix of  
electricity capacity for the mid-1990s. The pattern of fuel use in 
power stations in the 1990s will depend heavily on decisions taken 
over the next few years about new capacity and conversions. Nuclear 
has made great headway during the past few years and this is 
continuing. The Council has already recognised the importance of 
nuclear to the Community's future energy supply. In several countries, 
however, the rôle of nuclear in the 1990s must be clarified as a 
matter of urgency so as to facilitate planning of the electricity 
supply system.
(vi)  Natural Gas
Three questions deserve particular attention:
- the implications of increased use of natural gas in power stations.
Additional recourse to gas must be only at the expense of oil and must 
not be allowed to slow down progress in the introduction of additional 
solid fuels, nuclear or hydro power station capacity ;
- natural gas supply and security in the 1990s. The requirements will be 
analysed more fully in the Commission's separate paper on natural gas 
supply to 2000. The most pressing elements are the need for early 
negotiations between Norwegian and Community companies on the 
exploitation of the Troll gas field and greater attention than in the 
past to the cost and security benefits of improved transnational 
pipeline systems;
- the long-term role of natural gas in helping to reduce dependence on
oil. More analysis is needed now on the long-term costs of producing 
and transporting gas around the world and the implications for the 
expansion in the longer-term of its economic use.
(vii) New and Renewable Energies
Their contribution is still limited (less than 2% of inland energy 
demand) and the situation is unlikely to improve significantly during the 
rest of the 1980s. Longer-term prospects depend heavily on advances in 
technology as well as the evolution of energy prices. Public auhorities 
have a key role to play in ensuring continuity in and commitment to 
R, D & D, particularly at a time of weakening market signals. The 
Commission's proposals in the non-nuclear R & D field and the Community's 
demonstration programmes are particularly important in this context.

-  17 -
C 0 N C L U S I O N
23. The Council is invited:
- to endorse the Commission's analysis of the  
progress and outlook for structural change  
in the energy sector, including the areas  
of concern identified in paragraph 20  
above.
- to agree on the desirability of a new  
horizon for the coordination of energy  
policies, focussed on the mid-1990s  
(paragraph 21); and
- to agree on the priority areas for policy  
attention identified in paragraph 22 above.

-  18  -
TABLE 1: MAIN TRENDS IN THE COMMUNITY ENERGY BALANCE 1973-1990
MTOE
1973 1979 1982 1983 1  1990
(estimated) 1  (projected)
DEMAND
Gross Primary Energy Demand 968 1012 908 896,5 1  1061
Inland Energy Demand
(total): 931 985883 872,5 1  1032
Oil 564 537430 410 1  430
Solid Fuels 222 223216 207 1  245
Natural Gas 116 172158 162 1  194
SUPPLY 
Indigenous Production
(total): 351 458494 516 565
Oil 13 89118 130 106
Hard Coal 171 149151 )174144
Lignite and peat 26 3131 ) 35
Natural Gas 112 137116 119 114
Nuclear 18 3764 78 144
Hydro and Geothermal 9 1212 )1413
Other Renewables 1 1,51,5 ) 11
Net Imports
(total): 620 559418 373 496
Oil 596 487326 287 353
Solid Fuels 19 3446 37 65
Natural Gas 4 3644 47 80
Sources: Statistical Office of the European Communities and submissions by
Member States (July 1983 - January 1984)
5. Mid points of ranges submitted.

- 19 -
TABLE 2: MAIN ENERGY INDICATORS - EUROPEAN COMMUNITY 
(related to 1990 objectives)
1973 1979 1982 1983 1990
(est)(proj)
I.Share of oil
in gross energy consumption 62.1%55.,7%50.,1%48.2% 43%
II.Fuel inputg to electricity
production .  Shares taken by:
Solid fuels 46.1%47.,4%48,.7%46.6% 41%
Nuclear 7.5%13.,3%22.,8%27.5% 40%
Hydro and others 4.5%4.,9%4,.9%4.8% 4%
Natural gas 10.0%10..4%7,.1%8.0% 5%
Oil 31.9%24..0%16.5%13.1% 10%
Ill7.Supply dependence on:
Imported oil 61.6%48,.2%35.9%32.0% 33%
Imported solid fuels 2.0%3,.3%5.1%4.1% 6%
Imported natural gag 0.4%3.6%4.9%5.2% 7.5°/
IV.Share of imports in
gross consumption of:
Energy 64.0%55.2%46.1%41.6% 47%
Oil 97.8%86,.5%71.7%66.1% 77%
Solid fuels 8.6%15.1%21 .4 %17.9% 27%
Natural gas 3.5%21,.0%28.0%29.0% 41%
V1973/63
Average annual growth 
rates :
G D P  +4.7%
Inland energy consumptiog +4.6% 
Final energy consumption +4.8%
VI. Energy coefficient·^ 0.981975/73 1979/75 1982/79 1990/85
+0.3% 
-3.8%  
- 4.0%
VII.Energy ratio111973
833.01979
760.6
VIII.Intensity of final energy 
demand12+3.6% 
+3.4% 
+3.3%
0.94
1982
673.3+0.4% 
-3.6%  
-4.4%
1983
659.4
573.8 521.9 455.6 n.a.+2.4%
+1.6%
+1.0%
0.67
1990
669
439.5
6. Basic data expressed in oil equivalent terms
7. Respective shares of imported oil, imported natural gas or imported 
solid fuels in gross energy consumption.
8. Share of each imported energy source, in gross consumption of that 
source.
9. Non energy use included
10. Energy coefficient = ratio between growth rates of inland energy 
consumption and GDP
11. Energy ratio = volume of inland energy consumption per unit of GDP, 
expressed in real terms, at 1975 prices (in kg of oil equivalent per 
10J ECU)
12. Intensity of final energy demand = volume of final energy demand per 
unit of GDP, expressed in real terms at 1975 prices (kg per ECU)

