A look at the money: Energy and GDP

Looking at the money, for 2013, world GDP was $72T, of which energy was $6T, or about 8% of GDP. That $6T can be thought of as the income of the overall energy industry. This income balances with industry profit, investment and O&M. From IEA data the energy industry investment part was about $1.5T, of which about $0.8T was in oil and natural gas infrastructure,  $0.4T was investment in  electricity generation and $0.3T was investment on electricity transmission and distribution.

 From Bloomberg data, investment in wind and solar generation in 2013 was about $200B, with additional clean tech investment of about $50B on smart grid, biomass and bio fuels. Some of the investment in transmission and distribution is to integrate wind and solar and some smart grid spending is also related to wind and solar integration. So current investment in clean energy generation is over half of all investment  in electricity generation . I have to admit I found this surprising. I always see alternative energy as the underdog, not the biggest player.

That $200B bought about 45GW ($82B) of nameplate wind and about 35GW ($114B) of nameplate solar. Using average generation as the metric, conventional power plant capacity runs on average at about 50% utilization worldwide, so the world’s almost 6TW installed capacity generates an average 3TW of power. The 45GW of new wind generates an average of about 12GW and the 35GW of new solar generates an average of about 5GW, for a total of about 17GW of new average generation. That's 17/3000 or about 0.5% of current average electricity generation.

The other $200B bought about  140GW of coal, gas, hydro and Nuclear power plants, mostly in China and India, that generate more than 70GW of average power or about four times the 17GW average of the new wind and solar. When we account for the cost of fuel, wind and solar electricity averages about two to three times the cost of electricity from other sources.

Most of the investment in new electricity generation is driven by economic growth which needs to add about 3% of new generation every year. If just that increase was met with current wind and solar, it would cost close to $1T/y. That does not cover replacing the existing generation.

Of the $200B spent for wind and solar, government subsidies account for at least half, or $100B.

This is a look at the money. The bottom line is that wind and solar are already the biggest money part of electricity generation but are not providing much electricity. To scale wind and solar up just to meet current new generation demand would mean they would probably be the biggest industry on the planet.

By Edmund Kelly