CELEX: 51977PC0187
Language: en
Date: 1977-05-25
Title: PROPOSAL FOR A COUNCIL REGULATION (EEC) on the granting of financial aids to demonstrate projects in the field of energy-saving#PROPOSAL FOR A COUNCIL REGULATION (EEC) on the granting of financial support for projects to exploit alternative energy sources (submitted to the Council by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (77) 187
Vol. 1977/0075
 ---pagebreak--- Disclaimer
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In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
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der genannten Verordnung freigegeben.
 ---pagebreak---       COMMISSION OF THE EUROPEAN COMMUNITIES
                                                         COM(77)187 final.
                                                         Brussels , 25 May 1977 *
«
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  i
                         PROPOSAL FOR A COUNCIL REGULATION (EEC )
              on the granting of financial aids to demonstrate projects
                              in the field of energy-saving
                         PROPOSAL FOR A COUNCIL REGULATION (ESC )
            on the granting of financial support for projects to exploit
                             alternative energy sources
                       ( submitted to the Council by the Commission )
    CCM(77 ) 187 final .
 ---pagebreak---      COMMISSION
       OP THE
EUROPEAN COMMUNITIES
                                             COM ( 77 ) 187 final
                                              ri
         PROPOSAL FOR A COUNCIL REGULATION ( EEC )
on the granting of financial aids to demonstrate projects
              in the field of energy-saving
 ---pagebreak---                   FINANCIAL ASSISTANCE FROM THE EUROPEAN COMMUNITY
          TO PROMOTE DEMONSTRATION PROJECTS IN THE FIELD OF ENERGY-SAVING
I.' THE OBJECTIVES OF THE PROPOSED SCHEME
    1. '     In its communication to the Council of the 24 February 1977 ( 1 ),
      the Commission took the view , amongst other proposals , that the
    Community should assist in the financing of selected demonstration
    projects to promote energy saving . In this communication, the Commission
      describes in detail the scheme it now submits to the.; Council for
    adoption .
    2.       Demonstration projects are intended to reduce uncertainty about
    the commercial and economic viability of energy saving techniques which
    are either newly developed or which have remained unused because of such
      uncertainties . Generally, this means that it is intended to demonstrate
      the commercial viability of energy saving techniques both to the
    manufacturers of plant , equipment , and appliances and to their potential
    customers . In a few cases however , demonstration projects may be justified
    by wider considerations , taking into account the economic benefits to
    society as a whole of an introduction of the techniques in question .
    3.       Uncertainties can be of two kinds . For a newly developed technique
    which is not proven on an industrial scale , there willvbe uncertainties
    about the technical and cost implications of its large-scale application .
    For both newly-developed and existing techniques there will also be a
     lack of familiarity on the part of potential customers or users which
    makes it very difficult for the manufacturer of equipment and appliances ,
    or the supplier of services , to evaluate the potential market , and which
    may discourage them from investing in a particular technique . Projects
    can be assisted which are inhibited by either of these two kinds of
      uncertainty .
    4.       In short , demonstration projects have as their objective the bringing
    into the market place of energy saving techniques . Whi.le they differ
    therefore from research and development programmes , whose objective is
      ( 1 ) C0M(77)39 final "An' intensification of the Community's' programme for
            energy saving".
 ---pagebreak---                                           -2 -
     the conception and design of technologies , they are a natural complement
     to them . The scheme for demonstration projects in the energy saving field
       must therefore be managed in close conjunction with national and Community
     research and development programmes in this field .
II . THE SCOPE OF THE PROPOSED SCHEME
     5. '     In' its communication to the Council of the 24th February 1977,
     the Commission gave the following examples of possible demonstration
     projects :
         ( r) heat pumps ,
       ( n ) heat recovery ,.
     ( nr) the combined production of heat and power ,
       ( i.v) energy storage ,
         ( v) selected projects for reducing waste in industry ,
       ( vi ) low energy houses .
     6. :     Projects to demonstrate the combined production of heat and power
     will typically involve a much larger scale of financial assistance than
     other projects , and are therefore worth a detailed consideration . The
     Commission believes that , in the medium term , substantial savings of the
       same order or even more than those expected as a result of improved
     standards of thermal insulation or more efficient individual heating
                                                                a*
     systems ( 2), could be obtained by a more general introduction of the
     combined production of heat and power . Combined heat and power production
       can also help to reduce the energy requirements of industry for process
     heat and to encourage the recycling of such heat where possible .
       7.      While there will be opportunities to demonstrate new technologies
     in the field of combined heat and power - particularly as regards heat
     ( 2) Proposals for a Community programme of this kind are made separately
            in document COM ( 77)... .
 ---pagebreak---  storage and the distribution system - the dominant uncertainty arises
 out of the long lead times for development and concerns the evaluation
 of the future market . This is particularly difficult where potential
 customers have no comparable experience of such a system / and are
 therefore reluctant to commit themselves to it in advance .
 8.     It is true that combined heat and power lacks sponsors for a
 multitude of reasons , many of them quite unrelated to its commercial
viability . Organisational and legal frameworks are frequently
obstructive and such constraints are difficult to overcome when no
 enterprises exist which are in the business of selling combined heat
and power . For this reason , the Commission has proposed to the Council
that' it adopts a recommendation to Member States which sets out to
tackle these problems /^ C0M(77) ..J , but the Commission also believes
 that demonstration projects sponsored by the Community and Member
States are an essential further action to take , to encourage investors
 to accept the risks inevitably imposed by the long lead times
 mentioned above .
9. '   Community assistance need not necessarily involve participation
 in the costs of the project itself . The feasibility studies which
 have to be carried out in great detail before such important invest­
ments are decided upon , are often themselves relatively complicated
 and costly . Where they seem particularly promising , the Community
 could consider helping to meet the costs of such feasibility
 studies .
 ---pagebreak---                                            _ H _
      10 . In addition to demonstration projects in the field of combined heat
      and power , the Commission believes that the Community should assist each
      year , a small number of relatively large industrial projects which may
      involve important energy savings in industrial processes or the launching
      of new products or processes with important energy-saving characteristics ,
      and of general application, into the market .
      Finally , there may be expected to be a number of small projects involving
      commercial trials of particular applications of heat pumps , methods of
      heat recovery and heat storage , or the design and functioning of low-
      energy houses .
      11 . Based on a level of activity which would enable the Community
      to support every year a minority share of the costs of around two district
      heating schemes , two applications of the combined production of heat
      power in industry , around five or six major industrial projects and a
      number of small projects involving commercial trials of particular appli-
                                                               /
      cations , the Commission proposest 'within the framework of provisions to "be
     made for this purpose in the general "budget of the Communities , to provide
     financial assistance to the demonstration of energy saving tchnologies .
      12 . After a trial period of three years , the scheme would be reviewed
      to determine , in particular , future levels of financial assistance .
III . THE MANAGEMENT OF THE PROPOSED SCHEME
      13 .      The Commission would be responsible for the detailed management
      of the proposed scheme with the benefit of expert advice from consultants
      as necessary , but would seek the opinion of an advisory committee created
      for the purpose and composed of representatives of the Governments of the
      Member states . The Commission would seek the opinion of the advisory
      committee on the following points in particular :
            ( i ) the priorities for action ,
          ( ii ) the criteria for project evaluation ,
        ( iii ) the terms of the standard contract or contracts by which the
                  Commission would define the respective rights and obligations
                  of the Commission and of the beneficiaries of any financial
                  assi stance .
 ---pagebreak---    ( iv)    the relationship of the Community 's scheme to national schemes , if
            any, for the support of comparable demonstration projects .
  • ( v)    the relationship of the scheme to national and Communitv researrh
             . .*•                            _. .
            and development programmes in the same field .
14 . Apart from the general indications given in section II above, the
Commission will propose priorities for action °ri the basis of the projects
submitted to it .
15 .. The criteria for project evaluation will place, particular emphasis
on the need to determine :
     ( i ) the commercial or economic viability of the technology to be
           demonstrated, allowing for the fact that the demonstration
           project itself may not be commercially viable from the outset ,
           but must be defensible on the basis of a comparison of the costs
           and benefits of support for society as a whole ;
   Xii ) the precise definition of the reasons which prevent the enterprise
           drawing on internal or national sources of finance to undertake the
           project ;
 ( iii ) the degree to which the technology is suitable for general appli­
           cation in all the Member states of the Community;
   ( iv) a precise definition of the benefits to be obtained in terms of
           energy savings by a general introduction of the technology throughout
           the Community .
16 . .The terms of the standard contract or contracts to be drawn up
by the Commission would cover in particular :
     ( i ) the rights of access of persons accredited by the Commission
           to have access to information and to the project itself, and
           the rights of the Commission with regard to a non-voting
           participation in the management of the project where the scale
           of the support or the nature of the project -should justify it ;
 ---pagebreak---                                       – 1 >–
                                    -6 -
    ( n ) the rights and obligations of the beneficiaries of Community
           assistance , and the protection of proprietary information and
           patents ;
  ( iii ) the conditions for repayment of the financial assistance given
           by the Community in the event of commercial success , and the
           rights of the Commission to seek independent verification of
           the degree of commercial success .
