![\"\"](\"https://wernerzimmermann.eu/media/posts/21/economicmodel-2.png\")
Public companies are required to report financial data periodically, e.g., yearly, according to formal standards such as GAAP or IFRS. These financial reports show several aspects of their financial situation (German terms in ()):
\nThe management also writes about its view of the current business situation and provides a near-term outlook.
\nThe following is a very simplified description in layman's terms for people without a formal financial background. It presents the general ideas, but does not try to fully comply with the official accounting standards or terms and neglects a lot of technical details.
\nThis statement is very similar to the financial statement which private households get for their bank account. It shows how much real money was paid to and from the company over the reporting period. Basically, cash flow consists of three elements:
\nCash Flow from Operations (Laufende Geschäftstätigkeit) : Cash Income from Sales (Umsatzerlöse) - Cash paid for Operating Expenses OpEx (Betriebsausgaben)
\nIncome from sales and operating expenses OpEx here only include actual payments from customers or to suppliers, employees, taxes, etc. Revenue from products sold to customers or invoices from suppliers that have not yet been paid immediately show up in the income statement (see below), but not yet on the cash flow statement.
\nCash Flow from Investments (Anlagevermögen) : Sales of Business Units or other Assets - Capital Expenditures CapEx - Acquisitions of other Businesses
\nCapital Expenditures CapEx include purchases of production machinery, real estate for plants and warehouses, or patents and license fees. When CapEx is less than depreciation of existing assets (see below), this can be a warning sign that the company may lose production capacity over the long term.
\nCash Flow from Financing (Kapitalmaßnahmen) : New Debt, e.g., issuance of bonds - Repayment of existing debt + Issuance of new or repurchase of existing Shares - Dividend payments
\nThe final result is:
\nCash Flow (Kapitalfluss) = Cash Flow from Operations + Cash Flow from Investments + Cash Flow from Financing
\nCash flow shows how much liquidity the company was generating in the reporting period. The three cash flow elements typically depend on the state of the company's lifecycle:
\nStock analysts often use the so-called free cash flow, which tries to describe what is available to pay dividends, repurchase shares, repay debt, or expand the business in the future:
\nFree Cash Flow = Cash Flow from Operations - Capital Expenditures CapEx
\nThis statement shows how much the company earned over the reporting period from all products and services that the company provides. In addition to cash flow, which only considers real money transfers within the reporting period, the income statement takes into account non-cash items like depreciation and future payments due to open invoices or unpaid taxes that are already known but have not yet been paid. Net income from an accounting perspective is calculated step-by-step:
\nGross Profit (Bruttoergebnis) : Revenue from Sales (Umsatzerlöse) - Cost of Goods or Services sold (Herstellungskosten/Wareneinsatz)
\nExpenses from Operations OpEx (Betriebsausgaben) : Research & Development Costs (Forschungs- und Entwicklungskosten) + Sales & General Costs (Vertriebs- und Gemeinkosten) + Depreciation & Amortization of Machines and other Assets (Abschreibungen)
\nEarnings Before Interest and Taxes EBIT : Gross Profit - Operations Expenses OpEx
\nStock analysts often prefer Earnings Before Interest, Taxes, Depreciation, and Amortization EBITDA.
\nFinally, we arrive at net income:
\nNet Income = EBIT - Interest on Debt (Financing costs) - Taxes (Ertragssteuern)
\nA simple example of how accountants view a sales transaction:
\nWhile the cash flow and income statements show if the company earned money over the reported time period, the balance sheet shows how valuable the company is (based on its assets, not on its stock market value!). It lists all assets vs. all liabilities of the company:
\n| Assets (Aktiva) | \nLiabilities and Equity (Passiva) | \n
| \n Current Assets (Umlaufvermögen) \n
| \n\n Liabilities (Fremdkapital) \n
| \n
| \n Non-current / Fixed Assets (Anlagevermögen) \n
| \n\n Equity (Eigenkapital) \n
| \n
*1 A term you may frequently find here is working capital, which is the money tied up in day-to-day operations: Materials or products in inventory that the company has already paid for but not yet sold, invoices that have not yet been paid by customers, or bills received that the company has not yet paid.
