So, what are the capacity factors for wind and solar PV power, and what are the implications? We can calculate this from data in the BP Statistical Review. We can convert the 373 GW of wind capacity into theoretical electricity production if it was producing at full capacity for the entire year. A gigawatt hour (GWh) is the amount of energy that can be produced by 1 GW of power produced over the course of an hour.

A 373 GW facility could theoretically produce electricity for 24 hours a day and 365 days a year for a total of 8,760 hours. Thus, 373 GW of power could in theory produce 373 GW * 8,760 hours = 3.267 million GWh. A terawatt-hour (TWh) is 1,000 gigawatt hours, so this is also equal to 3,267 TWh. The actual consumption numbers reported by BP were 706 TWh of wind power consumption, so the global capacity factor for wind power in 2014 was 706/3,267 = 21.6%.

The consumption figures for solar power in 2014 were 185.9 TWh of energy produced from a solar PV capacity of 180.4 GW. Repeating the calculation performed for wind power, we get a global capacity factor for solar PV of 11.8%.

As a result of these low capacity factors, it would take several times as much wind and solar power capacity to displace an equivalent capacity in nuclear or fossil fuel-generated power.

For example, the U.S. has 303 GW of coal-fired power capacity with a capacity factor of ~60%, for an effective coal-fired capacity of 303 * 0.6 = 182 GW. To replace the amount of electricity produced from coal with solar PV in the U.S. would require 182 GW divided by the 11.8% capacity factor (assuming the capacity factor across the U.S. is consistent with the global capacity factor), or 1,542 GW of solar PV capacity. Actual installed solar PV capacity in the U.S. in 2014 was 18.3 GW; only 1.2% of what would be required to displace all coal-fired power capacity in the U.S.

Using wind power to replace the electricity produced from coal in the U.S. would require 182 GW divided by the 21.6% capacity factor for wind power – 843 GW of required wind power capacity. Actual installed wind power capacity in the U.S. in 2014 was 66 GW – 7.8% of the amount required to displace coal power.

There are a couple of important implications from these calculations. One is that the countries making serious attempts to rein in carbon dioxide emissions are going to require a huge expansion of renewables (and most likely nuclear power) to displace significant amounts of fossil-derived power. This also means that even at the rapid growth rate of recent years, it will take a long time to eliminate fossil-fired power from the global power generation portfolio.

The other thing to keep in mind is that global power consumption continues to grow. Between 2013 and 2014 world electricity consumption increased by 353 TWh. Over that same time period, wind power consumption increased by 65 TWh and solar PV power consumption increased by 51 TWh. Thus, the combined increase in the consumption of wind and solar PV power in 2014 accounted for only about a third of the increase in global power consumption. So, despite the gains for wind and solar power, coal consumption actually increased — as did the appetite for natural gas, petroleum and nuclear power.

The same is true if we look over the past decade. Between 2004 and 2014 wind and solar PV consumption increased by 621 TWh and 183 TWh respectively. But this combined 804 TWh increase was only 13% of the total global electricity consumption increase of 5,963 TWh.

Thus, while wind and solar power consumption is growing rapidly and making an important contribution to our electricity mix, it hasn’t come close to satisfying the growing global demand for electricity. As a result, fossil fuel and nuclear power consumption have continued to grow to keep pace with the world’s electricity demands.      

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

Portfolio Update

Take Some of the Money and Run

In an alert issued yesterday, we recommended selling half of your initial position in Williams (WMB). The rationale is blindingly obvious: banking some of the 26% one-day gain in Williams’ valuation on news of the bid by Energy Transfer Equity (NYSE: ETE) offsets the risk of holding on to the remaining half of the position in hopes of garnering  the 32% premium that ETE proposed, or possibly more from an improved bid.

Subscribers who bought Williams on our advice in October 2013 have already seen a total return of 82% on their investment, and while selling will generate capital gains taxes that a tax-free exchange with ETE would not, a taxable bird in hand is worth a slightly plumper tax-deferred one in the bush. It is a goal of ours to continue to increase your capital gains tax bills by continuing to generate capital gains worth cashing out alongside predictable tax-deferred income.

Here the lesson of Energy Transfer’s rejected bid for Targa Resources (NYSE: TRGP) last year should be instructive. We recommended selling half of the position last June at $135 per share a few days after merger speculation leaked. Seven months later Targa’s share price troughed at $85, and it trades only a bit higher now.

Of course, that lesson might be a useful reminder to Williams directors too as they hold out for a fatter bid. But we’re not keen on betting the farm on the value maximizing skills of corporate insiders faced with a loss of a business empire with all its perks. Sell half of your initial WMB stake if you haven’t already done so.

— Igor Greenwald