     ( iv)the circumstances in which the Commission shall be entitled to
           terminate its participation in a project and require repayment of
           its financial assistance .
17.     The Community scheme is designed to complement and not replace
financial assistance which may be offered by the Member states themselves .
Subject however to the Commission being satisfied that this condition
is fulfilled, the Community may find it advantageous to participate with
individual Member states in appropriate cases , in the financial assistance
to be given to a demonstration project .
18.      Finally , as was stated in paragraph 4 , the scheme to support
demonstration projects must be managed in close conjunction with national
and Community research and development programmes in this field and the
proposed advisory committee can help the Commission to maintain the
necessary close liaison with national research and development programmes .
 ---pagebreak--- PROPOSAL KIR A COUNCIL REGULATION ON THE GRANTING OP FINANCIAL
AIDS TO DEMONSTRATION PROJECTS IN THE FIELD OF ENERGY-SAVING
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community ,
and in particular Article 235 thereof ,
Having regard to the proposal from the Commission ,
Having regard to the Opinion of the European Parliament ,
Having regard to the Opinion of the Economic and Social Committee ,
Whereas , "by virtue of Article 2 of the Treaty , the Community has the duty
to promote the harmonious development of economic activity throughout the
Community, a continuous and balanced expansion and an increase in stability ,
Whereas in the present energy situation , a reduction in the rate of increase
in energy consumption will contribute effectively to the achievement of these
objectives ;
Whereas , in its Resolution of 17 September 1974 concerning a new energy policy
strategy for the Community , the Council approved the objective of a "reduction
of the rate of growth of internal consumption by measures for using energy
rationally and economically without jeopardizing social 'and economic objectives";
Whereas encouraging the demonstration of new technologies which directly result
in energy savings in -that they improve energy efficiency provides a means of
achieving this objective ;         .......
Whereas the first responsibility for financing such industries should be for
industry ; whereas , in view of the risks and large investments implied by such
activities , particularly with technologies which have not been subjected to full-
scale trials or applied commercially , provision should nevertheless be made for
the Community to support these activities particularly where they may benefit
the Community as a whole ;
 OJ No . C 153 , 9.7.1975 . P. 1 .
 ---pagebreak--- Whereas , m view of the need to limit such support to that which is strictly
essential , the Community must have at its disposal every means of assessing,
case "by case , the possible "benefits to it of such projects and their conformity
with the objectives of Community energy policy ;
Whereas , to this end "beneficiaries shall assume obligations towards the
Community , in return for the "benefits received ;
Whereas the Treaty does not foresee the powers necessary for these purposes ;
HAS ADOPTED THIS REGULATIONS
                                                        •7
                                  Article 1
As provided for in the following articles , the Community may grant support
for " Community projects" of paramount importance to improving the efficiency
with which energy is used .
                                  Article 2
1 . Every such project shall "be related to the creation of installations
making use on an industrial scale of new equipment , processes or products
for saving energy. Every project must genuinely "be the first of its kind
oapa"ble of providing a "benchmark and of "being an encouragement for other
installations of the same type in the Community .
                                                           *
2.   Community projects shall relate inter alia to the following areas :
    – heat pumps
    – heat recovery
    – combined production of heat and power
    – energy storage
    – rationalization of the use of energy in industry
    – low-energy dwellingb .
                                  Article 3
Responsibility for every project shall devolve upon a natural or legal person
constituted in accordance with the laws in force in the Member States of the
Community.
 ---pagebreak--- If the creation of a legal entity to carry out a project involves
additional costs for the participating undertakings , the project may
be carried out with no more than cooperation "between natural or legal
persons . In this case , these persons shall be jointly and severally
liable for the obligations resulting from Community support .
                                 Article 4
Support granted for a project may take the form of Community participation
in the project through financial support in the form of grants repayable
under certain conditions within the appropriations provided for this
purpose in the general budget of the Communities , and .taking into account
any other Community or national financial assistance to the project .    Such
support shall constitute only a minority share of the financing.
                                 Article 5
1 . Every project by individuals or undertakings in the Community shall be
subject to scrutiny by the Commission .
Every project must provide information on the following factors ;
– a detailed description of the project ,
– the financial situation and technical capabilities of the person or
   persons responsible for the project ,
–  the significance of the project for energy savings in the Community ,
                                                         *
-  the nature and extent of the financial risks of the project and its
   expected profitability,
–  the cost of the project and the financing arrangements proposed for its
   implementation ,
-  any other matter which might justify the type and extent of the support
   for the project , from the Commission ,
– the time scale for the execution of the project ,
- any support provided by or expected from Member States for the project ,
– how it is proposed to publicize the results .
The Commission shall determine which Community projects shall be granted
financial aid and shall be assisted by an Advisory Committee on the Management
of Demonstration Projects consisting of representatives of the Member States .
 ---pagebreak---                                 Article 6
The benefits granted by the Community must not affect the conditions of
 competition in a way incompatible with the principles contained in the relevant
provisions of the Treaty.
                                Article 7
 1 . The Commission shall set out the rights and obligations of each party
 in a contract with the beneficiary or beneficiaries of support for a
 Community project .
 2 . The person or persons responsible for implementing a project in receipt
of Community support shall send to the Commission , each year or at its request ,
a report on the fulfilment of contractual obligations towards the Commission
and in particular the progress of work on the project and the expenditure
incurred on it .
3 . The Commission shall have access at all times to the accounts relating
to the project . It may have checks performed in situ and from documentary
evidence as a means of monitoring the performance of the contract and in
particular the progress and implementation of Community projects .
4 . Where the extent of financial support from the Commission and the size of
the project so warrants , the Commission may propose , when the contract is drawn
                        9
up , to have a right to participate in the management of' the project without a
vote .
                                Article 8
The Commission shall report periodically on the application of this Regulation
to the European Parliament and to the Council which shall express an opinion
on the report .
                                Article 9
This Regulation shall enter into force on the day following its publication
in the Official Journal of the European Communities .
This Regulation shall be binding in its entirety and directly applicable in
 all Member States .
 ---pagebreak---      COMMISSION
       OP THE
EUROPEAN COMMUNITIES
                 PROPOSAL FOR A COUNCIL REGULATION
    on the granting of financial support for projects to exploit
                     alternative energy sources
            (Presented by the Commission to the Council )
 ---pagebreak---                        EXPLANATORY MEMORANDUM
In order to attain its objective of reducing dependence on imported energy,
the Community must "both seek to save energy and develop the resources
available in its territory . As the Commission has pointed out on several
 occasions ( see C0M(77)20 and COM(76)508 final ) this endeavour , which
 certain Member States have already begun , requires specific action by the
 Community in some cases .   This is particularly true of the application on
an industrial or semi-industrial scale of new technologies , processes ,
                         , . ,                          , , . technical-economic
equipment or products which are scientifically proved , but whose /viability
has not yet been demonstrated.                       ;
 2.   The attached proposal for a Council Regulation comes under the Council
energy policy programme for 1977 *     Its purpose is to enable support to be
given for demonstration projects or pilot plants using new techniques or
 technologies for exploiting alternative energy sources . This kind of
financial participation is a means of :
 (a) encouraging and expediting the execution of projects entailing
      financial , technical , and/or technological risks ;
 (b ) making successful installations set an example , thereby promoting
      swifter dissemination of the technology concerned .
Of specific concern here are projects to exploit geothermal fields
 (Annex 1 ), coal gasification and liquefaction projects (Annex 2 ) and,
for example , certain types of equipment for advanced nuclear reactors .
An indication of the financial implications     for the Community in the
two above mentioned fields are given in ths Annexes .
                                                                               \
This proposal Is to *. seen as part of a bigger package of Community
measures to promote the production of alternative energy sources
(e.g. technological projects in the hydrocarbons sector, uranium
prospecting, Euratom loans etc., other measures referred to m
documents COM(76)20 and COM(76)508 final).