\nThe right column of the balance sheet shows where the company's funds come from. The left column shows what they are used for. Most elements of the cash flow or income statement have a direct counterpart on the balance sheet. For example, cash flow is the difference between the cash position on the current balance sheet and the cash position of the previous reporting period (possibly with minor adjustments, such as FX rate effects).
\nThe fundamental principle used in balance sheets is double-entry bookkeeping:
\nAssets = Liabilities and Equity
\nEvery financial transaction either changes the totals in both columns of the balance sheet by the same amount or leaves both totals constant when one item increases and another item in the same column decreases by the same amount:
\nThe equity position in the right column plays a special role as a risk indicator. From the formula above, equity can be written as:
\nEquity = Assets - Liabilities
\nWhen the company needs money, it will use its cash. However, when there is not enough cash available, it can no longer service short-term liabilities like salaries, supplier invoices or interest payments, i.e. the company becomes illiquid, and needs to get fresh cash via a bank loan, new bond issuance, or asset sales.
\nIf losses accumulate and liabilities grow, the equity position decreases. Once equity turns negative, i.e. liabilities > assets, the company technically is insolvent, i.e., bankrupt. When a company must formally declare insolvency depends on the jurisdiction. Creditors may agree to restructure or forgive debt to restore positive equity, and authorities may allow companies to operate with negative equity for a limited time.
\nAnother balance-sheet risk lies in the intangible assets & goodwill item in the left column. Intangible assets include, for example, the company's patents or other intellectual property. As long as these assets are not sold, they do not have an actual market price. Thus, their value is estimated according to more-or-less well-defined rules. The same applies to goodwill, which represents a premium paid for an acquisition over fair value because of brand reputation or expected synergies. These estimates are hard to verify, so they can be inaccurate. If they turn out to be too optimistic, they will lead to a sudden drop in asset value.
\nIn many countries, companies must have their financial statements reviewed by statutory auditors such as EY, PwC, Deloitte or KPMG. However, this does not guarantee that they are always correct or immune to outright fraud, as occurred with companies such as Enron or Wirecard.
\nTo get the full picture of a company, one should look at the financial reports over a longer time frame and compare them with those of other companies in the same market sector. Trends and relative values are much more meaningful than single data points. And often the stock price trend vs. the general stock market may give an early indication of what is showing up in the financial reports only much later.
\n\n
", "image": "https://wernerzimmermann.eu/media/posts/31/cpastrick-ledger-1428230-2.jpg", "author": { "name": "Werner Zimmermann" }, "tags": [ ], "date_published": "2026-09-14T19:34:24+02:00", "date_modified": "2026-09-21T17:19:53+02:00" }, { "id": "https://wernerzimmermann.eu/war-and-peace.html", "url": "https://wernerzimmermann.eu/war-and-peace.html", "title": "War and Peace", "summary": "First things first: These rules can be found…", "content_html": "
First things first:
\nThese rules can be found in one form or another in all religions and philosophies. They are at the core of the laws of countries around the world.
\nWhy?
\nBecause they form the foundation of how humans live together in families, communities and societies. They enable us to sleep safely and interact with others without fear of harm. They simply make sense ...
\nNon-negotiable - not between individuals - not between nations.
\nHowever, there are people, who think they need not follow these rules. We use to call them criminals or terrorists. We let the police hunt them and judges send them to jail.
\nBut there are people, whom we allow to not follow these rules. We call them politicians. We allow them to declare war and send soldiers. At least if they are our politicians. Not, if they are foreign politicians, these are still considered criminals. Defense is accepted, attack is not.
\nHowever, what is what? Did the U.S. defend against Al-Qaida, or attack Afghanistan? Does Israel defend against Hamas and Hezbollah, or attack Gaza and Lebanon? Do Donald and Bibi defend the world against state terrorism, or attack the mullahs based on false claims.
\nEach conflict has two sides and these sides tend to have opposing views. As do their outside supporters who have their own interest to take one side or the other ...
\nTo get an idea how a conflict can be resolved, one must see the arguments of both sides. Not accept them, but look at them. For example, what about the conflict between Russia and Ukraine?
