Estimation of the EU electricity system capital value

Through a rough back-of-the envelope calculation we estimated to the total capital value of the EU electricity system, including generation, transmission & distribution and end-use.

Electricity generation

The EU-28 has roughly 1000 GW installed capacity (end of 2014) [i], figure 4]

The average investment cost for generation capacity  can be calculated from the following addition: 20% natural gas at 750€/kW; 15% hard coal at 1550 €/kW; 15% nuclear at 4200 €/kW; 15% off-shore wind at 1300 €/kW, 15% hydro at 2100 €/kW, 5% lignite at 1250 €/kW, 5% PV at 1250 €/kW, 5% biomass at 2500 €/kW, and 5% oil at 2100 €/kW. [i, figure 4 and Table 1]

The total cost = 2100 B€

Installations in buildings

There are 220 million residential buildings in Europe [ii], and 75% of the buildings are residential [iii].

So in total there are around 300 million buildings, with each an electrical installation.

A very rough estimation of 300 million installations at 4000 €/installation = 1200 B€

Transmission and distribution networks

The cost of the US transmission and distribution grid was estimated at 2100 B$. [[iv]]

There are 508 million inhabitants in the EU28 compared to 326 million in the US

2100 B$ x 508/326 inhabitants x 0.88 €/$ = 2900 B€

ICT appliances

The manufacturing of ICT appliances in the EU28 amounts to 0.0032% of the GDP, or 50 B€. [v]

The EU trade balance for ICT is 7.5 import compared to 5.4 export. [vi] and [vii]

Suppose a 10 year life-cycle for ICT appliances.

7.5/5.4 trade balance x 10 year life cycle = 700 B€

Household appliances

The manufacturing of household appliances in the EU28 amounted to 53 B€ in 2016 [viii], page 6.

Suppose a similar trade balance as for ICT appliances (7.5/5.4).

And a similar product life-cycle of 10 years.

53 B€ x 7.5/5.4 x 10 year life cycle = 700 B€

Railways and trams

The EU railway sector invested 40 B€ in 2011 [ix], page 22. Some of it is in Diesel trains, but on the other hand the trams and trolley busses are not included. Suppose a product life cycle of 25 years.

40 B$/year investments x 25 year life cycle = 1000 B€

Industrial end-use devices

A rough estimation is that industrial electrical end-use systems are worth the double from ICT and household appliances. That would be 1400 B€

Total

Adding the figures above leads to 10,000 B€

Notes

[i] Chalmers University of Technology, Investment Requirements in the EU Electricity Sector up to 2050, May 2015

[ii] OTB Research Institute for the Built Environment, Housing statistics in the European Union, September 2010

[iii] EU Commission, EU Buildings Factsheets

[iv] The Conversation, The old, dirty, creaky US electric grid would cost $5 trillion to replace. Where should infrastructure spending go?, March 2017

[v] Eurostat, ICT Sector – value added, employment and R&D, January 2018

[vi] The World Bank, ICT goods imports

[vii] The World Bank, ICT goods exports

[viii] APPLIA, The Home Appliance Industry in Europe 2017 – 2016

[ix] Ecorys and CER, The economic footprint of the railway transport in Europe, October 2014

Copper in electric motors

The European annual motor market (all motor sizes) is 15 M units with an average copper content of 5.3 kg/unit. Annual copper use in this market is 79 ktonnes. This figure is expected to increase because of 2 drivers:

  • Increased efficiency, which in general leads to higher copper use, leading to copper use of 6.5 kg/unit (~ 20% increase)
  • Growth in the market to 20 million units per year, due to motorisation following electrification.

Hence copper use in the future EU motor market can be expected to be 130,000 tonnes per year, an increase of more than 50 ktonnes from today. Over the period 2018-2050, this leads to a an additional use of 1.5 M tonnes (50 k * 30 years). Considering that the average motor lifetime is around 15 years, and that copper in motors has an almost full collection and recycling rate, the demand for primary copper is half this amount, i.e. 750 ktonnes.

Industrial electrification of heat

At present, the EU industry uses 150 Mtoe/year of fossil heat through oil, coal, gas. This is equivalent to 1,800 TWh/year. If this industrial heat demand is converted to electroheating technologies, around 750,000 industrial furnaces will be needed. This leads to a new copper demand of 1.5 Mtons. This is based on the following assumptions:

  1. One furnace requires about 1.2 GWh of electricity (e.g. 400 kW for 3000 hours).
  2. Switching to electricity reduces final energy consumption by a factor 2.
  3. 2 tons of copper per furnace for the furnace, its power supply and cabling.

It is highly unlikely that industry will convert from largely combustion technology to electric furnaces, even in a strongly carbon-constrained world. Green combustion using bioenergy or hydrogen will also play an important role. For the moment, we assume that electricity and green combustion will play equal roles, leading to 375,000 furnaces and a copper demand of 750,000 tonnes.