 ---pagebreak---                   PROPOSAL FOR A COUNCIL REGULATION
    on the granting of financial support for projects to exploit
                    alternative energy sources
  THE COUNCIL OP THE EUROPEAN COMMUNITIES ,
  Having regard to the Treaty establishing the European Economic Community,
  and in particular Article 235 thereof ,
  Having regard to the proposal from the Commission ,
  Having regard to the Opinion of the European Parliament ,
  Having regard to the Opinion of the Economic and Social Committee ,
  Whereas , under Article 2 of the Treaty the Community shall have , as its
  task to promote the harmonious development of economic activities throughout
  the Community, a continuous and "balanced expansion and an increase in
  stability,
I Considering the Council Resolution^of 17 December 1974 and 13 February 1975
I concerning the objectives of Community energy policy and measures for
! achieving them:
                                                       *
  Whereas , in the present energy situation , greater exploitation of
  alternative energy sources in the Community will reduce dependence on
  imported energy , diversify energy supply and contribute s            to
  the attainment of these objectives ;
  Considering the Council Decision of 22 August 1975 adopting an energy
  research and development programme ;
  Whereas financial support should be granted after the research stage for
  exploration for and utilization of alternative energy sources , in view
  of the financial risks implied by new techniques and technologies and the
  high capital cost of such projects ;
  Whereas reference projects which will provide encouragement for other
  projects and thus promote their execution will be eligible for such
  support ;
 ---pagebreak--- Whereas of these proposed alternative energy sources the exploitation
of geothermal fields and the conversion of solid fuels into hydrocarbons ,
in particular , offer          development prospects ;
Whereas the execution of such projects        "bring with it the development
in the Community of an industry with the relevant skills as well as
providing potential access to industrial outlets of some substance outside
the Community ;
Whereas the granting "by the Community of "benefits envisaged must not
adversely affect the conditions of competition in a manner incompatible
with the principles embodied in the relevant provisions of the Treaty ;
Whereas , in view of the need to limit such support to that which is
strictly essential , the Community mast have every means of assessing ,
case by case , the possible benefits to it of such projects and their
conformity with the objectives of Community energy policy ;
Whereas , to this end, beneficiaries shall assume obligations towards the
Community in return for the benefits received ;
Whereas the Treaty does not provide the powers necessary for these purposes ;
HAS ADOPTED THIS REGULATION :
                              Article 1
As provided for in the following articles , the Community may grant
support for reference projects , known as " Community projects", to
exploit alternative energy sources in the Community which constitute a
reference and have sufficiently good economic prospects .
 ---pagebreak---                                     -3-
                                 Ar-ticle 2
1. The projects referred to in Article 1 shall have ag their basis the
   exploitation of energy sources using new techniques or technologies
    capable of providing a reference and encouragement for other installations
    of the same type ,
2.  Community projects shall relate to the following sectors inter alia :
       – exploitation of geothermal fields ;
       – conversion of solid fuels into hydrocarbons *•>
                                 Article 3
   Responsibility for every project shall devolve upon a natural person or
   a legal person constituted in accordance with the laws in force in the
   Member States of the Community .
   If the creation of a legal entity to carry out a project involves additional
   costs for the participating undertakings the project may be carried out with
   no more than cooperation between natural or legal persons . These persons
   shall then be jointly and severally liable for the obligations resulting
   from Community support . .              t      ■
                                                         «•
                                 Article 4
   Support granted for a project may take the form of Community participation
   in the project through financing in the form of grants , repayable under
   certain conditions , from the appropriations provided for this purpose in
   the general budget of the Communities , and taking into account any other
   Community or national financial assistance to the project . Such support shall
             constitute only a minority share of the financing.
   1 . Every project put up by individuals or undertakings in the Community
   shall be subject to scrutiny by the Commission . When examining each
   project the Commission, shall take into consideration inter alia the following
   factors :
 ---pagebreak---                                  -4-                        XVIl/1 58/77 -E
– a detailed, description of the project and the time scale for its
   execution ,
– the significance of the project for the reduction of dependence on
   imported energy , diversification of supply and possible energy
   savings ,
– the financial situation and technical capabilities of the person
   or persons responsible for the project ,
– the cost of the project and the following arrangements proposed for
   its execution .
                               financial
– the nature and extent of the/risks of the project and its expected
   profitability ,
– any other matter which might justify the type arid extent of the
   support proposed for the project "by the Commission ,
– any support provided "by or expected from Member States for the project ,
– how it is proposed to disseminate the results .
2 . The Commission shall determine which Community projects shall be
granted financial aid and shall be assisted in this by Advisory Committees
on the Management of Reference Projects consisting of representatives of the
Member States .
                               Article 6
The benefits granted by the Community must not adversely affect the
conditions of competition in a manner incompatible with the principles
embodied in the relevant provisions of the Treaty .
                               Article 7
1 . The Commission shall set out the rights and obligations of each
party in any contract with the beneficiary or beneficiaries of support
for a Community project .
2 . The person or persons responsible for implementing a project in
receipt of Community support shall send to the Commission , each year or
at its request , a report on the fulfilment of contractual obligations
towards the Commission and in particular the progress of work on the
project and the expenditure incurred on it .
 ---pagebreak---                                      -5-
3 . The Commission shall have access at all times to the accounts relating
to the project . It may have checks performed in situ and from documentary
evidence as a means of monitoring the performance of the contract and in
particular the progress and implementation of Community projects .
4 . Where the extent of financial support from the Commission and the size
of the project so warrants the Commission may propose , when the contract
is drawn up , to have a right to participate in the management of the project
without a vote .
                                 Article 8            >'r
The Commission shall report periodically on the application of this
Regulation to the European Parliament and to the Council , which shall
both express an opinion on the report .
                                Article 9
This Regulation shall enter into force on the day following its publication
in the Official Journal of the European Communities .
This Regulation shall "be binding in its entirety and directly applicable
in all Member States .
         /
                                                                   «
 ---pagebreak---                                                                     ANNEX 1
    USES FOR GEOTHERMAL ENERGY
 1 . Geothermal energy may "be defined as the Earth 's natural heat energy , most
      of that heat being produced "by the radioactivity of deep-lying rocks . Apart
      from seasonal variations , which only affect some tens of meters under the
      surface the temperature increases with depth by an average of one degree
     per 30 meters ; this implies a flow of heat outwards from the interior . The
     temperature in the center of the earth probably reaches a level of several
     thousands of degrees .
     Most of this thermal energy of the earth, however , is too diffuse to
     lend itself for commercial exploitation . Nevertheless there are zones where
     the heat is concentrated at depths within reach of economical drilling - in
     the order of some thousands of metres down .
     In the most favourable cases geothermal energy is delivered by steam at a
     comparatively low temperature, of about 200°to 300° C. It is consequently
     a form of energy that does not lend itself readily to transport for more
     than a few tens of kilometres .
2 . Two types of geothermal source sire presently exploited :
     a) "high-enthalpy" sources - i.e. fields of steam or water/steam mixtures
         at temperatures over 150 - 200° Cj and
     b ) " low-enthalpy" sources - consisting chiefly of water at less than the
         above temperature .
     In both cases , a degree of ground permeability permits water to circulate
     which , depending on the geothermal gradient , the ,succession of permeable
     and impermeable strata , etc ., produces deposits of this kind .
     A further possibility of using this natural heat is based on the geothermal
     content of impermeable "hot rocks" although this calls for very complex
     engineering on which studies and research work are at present in progress .
3 . Fields of this type referred to in paragraph a) can be used for electricity
     generation . By the end of 1975 installed generating capacity throughout the
     world amounted to 1,300 MW , with approximately 420 MW in Italy and 500 MW
     in the U.S.A. Nearly 700 MW of capacity was under construction .
     Fields of the type described in paragraph b) can be used chiefly for
     non-electricity purposes ; the chief uses are for space heating, principally
     of dwellings , but also in buildings for industrial , agricultural or stock-
     raising purposes .
 ---pagebreak---    TECHNICAL AND ECONOMIC ASPECTS OF THE EXPLOITATION OP GEOTHERMAL PRODUCTION
4 * The bringing of a geothermal field into production carries with it financial
    risks which arise from geological uncertainties , and it calls for heavy
    investment .
    There are two successive phases marking such exploitation :
     - pre-drilling project design and estimates ! and
     - tailoring of the scheme to drilling results .
    The viability of such a project depends on the quantity of heat that can
    be recovered ; this in turn depends on the flow from the well , the temperatur
    of the fluid and the number of hours' utilisation . But , when a field is dis­
    covered it is extremely difficult to determine its potential output , for
    it will be necessary to establish the probable values of geological ,
    hydraulic , and thermal parameters such as :
     - depth and thickness of the deposit ;
     - temperature and chemical properties of the geothermal fluid ;
     - permeability of the deposit ; and
     - the deposit 's heat capacity ( or equivalent thermal conductivity).
    Although the first two of the above parameters can be established without an
    excessive margin of uncertainty , serious uncertainties may remain about
    permeability and conductivity .
    Not only, therefore , are the cost of drilling and its uncertainties highly
    variable ; the investment called for in successive stages is also fairly
    high. Furthermore , the lead time elapsing before full development is
                                                      >*
    often long and profit in the early stages of exploitation may be modest .
5 . Geothermal power stations are usually built up from 30 MW units , but
    they may go up to 110 MW . Above such capacities the turbines ought to be
    feld from a large number of wells , which would make costs higher than
    the benefits deriving from the economy of scale with larger turbines
    sets .
    The most wide-spread types of unit throughout the world are :
     - back-pressure turbines , fed with straight natural steam which is there­
       after discharged to atmosphere ; these axe small , readily transportable
       units for bringing a new field on line swiftly ;
     - condensing turbines , also fed with straight natural steam which is then
       1   . jed into a condenser .
