The Level of Investment Needed

This is an excerpt from my book “Energy from the Mongolian Gobi desert”, available for free as a PDF file on this blog:

Last year’s total investment in renewable energy worldwide was $260 billion, which is a modest rise of 5% over 2010 levels. Solar accounted for  $136.6 billion of that, increasing by 36% from 2010.[1]

These numbers are not bad. They compare favorably to the income or net worth of most people. However, in relation to world GDP they are still far too low. IMF estimates nominal world GDP at 62.9 trillion dollars.[2] A simple calculation shows that the above figure of $260 billion would be about 0.41% of world GDP.

Adopting the very sensible proposal by recently ousted former president of the Maldives Nasheed[3] to spend the modest sum of 2% of world GDP on renewable energy would boost investments by a factor of five. Anyone opposed to this level of spending needs to consider the costs of global warming, which are projected much higher.

How much would sinking Tokyo under a 70 meter sea level rise cost? Might that be more than 2% of Japanese GDP? Remember that already last year extreme weather events caused a new record of over $300 billion damages, very early in the catastrophic global warming development?[4]

The 2006 Stern review gave a figure of at least 5% World GDP yearly as amount of the damages to be expected from global warming, with a high estimate of 20%.[5] Investing at least one tenth of the high estimate in mitigating the damage would seem to be the rational choice.

In my view, the adequate yearly level of investment in renewable energy should be at least 2% of World GDP, or $1.25 trillion instead of the $260 billion recorded last year. That is what Stern himself recommended in 2008.[6]

The figure actually achieved of $260 billion is still only 37 dollars a year per capita of the world population. $1.25 trillion would work out to about $178 per year and person, a level much more compatible with the catastrophic risks it helps to avoid from global warming.

And the adequate scale of a Desertec Asia project should go into the trillions of dollars, cumulative over a couple of decades. At the very least.

The International Energy Agency estimated total investment for energy supply and use from 2010 to 2050 at $270 trillion under a baseline scenario unconcerned with global warming. Most of this ($240 trillion or almost 90%) reflects demand-side investments that will be made by energy consumers for capital equipment that uses energy, including vehicles, electric appliances and plants in heavy industry. They assume that $46 trillion (17%) more investment is needed to deploy large-scale low CO2 energy. That however would also lead to saving fuel costs of $112 trillion.[7]

Their estimate for investment only in the power generation sector is $23.5 trillion under a baseline scenario of business as usual and a 40% increase to $32.8 trillion for their “blue” scenario phasing out fossil fuel.[8] Keeping these scales in mind, the goal of spending a modest 1.25 trillion dollars a year to help avoiding killing everyone on Earth by runaway global warming suddenly sounds much easier to achieve.

That compares to a price tag recently estimated at 666 billion euro for delivering 707 TWh per year to Europe from the North Africa and Middle East Desertec projects at about 8 cent per kWh.[9] That amount of electricity would be about 15% of European consumption. If this becomes reality, over the 38 years of the project that would work out to about 17.5 billion euro per year, which is less than 40 euro per year and citizen of the EU.

I think this level of ambition is too low by a factor of at least 10. It would use less than 1 percent of the desert’s potential. I would much prefer to see at least 7 trillion dollars invested in the North African and Middle East project. Even ten times increased 7000 TWh per year of energy delivered would not even cover the whole world’s electricity generation of 2009 (given as 20,055 by the IEA).[10]

At only 700 TWh per year, the effect on climate change would be much too small.



[1] Bloomberg, Clean Energy Investment Rises to $260 Billion, Boosted by Solar, 2012, k-lenz.de/1075.

[2] IMF, Report for Selected Country Groups and Subjects, 2011, k-lenz.de/1076.

[3] Nasheed, Carbon delay is a luxury the Maldives can’t afford, 2011年10月27日、k-lenz.de/a067.

[4] Munich Re, Worldwide Natural Disasters 1980 to 2011, k-lenz.de/1038.

[5] Wikipedia, Stern review, en.wikipedia.org/wiki/Stern_report.

[6] Jowitt and Winter, Cost of tackling global climate change has doubled, warns Stern, Guardian 26 June 2008, k-lenz.de/1080.

[7] International Energy Agency, Energy Technology Perspectives 2010, pages 48 and 53, k-lenz.de/1106.

[8] International Energy Agency, Energy Technology Perspectives 2010, page and 55, k-lenz.de/1106.

[9] Trieb, Schillings, Pregger, and O’Sullivan, Solar electricity imports from the Middle East and North Africa to Europe, Energy Policy March 2011, k-lenz.de/1078.

[10] International Energy Agency, 2011 Key World Energy Statistics, page 24, k-lenz.de/a094.

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