Indutrial utilization rates: manufacturing on renewables?

Renewables will ramp up to 20% of global energy consumption by 2050, on our models for a fully decarbonized energy system. This is a vast achievement. But many commentators ask why renewables’ share is not higher. One reason is that renewables operate at low utilization rates (around 35% of installed capacity) while industrial demand requires higher utilization rates.

This data-file tabulates the utilization rates of different industries over time, based on a variety of data sources. Average US manufacturing utilization rates ran at almost 80% prior to the COVID crisis, to sustain c10% operating margins, with many commoditized industries running above 90%.

Utilization matters. A 5pp reduction in utilization rates (e.g., due to over-reliance on volatile renewables) could cut manufacuting profits by 35%. At 35% utilization, no manufacturing facility with >20% fixed costs is likel to turn a profit. This matters as manufacturing industries comprised $2.4trn of US GDP in 2019 (11% of the total) and c25% of energy consumption.