 ---pagebreak---                                   - 3 -
     The back-pressure type has a low specific capital cost , of approximately
     250 e.u.a./kW, "but its specific steam consumption is approximately twice
     as high as the condensing type 's ( 20 kg/kWh net compared with less than
     10 kg/kWh net ); the latter, "by contrast , has a specific capital cost in
     the order of 500 e.u.a./kW .
6 . In the exploitation of " low enthalpy" fields , the heating syestems installed
     are of greater or lesser technical complexity according to the outlet
     temperature of the geothermal fluid and its salt content , which causes
    problems of corrosion and scaling .
    Operation with superheated or saturated steam poses no corrosion problems .
    Hot water is generally laden with salts ; consequently it pollutes the
    environment and attacks materials . Furthermore , the temperature involved
    do not permit of large differentials whence the need for suitable heat-
    exchange areas .
    The water is drawn from extraction wells generally surrenders part of its
    heat to the ( fresh) heating water in heat exchangers and is then reinjected
    into the soil via return wells j this also has the effect of keeping the
    field under pressure . The he at -extract ion system , then , is based on twin
    wells for drawing and reinjecting, the cost of which vary between 1 and
    2 million e.u.a .
    Prom the heat exchanges , and depending on water temperature , the heat is
    piped to the heating network and distributed by radiators , through the floor
    or be other means . The placing of a heat pump in the circuit promotes heat
    extraction and permits better matching of the temperature of the heat ex­
    tracted to the type of space heating and to clim&tic conditions .
7 . The value of the heat drawn from the earth is obviously equivalent to the
    cost of the energy which it is able to substitute .
    In the field of electricity production the specific cost arising from fuel
    Sets un upper limit to the'relationship between the investments in prospec­
    ting , research and drilling needed for opening up a deposit , and the value
    of the available fluid . Judging from experience gained, the costs arrived
    at are lower than those of the fuel burnt in a conventional power station .
    In the field of district heating it is true that the provision of geo­
    thermal energy does necessitate heavier initial investments than those
    needed in the case of conventional boilers 5 nevertheless , after the first
    years of operation one can expect the users to find their heating expenses
    diminished .
 ---pagebreak---     PROSPECTS FOR GROWTH IN THE USE OP GEOTHERMAL ENERGY"
 8 . As geological surveys and research now stand, and without , for the time
     toeing, taking into consideration the possibilities of "hot rocks", pros­
     pects for growth in the use of geothermal energy are attractive in several
     Community countries . In the short term , however , prospects are "better in
     Italy and in Prance , where the exploitation of indigenous energy sources
     is of particular importance , in view of these countries * dependence on
     imported energy .
 9 * In Italy a programme has "been formulated, chiefly with the aim of loca­
     ting new geothermal sources for electricity generation . Phase 1 of the
     research, consisting of geological , geophysical and geochemical surveys ,
                       2
     covered 20 000 km   in the area of the western Pre-Appenines j of that
                   2
     6ome 1 500 km   have been selected as displaying promising characteristics
     for the discovery of "high-enthalpy" fields . Phase 2 , consisting of the
     drilling of exploration wells , has begun and some of these wells have
     led to the discovery of four reservoirs , varying in their characteristics
     but seeming exploitable .
     "Low-enthalpy" deposits were also located during both phases of the
     exploration programme .
     In the course of the 1980 's installed geothermal generating capacity
     might double , to approximately 1 000 MW , and geothermal space heating
     might rise to some tens of MWth .
10 . In Prance all the major sedimentary basins contain bodies of ground
     water at up to 80° C. Low-enthalpy geothermal systems are now in operation
     and by 1985 about 500 twin-well systems might be commissioned, half of them
     in the Paris area . From that year onwards geothermal energy might thus be
     providing the equivalent of 1.5 million toe for space heating .
     With regard to " high-enthalpy*1 deposits , surveys and exploration to date
     show that the best prospects are chiefly to be found in the Massif Central
     and in French overseas territories .
 ---pagebreak---                                      - 5 -
11 . In the United Kingdom the geothermal structures of possible interest are ,
     according to present knowledge , in Cornwall , Durham, the Hampshire Basin
     and Scotland. These zones comprise hot rocks of between 100 and 200° C ,
     from which it will be possible to draw the energy at lower costs than
     those of fossile fuels presently in use . A recent report on the country's
     geothermal potential estimated that , in the long term , this source of
     energy might provide the equivalent of 2.8 million toe .
     In the Federal Republic of Germany the most promising sources are in . the
     Rhine trough . The highest-temperature rocks are situated at a depth of
     about 3' 000 m, with temperatures above 200° C.
     Im the other Community countries , a number of prospection and research ,
     activities are under way , with the chief objective of obtaining knowledge
     about the geothermal potential hidden underground .
12 . Also a number of research institutes in various Community countries are
     engaged in projects relating to the use of this sources of energy .
     Under the Council Decision of 22 August 1975 adopting an energy research
     and development programme ( l ), the Commission, which is responsible for
     seeing that the programme is carried out , the projects being chiefly on
     a shared-cost basis ,           let the first batch of contracts of research
     projects on the following subjects ( Annex):
     a) the acquisition and collation of new and existing geothermal data;
          work to collate the data available on the Community 's geothermal
          potential and acquire data at present lacking to enable its geothermal
          potential to be better estimated}            »
     b) improvement of exploration methods ; research to perfect methods of
          exploring specifically for geothermal fields and related methods of
          interpretation ;
     c) sources of hot water ( low-enthalpy); theoretical studies using
          mathematical models and experimental work on the use of geothermal
          waters (behaviour of geothermal reservoirs, feasibility and viability
          of exploitation);
     d) steam sources (high-enthalpy) and hot rocks ; research and development
          to improve the exploitation of geothermal fields producing steam and
     ( 1 ) OJNoL 231 , 2.9.1975
 ---pagebreak---                                - 6 -
   also work on the possibility of extracting heat from dry rocks , parti­
   cularly "by fracturation to make them permeable .
The programme will be carried out in two stages extending over four years :
from 1 July 1975 "to 31 December 1976 and from 1 January 1977 to 30 June 1979 *
The Commission is assisted in the execution of the programme by an Advisory
Committee set up for the purpose .
 ---pagebreak--- | DESIRABILITY OF PROMOTING GROWTH IN THE USE OF GEOTHERMAL ENERGY j
 13 . While , on a near time span ( 1980-85), we must take a sober view of the
       contribution that geothermal energy can make to the Community' s total
       energy balance , in the longer term its contribution might be far from
       negligible , especially if research directed towards the exploitation of
       hot rocks leads to commercial applications . And, although we must realise
       that geothermal energy will not solve the Community 's energy problems , it
       will contribute to savings on imports of hydrocarbons and will produce
       more rational use of energy, if only for transport reasons . In regional
       terms - and bearing in mind that the countries where prospects are the most
       attractive sure among those with the highest dependence on outside energy
       sources - exploitation of geothermal resources' is genuinely attractive .
 144 . It is not easy to produce a quantitative estimate of the prospects for the
       use of geothermal energy , owing to the uncertainties attending the dis­
       covery and bringing into production of deposits . On the basis of surveys ,
       research and projects now in progress , a rough estimate of the geothermal
       contribution to the covering of future energy needs nevertheless , arrives
       at several percent . While it is a comparatively small contribution, in re­
       lative terms , in absolute terms it isnevertheless not inconsiderable , since
       155 of the Community 's energy consumption in 1985 will be over 13 million toe
      which at present prices means a saving of foreign currency of the order
       of 1 000 million EUA . These figures might be much higher in the future if
       research directed towards the exploitation of hot rocks should lead to
       commercial applications .
                                                         *
 15 . Furthermore , any contribution to the development of a "geothermal energy
       industry" in the Community may have favourable effects on industry generally
       and on the balance of payments , in view of the size of the potential market
       outside the Community . Several of the countries in question, which have
       recently embarked on accelerated geothermal exploration and drilling pro­
       grammes , have neither the engineering skills nor an adequate industrial
       base to exploit such deposits . The Community industry might therefore
       find substantial markets .
 16 . Geothermal energy, moreover , can be regarded as one of the least polluting
       forms of energy in view of the successes achieved in reinject ion of the
 ---pagebreak---                                   - B -
     liquid, after heat extraction, into the reservoir from which it was ex­
     tracted or into vexy deep ( over 1 000 m) strata at the edge of the geo­
     thermal field. The gaseous phase normally consists of COg with traces
     of HgS . Experience in Italy and the USA shows that the nuisance value
     is minimal .
17 * Beyond the R&D stage, one means of promoting the use of geothermal
     energy is to support practical projects which can serve as references
     and to promote the setting-up of industries with the necessary skills .
     The major obstacles in the way of the development of geothermal energy
     are the high investment costs and the geological uncertainties , which
     bring with them financial risks of some magnitv^de .