\nRussia basically says:
\nUkraine's arguments are:
\nSupporters of Ukraine officially say:
\nWhat European supporters of Ukraine do not say, but may think:
\nSupporters of Russia officially say:
\nWhat supporters of Russia do not say, but may think:
\nWhat China does not say, but may think:
\nOf cause, I have my own opinion about all these arguments. But frankly, neither my opinion nor those of most others do matter or change anything.
\nA major difference between individuals and nations is that conflicts between individuals can be solved by judges, who decide based on laws and rules. However, there is nobody to judge between nations and no universally accepted rules and laws. Yes, we have the United Nations, the International Court of Justice, and international law. But we do not have instruments like the police and jails, to enforce their decisions. Not even against small states with strong military like Iran, Israel, North Korea or others, who do not cooperate if it is not in their interest. And definitely not against major powers like the U.S., Russia or China.
\nThus, we still have wars - now and in future. How do wars end:
\nSo where does this leave us?
\n- To be continued -
\nIn times of growing economic uncertainty, trade wars, and tariffs, everyone should have a basic idea of how the economy and economic accounting work [ref. 2, 3]. Within each country, we basically have four major economic actors (Fig. 1):
\nEach country interacts with other countries via trade and financial transfers. So we have a fifth actor, sometimes called the foreign sector.
\nEach country must import goods and services, such as energy, that it does not produce domestically. To pay for these imports, the country must export a similar amount of other goods and services. If a country does not have enough goods and services to export, the country may force part of its population to work in other countries and send money home as foreign income. Economists [ref. 1] describe these activities between a country and the rest of the world by the Current Account:
\nCurrent Account (Leistungsbilanz) = Balance of Trade in Goods and Services + Balance of Foreign Income
\nIf a country has a current account surplus, i.e., it earns more from exports than it pays for imports, the country may export capital by investing in foreign companies directly or through stocks or bonds (credit, debt). The technical term for this balance is Capital & Financial Account. If the country does not invest this surplus abroad, its central bank may hold the excess income as foreign-exchange (FX) reserves (often in USD or gold). Countries with current account deficits will need capital imports and/or must sell their FX reserves. Economists [ref. 1] describe this relationship as the Balance of Payments:
\nBalance of Payments (Zahlungsbilanz) = Current Account (Leistungsbilanz) + Capital & Financial Account (Kapitalbilanz) incl. FX reserve balance (Devisenbilanz) = 0
\nAs you can see, this is an accounting identity, i.e. the sum of the terms is zero, meaning a surplus in one account must be balanced by a deficit in another.
\nTo measure the economic power of a country, economists [ref. 1] use the annual GDP
\nGross Domestic Product GDP (Bruttoinlandsprodukt BIP) = Consumption of the private sector + Investments of the private sector + Government spending (not including transfer payments) + Balance of Trade in Goods and Services (Exports - Imports)
\nGDP sums the total value of all final goods and services produced inside the country. Imports are subtracted because both the consumption and investment terms in the equation contain domestic and imported items. By definition, only domestically created value should be counted, and thus imports must be subtracted.
\nThe GDP is equivalent to the income, which the economy generates. It can be used for consumption or for savings and without it we would not be able to pay our taxes:
\nGross Domestic Product GDP = Consumption of the private sector + Savings of the private sector + Taxes paid by the private sector
\nBoth formulas describe the same GDP. So we can set them equal and rearrange the result:
\nSavings - Investments + Taxes - Government spending = Export - Imports
\nThe first difference on the left side of the equation describes the private sector's net income, the second difference describes the government's net income and the right side of the equation is the net income earned from the foreign sector, i.e. the trade balance.
\nWhile GDP measures a country's economic power over the past year, the Net International Investment Position NIIP measures the financial wealth it accumulated in other countries to date:
\nNet International Investment Position NIIP = Value of all Foreign Assets a Country Owns - Value of all Assets in a country Owned by Foreigners
\nFinancial assets include companies, stocks, government and corporate bonds, loans, and real estate.
\nA positive NIIP means that a country owns more assets abroad than it owes own assets to foreigners. However, a negative NIIP is not necessarily a sign of a debtor country. It can also reflect that a country's financial assets are more attractive to foreigners than those of their home countries.
