Energy Sector in France and the UK


Seminar Paper, 2002

27 Pages, Grade: 4 pkt (1-6: 2)


Excerpt

Table of Content

A) Introduction

B) Analysis
I Comparative Analysis: France vs UK
Basic Economic Indicators
Market Sector Opening
Consumption
Production
Prices
SWOT analysis of French Energy
SWOT analysis of United Kingdom Energy
Comparison of Analysis
II Europe’s Pollution
III The Energy Sector and the EU
The importance of EU legislation
Competition law
The Four Freedoms and their impact
Enlargement
EMU
Niche market
Cultural Issues

C) Conclusion

D) Sources

E) Appendix
Tables

A) Introduction

This course work deals with the energy sector of France and the United Kingdom, in context of the European Union. The first part concentrates on the analysis of the countries energy sector and their comparison. In the second part this analysis is brought into perspective within the European Union.

As for the sources of information and their validity and quality, we used primarily the youngest publications of the European Union, since this data is compared with others the most accurate and up to date. But we also took other international sources into consideration, newspapers as well as official energy sources.

B) Analysis

The analysis of the two countries France and the United Kingdom in this context is best done by comparing them. Nevertheless, the attempt to compare these two bares certain problems. Therefore the comparison will be done based on EU-publications in order to have not only a common but also most up-to-date source[1].

I Comparative Analysis: France vs UK

The structure for the comparative analysis is divided into five groups: basic economic indicators, market sector opening, consumption, production and prices. The complete data tables can be found in the Appendix under the individually indicated numbers (e.g. table 2.3.3).

Before going into specific distinction, very basic information on the relation of the two countries: France is a member of today’s EU since 1958, the United Kingdom not until 1973. The population doesn’t vary extremely between France’s 59.1 mio and UK’s 59.9 mio (eurostat ’99).

Basic Economic Indicators

The differences between France and the UK, when looking at general economic data, aren’t too big, compared to other European countries. The GDP (nominal) ranking in 1999 leaves the UK at place 2 and France at place 3 with a difference of ‘only’ €3 billion (table 1.1). The GDP growth rate in 2000 in both countries still is under the EU average (3.4%). A bigger contrast can be observed when looking at socio-economic figures (table 1.2), such as the unemployment rate. Here the EU-average is 8.3% in 2000 and France exceeds these numbers by 2.2 percentage points. The United Kingdom though managed to achieve numbers as low as 5.5%. Another contrast would be the share of employment in the agricultural field: The UK has the lowest percentage in the EU (1.6%) whereas France plays in the middle field in EU-comparison.

Market Sector Opening

Distinguishing in respect to the energy sector is a tricky task, since the two countries have almost totally different systems. The reason to choose the opening of the market (table 2.3.2) as basis for comparison is, that it reflects best the interests of the countries. Due to the different production capacities, as described later on, the UK has a great interest of importing energy, whereas France is one of the biggest, if not the biggest exporter in Europe. Surprisingly enough, the UK has a very regulated market for energy, but France shows a big privatization trend. This might be explainable with the resources of oil in the UK, although in world comparison this doesn’t account for much. Back to the market opening, it almost seems controversial how France can be as ‘closed’ as it is in respect to the import dependency of fuels (table 2.2.5). But logically, since France is such a big exporter of energy, there certainly is an industry to protect. Speaking in figures, France’s electricity market opening by end-2000 was 30% and UK’s opening was 100%. It is interesting to know, that the EU-directive on opening of the single electricity market requires a minimum opening of 30% in 2000. Looking at the gas market (table 2.3.3), France is even lower with 20% opening, the United Kingdom here has again 100%. The EU directive, if not changed by then, allows an adjustment to 33% minimum opening until 2008 in this market.

Another ankle to look at the different markets is to compare the taxation of energy (tables 2.3.1), although it isn’t the first thing one would relate to market opening. The United Kingdom clearly has the highest taxation of unleaded petrol (1.3 times higher than F.) and diesel (1.9 times higher than F.) in the whole of the EU. But Britain seeming to have high taxation, this view changes when looking at the specific VAT-rates: where the standard rate of France is about 2% higher, electricity and gas is taxed value added in France at 19,6% and in the UK as low as 5%, which is the minimum taxation in the EU.