     A degree of hesitancy when faced with a new form of activity, together
     with the comparatively long period elapsing between the decision to in­
     vest and the accrual of operating revenues , are other factors which may
     slow the growth of the use of geothermal energy . Because of this fact ,
     private operators may not find great attraction in this type of invest­
     ments; it is mainly at public/^levef^ihat the interest lies in the
     development of the use of this energy source . Hence the need to facilitate
     private investment by a public support , which should be limited in
     duration and should favour entry into the market by private operators .
 ---pagebreak--- [ ELEMENTS OF THE COMMISSION PROPOSAL |
 18 . The Commission proposes to employ Community funds for the purpose of
        encouraging the realisation of projects to exploit geothermal resources .
       The selected projects Bhould have a character that serves as a point of
       reference in this field, and sufficient promise of profitability .
 19 » A full-scale geothermal project comprises three stages : research , explora­
       tion and utilisation of a deposit . By research , the layers having geo-
       thermally favourable factors are identified} in the exploration stage , a
       number of samples and drillings are conducted and particular studies made
       to evaluate the possibilities for commercial exploitation of a deposit ;
       in the utilisation stage , the production wells are finally drilled and
       the investment for commercial exploitation of the deposit is carried out .
 20 . The support is based on subsidies to be repaid under certain conditions
       and by non-repayable subsidies ; it will represent a minority only of the
       funds with which the project is financed. It may cover at the most 40$ of
       the funds invested during the exploration stage , 5C$ of which being repayable
     . in the case of positive results and 20^ of funds invested at the utilisation
       stage , the whole of which would be repaid ( l ).
 21 . Clearly the promoters of the project must themselves provide the funds
       needed to cover the investment not covered by Community support . Consequently
       that support does not replace but rather strengthens and encourages national
       efforts .
                                                         *
22 . Possibilities to obtain the support would be limited in time . The support
       may stretch over a period of 5 years beginning on 1.1.1978 and thereby
       ensure the logical advancement of the Community 's research policy in this
       area, where it would mark the transition into the production stage . After
       this time limit , the projects carried out would in fact have to serve as
       a reference for other projects , thereby furthering their attainment .
 ( l) For instance , in the case of a 30 MW station requiring approximately 3 millio:
       EUA during the " exploration" stage and 15 million EUA during the "utilisa­
       tion" stage, the Community support could amount to 1.2 million EUA for the
       first stage , .6 million EUA of which would be repaid in the case of positive
       results , and 3 million EUA for the second stage to be repaid fully .
 ---pagebreak---                                      - 10 -
23 . ■ The repayable parts of the amounts will be paid back, beginning with the
       seoond year of commercial operation of the deposit . The total amount to
       be repaid will be divided into payments stretching over a maximum period
       of 8 years . The detailed conditions for repayment of the repayable amounts
       will be defined separately for each project .
2 )+   The Commission proposes that the support operation should be carried out
       through the Community budget . As the chief object of the proposed support
       is to develop indigenous energy sources and thereby to reduce the Community 's
       external dependency in relation to imported oil , the support would take
       place under the EEC Treaty .
 ---pagebreak---                                                                           ΑΝΙΤΕΧ 2
    Subject : Gasification and liquefaction of coal
1 . The question of coal gasification , and. of underground gasification in
    particular , was raised at the meetungs of the Energy Council of 19 October
    and 2i December 1976 . At its meeting of 25-26 November 1976 , CREST put
    forward a serious of recommendations with regard to energy research and
    development , including bi- or multilateral cooperation for the gasification
    and liquefaction of coal .
2 . In 1975 and 1976 the European Parliament adopted , on the basis of reports
    on the gasification and liquefaction of coal prepared by its Committee on
    Energy , Research and Technology , resolutions which , among other things ,
    invited the Commission of the European Communities to promote research
    and development in these two fields . This resolution was submitted to the
    Council . After having studied the problems within its services and in
    collaboration with a committee of experts , the Commission expressed itself
    on the subject on several occasions ; it made a clear statement in its
    Medium-term Guidelines for Coal , 1975-1985 *
 ---pagebreak---     Collaboration with the United States has been est iblished
    bilaterally with the United Kingdon and the Federal Republic
    of Germany. The interest^ of th$ United State#) are , however,
    very different because of the lower cost of American coal *
3*  Pn the technical level , the processes may be divided into two
    groups. On the one hand, there are conventional procesgep
    which have reached the industrial stage but which cannot yield
    the range of products desired ( such as SNG) and can use only
    certain types of coal ) their production costs , moreover, are
    still too high* On the other hand there are proposed new systems
    which are still mostly at the laboratory or small pilot plant
    stage . These are aimed at widening the range of coals that
    can be utilized and of products that can be obtained-, as well as
    at reducing production costs* The use of nuclear reactors as
    a source of heat could be included in the ramge of gasification
    processes that are most economically viable . The combined gas
    turbine and steam turbine cycle for electricity generation appears
    promising* With regard to lead times , it must be emphasised that
    the development of new processes on the pilot scale will take
    6 to 8 years to reach the point at which the results obtained are
    applicable on the industrial scale * The time lags anticipated
    pnd the technical problems that have still to be solved demon­
    strate the need to avoid delay in making the transition from $he
    laboratory or small pilot stage to the semi-industrial stage
    that the Community may have new techniques available within the
    4esir$d time).
4. Jj^cept in a few_ special , Isolated casejB , underground gasification
    Of coal by traditional methods ( preferably using coals of high
    yolatile matter content at shallow depths) has not , up to nowf
    yielded economically useful results , mainly because the gas has
    been too lean and its quality irregular . In contrast , new ideas
    and proposals are currently being given serious attention with
    * view to improving the quality and cost of production of the gas
    9btained. The processes in question will operate under pressure ,
    tt greater or lesser depths , using boreholes from the surface *
 ---pagebreak---                                 3.
5.   Work is being carried out , in the context of basic scientific research ,
     in the research centres of the Community 's coal producing countries
     either with financial aid from the E.C.S.C. within the framework of
     the programme " Chemical and Physical Valorisation of Coal " Or with
     national funding within governmental programmes . Research and development
     and a number of tests on the pilot- or smaller scale are under way in
     the national programmes on coal gasification and liquefaction , principally
     in the Federal Republic of Germany , the United Kingdom and Belgium .
     Furthermore , several projects go beyond the national level and merit
     the launching of a programme of action by the Commission .    Moreover , the
     technological developments lie more within the province of industry than
     in that of the research centres .
6.   Coal gasification and liquefaction is , in the long term , the most promising
     means of obtaining substitute petroleum products .  This technique is of
     positive interest to the Community not only under the difficult economic
     situation and effects on the balance of payments due to petroleum imports ,
     the price of which threatens to be increased in the near future . As well ,
     coal gasification and liquefaction is likely to replace petroleum pro­
     duction when a lessening of gas and petrol reserves is felt .
     These technologies can make use either of the Community 's own
     resources ( the Community has extensive coal reserves ) or coal imported
     from Third countries . Because transport of a gasified or liquefied
     product is ear than the transport of coal , a demand from the whole
     Community could be met , even in Breas without coal resources or
     liquefaction and gasification installations .
7.   In consequence , considering the growing interest in ftie Community in
     coal gasification and liquefaction , the important technical and
     economic problems that have still to be solved , the time needed to
     achieve results that can be applied industrially and the reserves
     of solid fuel that exist in the Community , and taking into account the
     importance of these problems in the sphere of energy supply in the
   . longer term , the Commission is of the opinion that financial support
     by the Commission for the construction and operation in the Community of
     pilot installations for the gasification and liquefaction of coal is
     necessary .
 ---pagebreak--- GASIFICATIOïï AND LIQUEFACTION OP COAL
1*  Gasification of coal
    ») Techniques
         – The technicpies^for^gasifjring^coal are based on known methods .
           Processes for gasifying hard coal or lignite with steam to
           produce a fuel gas or a synthesis gas (the high-pressure LljBGI
           process, the KOPPERS-TOTZEX process , etc.) have been used
           the industrial scale over a long period.    '■
         – The aim of more recent methods , on the other hand, is to
           produce a gas from coal to replace natural gas ( Substitute
           Natural Gas » SNG) ; SNG is obtained either by methanation
           of the synthesis gas produced by steam gasification (LURGI ,
           SYBT^ANE, COED-COGAS, BIGAS, COg-ACCEPTOR processes, etc.) or
           by gasification brought about by direct hydrogenat ion
           and HY-GAS processes). These processes are , for the most Ejart ,
           (it the laboratory-- or small pilot-scale stage , arid semi.-
           industjpial scale tests have still to be carried out .