\nNote: Be careful when politicians label a project as an investment, because in the ears of voters this sounds better than consumption. For example, when a government buys military equipment. There may be valid reasons for such a purchase, but it is not an investment. In economic terms, an investment is money spent in the hope that it will generate future income. Tanks and fighter jets don't ...
\nThe world consists of four major economic regions:
\nWhile internal trade dominates in the first three regions, interregional trade still plays a prominent role. North America, with the US, is a major importer of goods from China and the EU. These trade deficits are indicated by the negative values in Table 1. The large deficits which the US runs in goods, are partly compensated by a surplus in services.
\nChina has been an important export market for German products, but the EU as a whole imports more from China than it exports.
\nBy strategically exploiting its own oil and natural gas resources, North America is now independent and has even become a net exporter of energy. However, the EU, China, and Japan still depend on large energy and commodity imports.
\n| \n | US | \nEU | \nChina | \n
| Exports of Goods and Services | \n$ 3190 B | \n$ 3250 B | \n$ 3920 B | \n
| Imports of Goods and Services | \n$ 4110 B | \n$ 2900 B | \n$ 3100 B | \n
| Balance vs Rest of World | \n- $ 920 B | \n+ $ 350 B | \n+ $ 820 B | \n
| Balance vs EU | \n\n - $ 150 B \n(Goods -$240B, Services +$90B) \n | \n\n | \n |
| Balance vs China | \n- $ 260 B | \n- $ 280 B | \n\n |
| \n GDP \n(% of World GDP) \n | \n\n $ 29 200 B \n(26%) \n | \n\n $ 19 500 B \n(18%) \n | \n\n $ 18 700 B \n(17%) \n | \n
| \n Population \n(% of World Population) \n | \n\n 340 M \n(4%) \n | \n\n 450 M \n(5.5%) \n | \n\n 1400 M \n(17%) \n | \n
| Net Energy Exports | \n+ $ 100 B | \n- $ 400 B | \n- $ 350 B | \n
| NIIP | \n- $ 26500 B | \n+ $ 1020 B | \n+ 3300 B | \n
I am a retired Professor of Esslingen University (Hochschule Esslingen). My teaching and research topics include Computer Architecture, Digital Systems, Control Engineering, Automotive Systems Design and Networks.
\nSome details:
\nStudied Electrical Engineering at the University of Stuttgart, Germany
\nPh.D. (Dr.-Ing.) Digital Control of Electrical Drives, supervised by Prof. Dr.-Ing. habil. A. Boehringer
\nDepartment Manager Engine Management Systems at Robert Bosch Corp, Software and Hardware Development for European, US and Asian Customers
\nProfessor at Esslingen University (Hochschule Esslingen), Vice Dean, Member of the Senate, Vice Chairman of the University Board
\nProject Management at Steinbeis GmbH for Technology Transfer for Automotive 1st Tier Suppliers and OEMs
\nWorked with Cambridge Consultants. Consulted for Small Businesses and Startups. Held courses at Technische Akademie Esslingen TAE.
\nSome 50 Publications including national and international Patents and Books.
\nRetired, but still teaching and researching ...
\nYou can reach me via mail here.
\nAs automotive engineers, we are interested in E-mobility and how to combine it with clean energy. Let us look at an example, where we consider replacing a VW Golf with a Tesla Model 3.
\nThe VW Golf (*1) has a WLTP combined fuel consumption of 5.6 ltr/100 km. With a specific energy density for gasoline of 8.9 kWh/ltr the corresponding primary energy consumption is 49.8 kWh/100km. As an average driver in Germany drives about 15000 km/a (per year), she needs 840 ltr gasoline and generates 2000 kg of CO2. Her car's annual primary energy consumption is approximately 7500 kWh/a.
\nNote: Experience shows, that real-world consumption is 10 ... 30% higher than the WLTP values, as the WLTP test conditions are somewhat artificial. But let's be optimistic and stick with the WLTP data.
\nThe Tesla Model 3 (*2) has a WLTP consumption of 14.0 kWh/100 km. With the same driving distance as above, its annual electric energy consumption is 2100 kWh/a. We can see that the ICE has an energy efficiency of only 0.28 (=2100/7500) compared to the electric drive. Combined with the fact that the electric drive has zero local CO2 emissions, this approximately 3 times higher energy efficiency is the main advantage of E-mobility.