-  20  -
Table 3 TRENDS IN FINAL ENERGY CONSUMPTION - EUROPEAN COMMUNITY
1973 1979 1982
|  INDUSTRY:
|  Energy consumption (1)
|  (in million toe)
|  Share in final consumption 
1
|  Energy consumption 
|  per unit of value-added(2)
|  (in kg oe per 10 ECU)247.94 
38.7% 
753.8237.54 
35.1% 
646.5193.06 
32.3% 
549.5
j  TRANSPORT:
|  Energy consumption (1)
|  (in million toe)
|  Share in final consumption 
1
|  Energy consumption 
|  per unit of GDP (3) 
j (in kg oe per 10 ECU)128.22 
20.0%
114.8152.44 
22.6%
117.7156.37 
26.2%
119.2
|  HOUSEHOLDS, etc...
|  Energy consumption (1)
|  (in million toe)
|  Share in final consumption 
1
|  Energy consumption 
|  per unit of private 
|  consumption (4)
|  (in kg oe per 10 ECU)264.94 
41.3%
395.6285.76
42.3%
356.8248.37 
41.5%
304.21990
228.4 
33.7% 
551.2
168.9
24.9%
109.5
280.8
41.4%
297.6
678.1
45.7%
67.9
Sources and General Notes:  Statistical Office of the European Communities (1973- 
1979); Member States'submissions 1985, 1990, supplemented where necessary by 
Commission estimates.
Notes:  (1) non-energy use, not included.
(2) volume of energy consumed in the industrial sector, per unit of value- 
added produced by industry, expressed in real terms, at 1975 prices (in 
kg of oil equivalent per unit of national currency).
(3) volume of energy consumed in the transport sector, per unit of GDP, 
expressed in real terms, at 1975 prices (in kg of oil equivalent per 
unit of national currency).
(4) volume of energy consumed in the residential + tertiary sector, per unit 
of Private Consumption, expressed in real terms, at 1975 prices (in kg 
of oil equivalent per unit of national currency).|  FINAL ENERGY CONSUMPTION | 641.10675.74 597.80 |
|  (in million toe) (1)1
j of which: Oil 159.1%55.3% 51.4% |
|  Final non-energy use |70.2569.37 52.77 |
|  (in million toe) 1

21
TABLE 4: VARIATIONS AMONG MEMBER STATES
(i)  Oil Dependence
(The share of oil in primary energy demand)
1973 1982 1990
Belgium 62 51 41
Denmark 89 66 52
Germany 56 44,5 41
Greece 81 73 57
France 72 53 36
Ireland 79 56 49
Italy 79 68 57
Luxembourg 37 35 32
Netherlands 56 48 52
United Kingdom 50 40 38.5
EUR-10 62 50 43(projected)
(ii)  Oil and Natural Gas Use in Electricity Generation  
(% of total primary energy inputs)
1973
Oil |Natural Gas OilNatural Gas OilNatural Gas
Belgium 5 2 ,5| 24 25 4 8 2
Denmark 61 | - 8 — 9 —
Germany 14 | 11 5 10 3 10
Greece 51 j - 30 — 7—
France 44 |6 10 2 2 1
Ireland 6 2 ,5 1 - 27 48 36 3
Italy 73 j 4 59 8 46 8
Luxembourg 24 j 9 19 - 13 7
Netherlands 13 j 78 23 45 14 35
United Kingdom 25 j 1 11 1 5 —
EUR-10 32 | 10 16 7 10 51982 1990 (projected)
(iii) Energy ratios’ ^  and intensity of final energy demand^
Index 1973 = 100
1982 1990 (projected)
Energy ratio| Energyintensity|Energy ratio Energy intensity
Belgium 77 j 72 j 76 72
Denmark 75 | 70 j 69 67
Germany 81 j 78 | 82 75
Greece 104 j 103 j 115 107
France 81 | 75 j 82 72
Ireland 87 j 84 j  83 79
Italy 84 | 88 |  82 83
Luxembourg 62 | 63 | 65 68
Netherlands 77 j 79 j 77 79
United Kingdom 82 | 84 j 79 80
EUR-10 81 | 79 | 80 77
13. Ratio of inland primary energy demand to GDP.
14. Ratio of final energy demand to GDP.