         – Interesting attempts are being made to use heat_from high–
           temperature nuclear reactors^ instead of burning coal to
           provide the heat required for the gasification process ,
                                                          ■»
                                                                         Sych
           a technique could be used to produce various' types of ^as fpom
           either hard coal or lignite , and would have some potential
           advantages : less rapid exhaustion of reserves , % lower gas
           price , and a favourable impact on the environment . On the
           other hand , there are some technical problems - notably that
           of transferring the nuclear heat at the high temperatures
           required for the gasification reaction (about bOO°C for lignite
           and 1000°C for hard coal). The outlook for this gasification
           technique depends mainly on the development of nuolear reactor
           technology.
 ---pagebreak---                                           s\
    – In parallel with the development of the above gasification
       techniques , there exist new possibilities for utilizing the gas
       produced, particularly in connection with combined cycles (gaBifi^rs,
       gas and steam turbines) for electricity generation. Such methods
       should permit a more rational utilization of coal , thanks to theix>
       higher thermal efficiency, and henoe a reduction in the cost pf
       electricity (about 17% for a 600 MW power station).
    *- It should be pointed out that gasification is a suitable technology
       iq, relation tp the protection of the environment because the major
       j>qrt of the ppllutants can be eliminated from the gas by Relatively
       simple mean?.     However, problems could arise in connection with
       tt)e supply and purification of water and, in cortain castes , tjie
       utilization of the waste productit .
 b) Raw materials
    Jn order to put gasification into practice it is necessary to have
    available sufficient quantities of coal to supply a coal refinery.
    As a guide, the production of 1 milliard m^ of SEG ( of the sane quality
    as natural gas) requires 1.8 to 2 million tonnes of hard coal or
    6 pillion tonnes of lignite if conventional gasification techniques
    are used. If , on the other hand , nuclear heat is used , the quantities
    required are estimated to be 1 to 1.2 million tonnes of hard coal or
    4 million tonnes of lignite - in other words , an expected saving of
             In addition to the problem of the availability 'of these amounts
    of coal , questions arise in connection with the amount of water needed
    for all the processes. Furthermore , it is necessary to manufacture
 '  significant quantities of hydrogen in order to produce SNG. Another
    prpblsm that should be borne in mind is that of utilizing the waste
    products that will be formed in greater or lesser quantities , depending
    on the gasification process used.
0)  Economic problems of gasification
    The cost of gasification depends mainly on the price of the coal usej.
    These costs sure shown in the following table for the gasification of
    hard coal (reference year 1974) •
    f      ■ "I 1                  " II                        ■  'F II 1 V" «1 ■  11   "
     Priçe of hard coal in UA / Gcal      3      4        5          6             T
                                                                                    r
    Cost of production of SNG           8.85   10.30    11.70    13.15          14,60
    (UA/Gcal)                            to     to       to        to             V
                  Conventional          9.75   11.25    12.70    14*15          15 r 55   -
                                                                              ™    u ~ ■
                  V aueW hert           7.60    8.45    9-30 10.15 11,00
 ---pagebreak--- ^he corresponding figures for th^e production pf SNG from lignite
^ixe of the order of 8 UA/Gcal for conventional gasification and
6,2Q tll/lcal for gasification by nuclear heat . These figurap
Include the cost of the pretreatment necessary for lignite
{ pri,ce of raw lignite : 1*55 UA/Gcal) •
It should be noted in this connection that thq costs of conventional
gasification can be calculated pith some precision , thanks to th^t
experienced gained in industrial installations , while estimates
for the newer processes can be obtained only by extrapolating
laboratory or semi-industrial scale results , with all the uncertainty
that that involves * This is particularly the case for gasification
by nuclear heat , where the cost of producing the gas depends
strongly on both the profit gained from the electricity that is
produced simultaneously ( calculated here at 0.01 UA/Gcal ) and the cost
of the nuclear heat ( estimated to be between 2.20 and 3*70 UA/Gcal ).
It can thus be said that the cost of transforming coal into gas
increases the price of the calories obtained by a factor of 2 to 3*
According to some estimates , the current costs should be 1 ^ higher
because of increased capital coats , while the patio of coal price
to gas price remains more or le^ constant .    By way of example ,
the current price of imported natural gas is C to 7 UA/Gcal , and
the price of SNG made fropi Community coal (average price ) is
estimated %o be between 13 and 10 UA/Gcal , depending on whether
gasification is achieved by conventional methods or by pucleur he^t .
The figures quoted give ojfily an approximate idi^a of the oostu *
Oply pilot plants on the pemi-ir)4u®trial scale can give precise
answers .
Underground gasification of coal
As in the case of gas production from coal in surface installations ,
several processes for and experiments on underground gasification
go back to the period 1945~1960 (U.S.A. , U.S.S.R. , Great Britain ,
Belgium , Morocco). The technical principle consists of making a
reaction front advance in a coal seam by supplying oxygen ( air)
either from two boreholes drilled from the surface or from existing
mine workings , and then drawing the resulting gas mixture to the
surface for further treatment .
 ---pagebreak--- All tests BO far carried out on such processes have failed in
practice for the following reasons ;
– only a fraction of the energy content of the coal is utilized
– the gas mixture produced has only a very low calorific value
   (about 1000 kcal/m^) and is of very variable composition
– it is extremely difficult or totally impossible to cojitrol the
   reaction temperature because of geological disturbances , f^lls
   of ground and the possible influx of water
-r thq risks of surface subsidence (damage to buildings and djfaina^p
   systems ) and pollution <rf grouj)4 water cannot be eliminate^
«r thq cost of gas production is consequently v«iry high .
SincQ 1973 » the problem of underground gasification has been re-ex^^nined
and , as a result , under certain very favourably geological
conditions (very thick 6eams , high volatile matter content , shall^fw
depth)* processes of the conventional type are being used with soi^e
success in the U.S. A*, although the calorific value of the gas is
still low.
In Europe , on the other hand , and notably in Belgium and the Federal
Republic of Germany , new investigations are under way with a view to
carrying out gasification under pressure at greater or lesser depths .
The aim is to achieve better control of the gasification reactions
and to obtain a richer gas , with the objective of making use of
                                                       »»
deposits that cannot be exploited economically by traditional mining
techniques .   Collaboration has been established between the two
countries in order to carry out joint research work.      What are the
prospects for this new process? The answer to the question can be
pbtained only by full scale tests , following a_ series of preliminary
laboratory studies , which will confirm or deny the econoaic value
pf the new technique .
Ligue faction of coal
?he technology of coal liquefaction is based or» three knoi»fu p^ocespes
phich have already been applied QJI the industrial scale :
v Jiydrogenation of coal under preusure (BERGIUS/PIER )
v extraction of coal (POTT-BROCHE/UHDE )
v synthesis of petrol from water gas ( FISCHER-TROPSCH )
   (practised on the industrial scale at SASOLBURG , South Africa).
 ---pagebreak--- I
                                           8.
       Several new methods base<| on theqie principles are being developed
       in the U.S.A. t the Federal Republic* of Germany and Great Britain
    *  in order to ijnprove the tj^chniquqi and the yield,, e.g. the H-COAL ]process
        (bydrogenation) , the CONSOL SXNTW2TIC RJEL and SOLVEOT-HEFDHjiP CO^jL
   I   processes ( extraction), the GEMEitlAL ATOMIC/GULP ( liquefaction/
       gasification with nuclear heat ) pnd EXXON processes, and the hydr^p
       genation process (NCB).
       Similarly, the classical process of low-temperature carbonization
        (pyrolysis) is attracting renewed interest , particularly in connection
       with carbonization in multi-stage fluidised beds where the char i ^|
       used in combined 'processes for the production of electricity or
       gas (COED and COGAS processes). Another variation involves preliminary
       distillation of coal (LURGI-RUHRGAS) in order to obtain by-products
       before combustion of the residue in power stations .
  I
       The tonnages_of coal needed for the classical liquefaction processes
       are of the following order ( per tonne of petrol )
       – hydrogenation:     3*2 tonnes of hard coal , or 9*3 tonnes of lignite
  !
   |   - synthesis:     4*8 tonnes of hard coal, or 16*4 tonnes of lignite
       These figures could be improved by using nuclear heat .     The cpst of
       petrol made from Community coal is estimated at 0.13 to 0.16 UA/litrie ,
       or 16 to 21 U&/Gcal y while the cost of producir^g petrol in an oil
       Refinery is of the order of 0.10 VA/litre .
       for tfcis reason it would be sensible to produce , in the first plac,p ,
       (pnly ft heavy oil from coal at a jupice of about p. 11 UA/litre . Thi,p
       Ifieavy oil could act as a substitute for the fuel oil that is currejptly
       t>urnt in power stations , thus making the latter material available
     i for clacking and production of lighter hydrocarbons. It is necessjpjrjp,
       however , to take account of the facts that no experience of the ne]f
       processes has yet been obtained on the industrial scale , that the
       capital costs depend mainly on the product that it is desired to
       Obtain (oil , gas , petrol), and that it is very difficult to estimate
       production costs.