\nHowever, while fossil fuels can be considered primary energy, electric energy must be generated from other energy sources. So how do we charge our Tesla?
\nFor the individual car owner a private nuclear power plant to charge her car is not an option. But for a whole country it is a possible solution. If all 48 million passenger cars in Germany, most of which are still ICE-powered, were replaced by Tesla Model 3s, the required electrical energy would be 48 million · 2100 kWh/a = 100 800 GWh/a = 100.8 TWh/a per year. In 2020, before we shut down or last nuclear power plants in Germany, each of them produced about 11.5 TWh/a (data for 2020). Whether you like the idea or not, 9 of them would do the job ... But if you want \"real clean energy\", we have to find another solution.
\nAccording to (*3) an optimally positioned solar panel converts the 1 kWp/m2 peak power, which the sun delivers theoretically on a sunny summer day at noon, into a theoretical Ppeak,solar= 0.2 kWp/m2, i.e. commercial solar panels plus inverter have a total efficiency of about 20%. It is this peak power Ppeak,solar, for which we have to design the electric components of the system. And it is this value which is frequently reported as \"installed power\".
\nBut peak is not average and power is not energy! Due to the daily rise and dawn of the sun and the seasonal cycle of summer and winter, as we move away from the equator, the average is much smaller (Figure 1). E.g. in southern Germany on a sunny winter at noon, we only get one third of the summer's peak power. The daily energy is even more sensitive, as in summer daylight lasts for up to 16 hours, while during winter it may be as short as 8 hours. And then we have the weather: clouds, rain and snow. All these effects drastically reduce the total available energy in each month (Figure 1).
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/11/strom-report-monatliche-stromerzeugung-aus-photovoltaik-in-deutschland-2021-2022-amp-2023.png\")
For my hometown (Stuttgart, Germany) over a year an average reduction factor of 0.136 was measured (*3), i.e. the annual effective power (*9) is Peff,solar= 0.136 Ppeak,solar . Thus, our solar panel provides a total energy of about Esolar= Peff,solar · 365 d/a · 24 h/d = 240 kWh/(m2 a) per year. However, the annual values may be a bit misleading. As Figure 1 shows, there is a strong monthly variation in the total solar production of Germany (Figure 1). During the best summer months, we may produce more than double (2x) the average, while during the worst winter months, we have less than a quarter (0.25x) of the average.
\nIf the panel is not in the optimal position, the energy will be further reduced (*4). E.g. if the panels point to the east or west rather than south, we lose 20%. If the panel is mounted vertically rather than with the optimal 30° ... 45° inclination, we lose another 30%. Assuming a slightly suboptimal position, let's continue with Esolar= 200 kWh/(m2 a) per year.
\nNow back to our Tesla Model 3 example. If we want to generate all of the required 2100 kWh/a, we would need a solar panel with 2100 kWh/a / 200 kWh/(m2 a) = 10.5 m2. No big problem, if you can use the roof of your garage or house. A bit too much, if you have to place the solar panel on the balcony of your rented apartment.
\nHowever, this calculation cares only about balancing the averages, forgetting that electric energy production and consumption must be balanced not only on average but at any moment unless someone provides an intermediate storage for the energy. Without that, you'd better drive during the night only, because during daylight you have to charge your car. And you should prefer to drive during the summer season and stay at home in winter, as the bulk of the solar energy is generated in summer (Figure 1). Averaging electrical energy over the daily cycle should not be a problem for your grid operator, as there are a lot of other consumers during the day, while during the night some nuclear or fossil power plants may have excess capacity to charge electric vehicles. The summer/winter seasonality however cannot be averaged away, as a lot of other consumers also need more energy in winter than summer. Balancing between the northern and the southern hemispheres, where seasonality is inverse to each other, seems far from realistic. Thus, we may need to oversize our solar panels by a factor 1/0.25 = 4 or more to have enough energy even in January and December. Now our solar panel size has increased to 40 m2. And we have not yet discussed the cars of your spouse and all the other electric consumers at home. Hm.