Consumption

The consumption of energy (tables 2.2.1 & 2.2.3) is almost the same in both countries, but not the structure of which kind is consumed how much. The biggest difference in gross inland consumption is, that France uses nuclear power the most and the UK uses natural gas the most. Despite all negative publicity for France due to the nuclear power plants, France is with a big head-start number one user of renewable energy in the EU. But the comparison of final energy consumption shows that both countries consume oil the most.

Production

The production is best shown by electricity generation and production capacity. The gross electricity generation (table 2.4.1) is clearly higher in France, as it is the second in the EU after Germany. The UK generates about 75% of what France generates. And again, France generates nuclear energy and the UK from coal and gas. For the electricity production, oil doesn’t seem to be very popular for obvious economic and technical reasons. Still, France generates double from this source than the UK. France produces the biggest amount of energy from renewable sources in Europe. Looking at the production capacity (table 2.4.2), it is not surprising to learn about the contrasts between the two countries. As mentioned earlier, France is an energy exporting country and the United Kingdom an importing country. Accordingly, France’s capacity to produce electricity is 1,5 times higher than the UK’s. The structure of the sources is almost clear, mostly nuclear in France and mostly from conventional thermal sources in the UK. One interesting aspect might be, that in the UK the production of wind electricity is 20 times higher than in France; although it doesn’t account for much as a number. A closer look at the production of electricity from renewable sources, it changes the first impression of France being leader in Europe. The table 2.4.5 analysis the production by share of gross production. Logically, France being a nuclear generator and Britain a coal and gas generator, both have a hard time accounting for green nations in that perspective. Nevertheless, France with a total share of 14.4% is an example for Britain with a share of only 2.8%. All EU member countries presented targets for 2010, as for how much they want renewable sources to account for. Both countries don’t run among the top ten nations in these figures.

Prices

The prices for energy varies very much in the European Union. The UK charges the most for diesel fuel in the EU, France is below EU-average (table 2.5.4). For Unleaded petrol (table 2.5.5) UK still leads the field, but France too is not a cheap country either. Energy prices for the industry don’t surprise when knowing about the infrastructure of the sector. Electricity is charged lower in France (table 2.5.6) and gas lower in the UK (table 2.5.8). This is different for households. In France households are charged more for electricity than in the UK (tables 2.5.10 & 2.5.12). If the reasons for this are economical or ecological is highly arguable. But it clearly is connected to market opening and competition.

SWOT analysis of French Energy

Strength:

- Electricity Auto-sufficiency
- Electricity exportation
- EDF: 20 Millions clients all over the world, One of the biggest energy company in the world, Strategy of world-wide development (20 countries)
- Renewable electricity production on development (20%)

Weakness:

- Dependence on fossil energies
- Increase of consumption (2001)
- Importation of gaze, oil, coal and wood.
- Still low percentage of green energy production
- High consumption of energy per habitant
- Imperfect competition on electricity energy

Opportunities:

- Development of renewable energies (Aeolian, Solar Energy, Biomass..)
- Privatisation of Electricity market (only 30% of the energy market liberalised)
- Higher taxation of polluted energy
- Lower taxation on non -polluted energy

Threat:

- Dependence on fossil energy price (i.e. Oil crisis 1974)
- Ozone layer destruction
- Energy production based on nuclear production
- Higher energy price for rural inhabitants if the market is liberalised
- Energy consumption uncontrolled by authority

[...]


[1] Publication: European Union, Energy and Transport in Figures 2001

Excerpt out of 27 pages

Details

Title
Energy Sector in France and the UK
College
Helsinki School of Economics  (Haaga Instituuti)
Course
Business in the EU
Grade
4 pkt (1-6: 2)
Author
Year
2002
Pages
27
Catalog Number
V4572
ISBN (eBook)
9783638128094
File size
1132 KB
Language
English
Notes
Tags
Energy, Sector, France, Business
Quote paper
Thomas Leutbecher (Author), 2002, Energy Sector in France and the UK, Munich, GRIN Verlag, https://www.grin.com/document/4572

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