       It is only by pilot 6cale tests that precise information about
       production costs and the technical and economic value of the procepevs
       can be obtained*
 ---pagebreak---                               - 1 -
                          FINANCIAL IMPLICATIONS '
                        presented only as indication *
I. Demonstration projects for saving energy                     Financial year 1978
  1.    Relevant budget heading code            Article 324
  2.    Title of budget heading :     "Community demonstration projects under the
                                      Community's energy-saving programme "*
  3*    Legal basis :
  3.0 . Article 235 of the EEC Treaty .
  3.1 . Proposal for a Council Regulation on the granting of financial aids for
        demonstration projects for saving energy              - _l        - -- - –
  4.    Description , objectives and justification of the project
  4.0. Description of the project/persons concerned
  4.0.0 . Description : Financial support, for operations demonstrating new
                          technologies , processes , equipment or products liable to
                          increase the energy efficiency of installations , with a
                          view to establishing their viability and speeding up
                          their dissemination .
  4.0.1 . Persons concerned
   J
  4.0.1.0 . Category : Community enterprises
  4.0.1.2 . ITunbe r : About 50
  4.0.1.3 . Location : Community territory
                                                          *
  4.1 . Objectives
  4.1.0 . General objective : In view of the size of the deficienc.v expected, m th
                                production of energy from indigenous sources and the
                                difficulties of again speeding up developments -
                                particularly in the nuclear sector - the Council
                                recognized , on 29 March 1977 , the need to intensify
                                the Community's energy-saving programme , specificall
                                by" financing demonstration projects . **
  4.1.1 . Specific objective ; 'The projects to be financed :
          – must genuinly be the first full–scale ones of their kind executed
            and be capable of providing a benchmark and encouragement for other
            installations of the same type throughout the Community.
 * These amounts will be submitted for approval in the frame of the
     budgetary procedure
** COM ( 77)39 final
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         - must offer sufficient prospects of paying off in terms of savings
            in energy and operating costs# Should their technical viability
            be demonstrated , as a result of this financing , the only
            consideration promoting the dissemination of the technologies or
            equipment in question is to be financial attractiveness for users ;
         - must be sufficiently widely applicable , so that their dissemination
            can provide significant medium-term energy savings at Community
            level *
         Demonstration projects which the Commission is intending to finance
         will be chiefly in the following areas :
                     (i)         heat pumps
                        ii )     heat recovery
                      ( iii )    combined heat and power production
                      ( iv )     energy storage
                      ( v)       reduction of waste of energy in industry
                      (vi )      low-energy dwell ings .
         This proposal could be examined by the Council in the second half
         of 1977 . The Council meeting of 29 March 1977 has already agreed.,
         to the principle of the operation as outlined in Doc . 0011(77)39 •
         Practical action to save energy is also one of the priorities
         mentioned most frequently by the Council .
4.2 . Justification of the form of action chosen to attain the objectives
       Although the increase in energv proces has made investments for
       saving energy economically attractive - or more so - , investors
       are still made hesitant because little , if anything , similar has
       actually been built or installed . Hence a system of Community aid
       is proposed to get investment for saving energy under war-r and produce
       significant savings as swiftly as possible .
       This aid is for the purpose of financing selected demonstration
       projects and the results would be made available to the Member States
       on a non-discriminatory basis .
5*0 * Implication in respect of expenditure
3.0.0 . Operations covering several years to be charged to the Budget as
         appropriations for commitment and appropriations for payment
     *   ( "differentiated appropriations " )                          7~
5.0.0.0 . Hult iannual schedule of appropriations for commitment and
            appropriations for payment ( in m^UA ) at current prices
                                                                     •A
 ---pagebreak---                                   3.
                  S ch.edu. le   Schedule of foreseeable payments  =
                       of
                                 appropriations for payment required
                 commit ment s                                     Subsequent fi­
                                  1973    1979      1980    1981
                                                                   nancial years
2 . New appro­
    priations
    for
    commitment
    - 1978            45          17         13     15
    - 1979            48                    -18     15      15
    - 1980            51                            20      15-         16
    TOTAL            144           17        31     50      30-)        16
5.00.1 . Method of calculation , general economic situation and factors of
         uncertainty       .                          ;
5.00.1.0 . Method of calculation , in relation with the general economic
           situation
           Appropriations for commitment for 1978 , 1979 and 1980 and schedule
           of payments .
           - Community participation will in no case exceed 40 $o.
           - It     is estimated that 39 mSUA could provide support for all the
              following projects :
                    • two projects in combined heat and power production
                    • two district-heating projects
                    • five to ten fairly big projects on industrial processes
                    • up to 40 small projects in the industrial , commercial
                       and residential sectors .
           - This variety of types of project would be financed either on an
              annual basis or over a period of three years :
              • annual basis ( about one-quarter of the total appropriations )
                for heat pumps , reduction of waste of energy in industry and
                low-energy dwellings . Payment to be made in full in one year.
              • over three years (the remainder , i.e. three-quarters of the
                appropriations ) for more costly projects : combined heat and
                power production , district heating , heat recovery and energy
                storage .
                In this case , payments would generally be made as follows :
                20 fo when the contract is signed ,
                4C $ in the second year ,
                40 /o in the third year .
           This programme would initially run for a period of three years .
           It would subsequently be reviewed to decide whether or not to
           extend it .                                  •
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           At 1977 prices , an estimated 39 m&JA per annum would be required to
           finance the Community projects in 1978 , 1979 and 1980 • Assuming that
           the price and cost index moves from 100 in 1977 to 108 in 1978 ,
           ll6 in 1979 and 124 in 1980 , appropriations for . commitment emerge as :
                         1978      s 45 mEUA
                         1979      î 48 . mEUA
                         1980      : 51 mEUA
           By way of example , this is how 1978*S appropriations for commitment
           were calculated :
           - payments for 1978 : 25$ (59 xl ,08)+20$x75$ (39x1 ,08 ) « 17 mEUA
                            1979 :               40$x75$ ( 59x1 , 16 ) = i3mEUA
                            1980 ;               4<$x75f* (39x1 ,24 ) = .15 mEUA
                                                         ... Total = /45 mEUA
. 00.1.1 . Factors of uncertainty  f
           Factors of uncertainty operate in three areas :
           a) commitments : the amount of support to be afforded depends on the
               number of projects put up , and on their quality , on the investment
               needed to carry them out and the level of support for which the
               Council opts ;
           b) payments : the projects selected may be abandoned , modified or
               delayed before completion , entailing ohanges in the schedule of
               payments * And the Commission may suspend or withdraw financing in
               certain cases {
           c ) repayment of capitale : some of the money requested could be
               provided on the condition that it is paid bacl if the project is
               successful , and might then be reallocated *
           Control arrangements
           Ho provision is made for checks ^ by the Member States * The authorizing
           department and Financial Control will carry out periodical checks
           in situ and from documentary evidance and monitor the projects through
           the medium of periodical , technical and financial reports which the
           firms are required to send .
     6.1 . The Commission is required to prese t to the Council a periodical
           progress report on each project and the costs incurred , and to inform
           the Council and the Assembly about the application of the Regulation
           which is being prepared *
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7 « Financial implications of the action throughout its expected duration
    Support for demonstration projects as part of the Community 's energy-saving
    programme is a three-year programme renewable each year#
    It is therefore a continuous operation , the cost of which in an average
    year would be split about 40/60 between the Commission and the firms
    responsible for projects financed on an annual basis ( see paragraph
    5 . OO.I.O. ).
    With projects which are financed over a three-year period , the Commission
    would finance the net extra cost , compared with a conventional type
    of the installation under test .
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II. Financial support for projeota te exploit geothermal resources,
     A. Proiects to exploit geothermal resources
   1 » Relevant "budget heading code :    * 32 * •
  2 . Title of budget heading : Community financial support for projects to
                                    exploit geothermal resources .
  3 . Legal "basis : Article 235 of the EEC Treaty
  4 . Description :
        To reduce the Community's dependence on imported oil , use must "be made
        of indigenous , economically-workable energy resources ( see the Council           (
       Resolutions of 17 December 1974 and 13 February 1977 ) •
       After the research stage , the main aim of which is to define the Community 's
        geothermal potential , greater exploitation of geothermal power is
        conditioned by the development of new technologies , the existence of
        geological hazards which introduce a high element of risk in respect
        of returns from the investment and the substantial investment required ."
        Community financial support for projects to exploit geothermal resources
       would enable the financial risk to be reduced and the new techniques
        disseminated by a process of demonstration .
        Initially , this would be a five-year operation.
  5# - Type of expenditure
        Support would be granted to firms planning to invest in the exploitation
        of geothermal power for electricity generation and to make use of
        geothermal heat . It would take the form of grants repayable under certain
        conditions , but constituting only a minority share of the financing , and
       not exceeding :
        - 40 'ft of the reservoir exploration^ phase , 50 'ft of which would be repayable
          if the results were positive ,                      „
        - 20 $ of the financing of the reservoir utilization phase , which would
          be repayable in full .