\nAccording to (*3, *5) the power P ~ d2 v3 of a wind turbine is proportional to the diameter d of the rotor blades squared and to the third power of the wind speed v. A turbine with a diameter d = 2 m, which you could mount on top of your roof, at a gentle breeze of 4 m/s (8 knots), which is the average wind speed reported for the German countryside, and an efficiency of 50%, which is close to the theoretical limit, would generate P ≈ 60 W. Enough to power your notebook, but not to charge your Tesla.
\nThus, having your own wind turbine at home does not solve the problem. Better we use much larger rotor diameters and install them on top of mountains or at the coast, where wind speeds are higher and more reliable. A turbine with a rotor diameter of 120 m at 6 m/s could generate some Ppeak,wind= 750 kW. Such values for average or - even more misleading - for maximum wind speed are frequently reported as \"installed power\" Ppeak,wind and again are close to useless. What we are interested in is how much energy this wind turbine really generates.
\nSimply using the power for the average wind speed and multiplying it by 1a = 8760h to calculate the annual energy does not work, because P is highly nonlinear with respect to v and v is very volatile. Similar to solar panels, where we need the time profile of the local sunshine, we need the profile v(t) of the local wind speed over a year and then average P(v(t)). For several commercial German onshore wind farms annual effective power (*9) was reported to be Peff,wind ≈ 0.25 Ppeak,wind, while offshore wind farms achieved Peff,wind ≈ 0.5 Ppeak,wind. The annual energy Ewind= Peff,wind · 8760 h/a is in the range of 8 to 10 GWh/a per onshore wind turbine (diameters normalized to 120 m). Offshore wind farms provide 15 to 20 GWh/a per turbine, indicating the higher wind speeds on sea.
\nAgain there is a strong seasonal cycle (Figure 2). In Germany, we may have double (2x) the monthly average in winter months, while less than half (0.5x) the average in summer months. This profile is nearly invers to the solar profile, where most of the energy is generated in summer. Thus, combining sun and wind helps to reduce our seasonal balancing problem.
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/11/wind-energy-production-per-month-in-germany-2.png\")
Let's calculate the specific area requirements first. For solar panels, we got 200 kWh/(m2 a). When mounted on a flat surface rather than on an inclined roof, we need some space between the panels to avoid shadowing. 100 to 150 kWh/(m2 a) seem more realistic for larger solar parks. Wind parks also need a lot of space. As the turbulences caused by one turbine influence its neighbors, turbines are typically installed in a chessboard pattern with an area of 4 times or more the rotor diameter squared per turbine. The 10 to 20 GWh/a for wind parks lead to 50 to 100 kWh/(m2 a), i.e. the same order of magnitude as for solar farms.
\nAgain ignoring any daily and seasonal balancing problems and using an optimistic 100 kWh/(m2 a), the 100.8 TWh/a electrical energy for our fleet of 48 million Tesla Model 3s could be generated by solar and/or wind farms with a total area of some 1000 km2. Assuming that it takes 6 · 2.5 m2 to park a single Model 3, i.e. some 720 km2 for all 48 million cars, we could even park them all directly below these solar panels and wind turbines. Well, maybe not below those offshore wind turbines ...
\nBTW, the energy for our fleet of electric cars would increase Germany's consumption of electric energy by close to 20%, as in the last 10 years Germany's annual electrical energy production was 575 ... 650 TWh/a (*6, *7). To put that in perspective, Germany's annual primary energy consumption in the pre-COVID years was 13 ... 14 Exajoule/a, i.e. 3600 ... 3900 TWh/a. A bit more than one quarter is used for transport (cars, trucks, ...), a similar amount goes to households (heating, cooking, ...) and the remaining 45% are used for industry and all other sorts of economic activities (production, commerce, services, ...).
\nThe balancing problem between power generation and power consumption remains. Solar and wind are extremely volatile and do not care about when consumers need energy. Even if the right combination of solar and wind and a considerable amount of oversizing may help with the seasonal problem, the daily variability remains to be solved. Every night there is no solar energy and if we have cloudy, but calm weather we may have a stretch of several days without any solar and wind energy at all. So we either need intermediate storage, which is not feasible on a large scale (see also below), or we must keep nuclear and/or fossil fuel power plants to smooth out the stochastic behavior of sun and wind (Figure 3 (*8)). The latter is not only costly but also one of the reasons for Germany's dependence on (Russian) natural gas. And may remain so for the foreseeable future, unless Germany reverses its decision to shut down even more of its nuclear, coal and oil power plants as it goes \"green\". Hm.
\nIf you want to learn a bit more about the economic and technical problems with Germany's approach to \"going green\" with its electricity grid, you can watch this Youtube video (starts at 56:15min, sorry, only in German, try to enable subtitles).
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/11/gallery/ActualElectricEnergyProductionGermanyNov.PNG\")
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/11/gallery/ActualElectricEnergyProductionGermany.PNG\")
\nWhen it comes to climate change, renewable energy and related issues, discussions tend to be emotional. Often, because opinions are exchanged rather than facts. Alarming news shall catch your attention rather than inform you. NGOs may seek more funding and justify their own existence rather than provide more insight. So-called experts expressing strong opinions on TV talk shows may want you to follow someone's agenda rather than enlighten you. And politicians may want to get reelected by comforting or by scaring you, but expect no real problem-solving if that would take more than one election period.
\nWhen in doubt - and you always should be - use your common sense, combine it with some basic high school math and physics and some data, for which you can easily find reliable sources on the Internet, if you do a little searching. Sure, developing such complex systems takes hard work and more knowledge and skill than most of us have. But often it does not take much to do some rule-of-thumb quantitative analysis and draw your own conclusions about whether something makes sense or is just wishful thinking.
\nOne last example, of how easy that can be: What about the idea, to use the combined batteries of our electric vehicles to solve the intermediate storage problem for an all-wind, all-solar power grid? If our 48 million Teslas with their 60 kWh battery capacity (*12) were to feed the Germany power grid, their combined electrical energy would be about 2.9 TWh, hoping that they are all fully charged. Since Germany consumes 650 TWh/a of electrical energy, the Teslas could power Germany for about 2.9 TWh / 650 TWh/a = 0.0045 a = 1.6 days. Not bad, but what if the calm cloudy weather lasts a bit longer, if 48 million fully charged Teslas are unlikely, or - heaven forbid - if owners use their cars for driving instead? Looks like we'd better have some backup power sources with different technologies ...
\nWant to dive deeper? Why not try to figure out, if we have enough lithium, cobalt, nickel or copper to build all those batteries and how the energy required to mine and produce batteries compares to the potential energy savings of electric vehicles. Figure 4 from (*13) or the video below are a good place to start. And if you are interested in geopolitics, see if you like the countries, where these materials can be mined (*14 - 18), more than the countries, where we get our fossil fuels from ...
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/11/GTK-time-to-wake-up-presentation-slides_Seite_22-3.png\")
Most of the renewable energy information has been taken from reference (*3), while (*6) proved to be a brilliant source for all sorts of energy-related data. All errors in the above calculations and all opinions expressed are mine - and subject to change, if the facts change.
\n(*1) VW Golf 8, model year 2022, 1.5l TSI OPF 110 kW gasoline engine, front-wheel drive, manual transmission, see here and here (checked 2022-07-26)
\n(*2) Tesla Model 3, Europe version, model year 2022, single PSM motor with 88 kW average / 239 kW peak power, rear-wheel drive, 60 kWh battery package, see here and here (checked 2022-07-26)
\n(*3) C.Holler, J.Gaukel: Erneuerbare Energien - Ohne heisse Luft, Oekum, 2018, based on the book of the late David MacKay: Sustainable Energy - Without the Hot Air, 2015
\n\n\n\n\n
\n(*5) Wind turbine power \\(P = \\frac{1}{2} \\cdot \\eta \\cdot \\rho \\cdot \\pi \\cdot (\\frac{d}{2})^2 \\cdot v^3\\) with efficiency \\(\\eta \\), air density \\(\\rho = 1.25 kg/m^3\\), rotor diameter \\(d\\) and wind speed \\(v\\)
\n(*6) BP: Statistical Review of World Energy, 2022. Beginning in 2024, future versions of this report will be published by the Energy Institute.