        Support could cover 20 to 40 of the financing , depending on the type
        of project . The total amount requested is 83 mSUA , which could enable
        support to be given to 15 to 30 projects .
   6 . Justification                                                     '
        In view of the n6ed to develop new technologies , the geological contingencies
        and the high cost of this type of investment ,    the great financial risks
       •entailed would deter the fr.rms concerned from     launching such projects .
        Community support is therefore needed so that     these firms do not pull out
        of this field , leaving a new source of energy    untapped .
                                                                                          /•
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      .(• Method of calculation
          Support totalling no more than 83 mEUA over 5 years , with the following
          commitments :
                           10% in 1978
                           190 in 1979
                         . 25# in 1980
                           25# in 1981
                           255» in 1982
          It is difficult to estimate the payments corresponding to these commitments ,
          but in order to indicate a schedule of appropriations for commitment and
          appropriations for payment until 1980 ( see table below) it is proposed
          that the projects cover three years , payments being made as follows :
                           20Js when the support contract is signed
                           40Jo in the second year
                           40^ in the third year               'f
          The appropriations for commitment will have to take into account cost
          increases during the period of execution * At 1977 prices ,8,33 mEUA woulcl
          be needed for 1978 , 12,5tiEUA for 1979 and2,8 m EUA for 198° . Assuming
          an increase in theprice index from 100 in 1977 to 108 in 1978 , ll6 in 1979
          and 124 in 1980 , the following appropriations for commitment are
          obtained ( round figures ) :
                           1978 : 9,8 mEUA
                           1979 : 15,7 mEUA
                           1980 s 27,4 mEUA
          By way of example , the calculation for 1978 is as follows :
          payments for 1978 : 2 x 1,67 = 1,8 mEUA
                           1979 : 4 χ3,33 = 3,8 πιΕυΑ
                           1980 : 4 x 3,33 = 4,2 mEUA
                                                ; 9,8 mEUA           ,
New appro­   Schedule of                             Payments     '                      I
priations     Commit­
                                  1978       1979        1980        l9oi  Ensuing years
  for          ments
commitment
- 1978          9,8                lf8       3.8        4,2 .
- 1979.        X5r7- _ ....                  2.9 ,       6,2 .       6,6
- 1980         87r8                                     5,2 .       il-, 9     11,6
                                             1,8-          -7       15,6       11;6
 ---pagebreak--- B. fluni-M nation and liquéfaction ef coal
                                                                      - 1978 Financial year -
      1 « Relevant budget heading code :     323
      2 . Title of "budget heading : " Projects on construction and trial of pilot plants
                                      for the conversing of solid fuels into hydrocarbons "
      3 . Legal basis : - Article    235 of the EEC Treaty
                         - Proposal being drawn up by the Commission departments
                         - Preliminary draft Council Regulation under preparation
                         - the fourth indent of Item 44 of the Medium-term guidelines
                           for coal (Doc . COM ( 74 ) i860 ), adopted by the Commission on
                           2 November 1974 and published in OJ* No C 22 of 30 January 1975 *
      4 . Description , objectives and justification of the project                        ;
      4*0 . Description of the project
      4*0.0 . Description : The granting of financial aid by the Commission to Community
                             undertakings or bodies to encourage the construction and
                             trial of pilot plants for the gasification and liquefaction
                             of coal (hard coal and lignite ) including subterranean
                             gasification.
      4.0.1 . Persons concerned :
      4.0.1.0 . Category ? Community undertakings
      4.0.1.2 . Number : 15
      4.0.1.3 . Geographical location : Community. territory
                                                                    «
      4.1 . Objectives of the project
      4*1.0 . General objective : To establish an energy policy ; to construct , in the
                                   medium and long term , factories to obtain liquid or
                                   gas products from Community solid fuels as a substitute
                                   for petroleum in order to reduce the Community's
                                   dependence on petroleum imports and to help ensure
                                   security of energy supply in the longer term (there
                                   are extensive hard coal and lignite reserves within
                                   the Community) •
      4.1.1 . Specific objective : To provide incentives for technological projects on
                                   the techniques for converting solid fuels into hydro­
                                   carbons . The introduction of gasification techniques
                                   ( including subterranean gasification) and liquefaction
                                   of coal at the industrial stage gives vise to techno­
                                   logical and economic problems .
 ---pagebreak---                                        h» •
                                - 9 -
                              Basic scientific research has shown "that it is possible
                              to overcome these problems# Many research and development
                              projects are now under way . The aim of this project is to
                              confirm or prove unfounded the results obtained in the
                              laboratory by constructing pilot plants and conducting
                              trials * The economic and technical value of different
                              coal gasification and liquefaction processes can be
                              found out only by moving to the semi-industrial stage ,
                              and this will also enable the Community to make an
                           •  exact estimate of the investment involved . The objective
                              of this Community project is the industrial development
                              of this technology so that the conversion of solid
                              fuels into hydrocarbons , a higher grade of energy , can
                              be retained as a feature of energy policy in respect
                              of energy supply .
4.2 . Justification of the project chosen to attain the,, objectives
      For several reasons - the technical risks , the high cost of such projects
      which cannot be borne by one country alone , the increasing importance of .
      problems of coal gasification and liquefaction in the Community , the technical
      and economic problems still outstanding , the time required to arrive at results
      which can be used on an industrial scale , the extensive reserves of solid
      fuels in the Community , the importance of these problems with regard to
      energy supply - for all these reasons this project could not be carried out
      without financial support from the    Commission , as these industrial technolo­
      gies must be made available to the    Community in good time . It is impossible
      to pool technologies and make them    available in all Community countries
      without financial support from the    Community . Any other form of Community
      intervention would not be capable of producing the same results .
5.0 . Implications in respect of expenditure
5.0.0 . Hultiannual projects to be entered in t he Budget in appropriati ons for
       commitment p.nd appropriations for payment "X"d. ifferent iat ed appropri at i ons " ;
5.0.0.0 . Kultiannual timetable for the appropriations for commi tment and the
          appropriations for payment 7Tn £jOA , at current prices )
                             Timetable
                                            lime tab le for payments forecast =               j
                               for
                                            require;ments in aDoronriations for na'Tnent      |
                         " commitments      1978     [ 1979    1980      1981       1952
 new appropriations
 for commitment
 - 1978                      16 mSUA          6,0      4,8      5,2
 - 1979                      23 mSUA                   8,7      6,9        7,4
 - 1980                      26 mEUA                            9,2        7,3        9,5
                              Total           6.0      13,5    21,3       14,7 |      9,5
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5 .0.0.1 . Method o f calculation ; the connection with the general economic
            situation ; factors of uncertainty
5.0.0.1.0 . Method of calculation and connection with the general economic
              situation             .             .
              The Community schemes for the conversion of solid fuels into hydro­
              carbons will "be launched over a period of three years . The project
              should be in operation for 10 to 15 years .    As a general rule , payments
              will be phased approximately as follows :
                       40 $ when the support contract is signed
                     . 30 fo in the second year
                       30 $ in the third year
              The commitment criteria must take account of rising costs over the
              three years .
                                                                           1278 ,
              By way of example , the appropriations for commitment for /0979 and 1980
              are 23 and 26 mSUA respectively , weighted at 108, 116 .and 124
5.0.0.1.1 . Factors of uncertainty
              There are factors of uncertainty at two levels :
              a) Commitment level : the amount of support depends on the number of
                  projects to be implemented , which in turn depends on their soundness
                  and value to the Community .
              b) Payment level : some of the projects selected could run behind or
                  ahead of schedule . The level of investment ( construction) will also
                  affect payments .
6 . Type of control to be applied
6.0 . The authorizing department (DG XVII ) and Financial Control will carry out
       annual on-the-spot inspections and will examine the supporting documents
       in order to follow the financial development of the projects . An ad hoc
       committee of experts , to meet twice a year or whenever necessary , will be
       set up to inspect the technical execution of the project .
6.1 . Each year the Commission will report to the Council on the state of progress
       and on the expenditure incurred .
7 . Financial implications of the project ( for the whole of its expected duration)
   ( in SUA )                :              :
       The project is expected to extend over a period of 10 to 15 years starting
       in 1978 at 20 mSUA per year. This is a long-term project and the cost is to
       be shared between the Commission and the undertakings in charge of the
       projects .
                                                                          ./
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    6 . Information regarding staffing and the appropriations for administrative
        expenditure necessary for the implementation of the pro.lect
    8 .0 . a) Investigation of appl ications and technical management
               One committee of experts from the countries concerned , comprising
               17 national experts and scientists
               Frequency of meetings : three meetings a year , two of which in the
               field for the technical management   of the project .
           b ) Administration by Commis sion departments
               The project to be administered by the administrative unit XVII -B-4,
               Coal Research and Technology .
    9 * Financing the project
        By appropriations in the General Budget under Article 235 of the EEC Treaty .
   10 . Appropriations to be entered in future budgets
         20 mEUA a year at 1 977 prices for a period of 10 to 15 years *
if