\n(*7) Umweltbundesamt: Energieverbrauch nach Energieträgern und Sektoren and Umweltbundesamt: Primärenergieverbrauch (checked 2022-08-06)
\n(*8) Bundesnetzagentur: Actual Electricity Production by Source for Germany (Note: set the time range as needed)
\n(*9) Electrical engineers will notice, that the effective power Peff relates to the peak power Ppeak in a similar way as the RMS value of an AC signal to its amplitude. The \"effective value\" represents the time variable AC signal by a constant DC value, which has the same effect (power/energy) averaged over a certain time period.
\n(*10) Wood as renewable energy? Forests in Germany produce some 10 m3/ (10000m2 a) of wood. With a specific weight of 625 kg/m3 and a specific energy of 4 kWh/kg (average values for different sorts of wood with 20% or less water content), our wood contains a primary energy of 2.5 kWh/(m2 a). With a conventional thermal power plant with a best-case efficiency of about 40% this could be converted into some 1 kWh/(m2 a) of electric energy (neglecting the energy required to cultivate the forest and cut the wood), i.e. two orders of magnitude less than wind or solar farms. If you intend to completely power your Tesla by this \"wood electricity\", you should consider purchasing some 2100 m2 of forest. Note: Germany has about 1300 m2 per person or 2400 m2 per car. Sources: here, here and here.
\n(*11) Plants as an alternative form of solar farms? Wheat, corn, oilseed rape or other plants transform solar energy into biomass. Rather than eating or feeding these plants, they can be converted into biofuel or biogas. According to (*3), the respective annual primary energy would be in the range of 1 ... 5 kWh/(m2 a), again neglecting the energy required to grow and process the plants.
\n(*12) State-of-the-art Lithium Ion batteries for electric vehicles have a specific weight of 5 kg/kWh = 1 kg/ltr and a lifetime of 2000 ... 4000 charging cycles. End of life is defined as losing more than 20% of the initial capacity.
\n(*13) S. P. Michaud: Assessment of the Extra Capacity Required of Alternative Energy Electrical Power Systems to Completely Replace Fossil Fuels, 2021, (full report, summary slides)
\n(*14) Visual Capitalist: The EV Mineral Shortage
\n(*15) Visual Capitalist: Cost Structure of EV Batteries
\n(*16) KGP Auto’s Powertrain Outlook Report
\n(*17) US Department of Energy: Critical Material Assessment 2023
\n(*18) IMF Working Paper No. 2023/201
\n", "image": "https://wernerzimmermann.eu/media/posts/11/electric-mobility-g7dcf4563e_1920-2-2-2.png", "author": { "name": "Werner Zimmermann" }, "tags": [ ], "date_published": "2026-04-09T21:55:00+02:00", "date_modified": "2026-04-09T21:56:54+02:00" }, { "id": "https://wernerzimmermann.eu/something-not-to-forget.html", "url": "https://wernerzimmermann.eu/something-not-to-forget.html", "title": "Thoughts ...", "summary": "Unfortunately, some in society and many in politics…", "content_html": "Unfortunately, some in society and many in politics seem to have forgotten that ideology and wishful thinking do not change physical and economic laws and are no substitute for studying the facts and working hard. History tells the story of those who didn't believe it ...
\nNever blindly trust politicians, activists, or so-called experts, especially those with a professor title, who never got any real work done and never made a living in the free economy. If their statements contradict common sense, the problem is not your common sense ...
\n\"The fool does think he is wise, but the wise man knows himself to be a fool\".
\n\n\"Each politician hopes that if he feeds the crocodile enough, the crocodile will eat him last. All of them hope that the storm will pass before their turn comes to be devoured.\"
\nWinston Churchill, (New York Times, 1/21/1940)
\n\"Kites rise highest against the wind - not with it.\"
\n\"Do not walk behind me, I may not lead. Don't walk ahead of me, I may not follow. Just walk beside me and be my friend.\"
\n\n\"If people do not believe that mathematics is simple, it is only because they do not realize how complicated life is.\"
\n\n\"Everyone should be ashamed who uses the wonders of science and technology without thinking and without understanding any more about them than a cow understands the botany of the plants which she eats with pleasure.\"
\nAlbert Einstein, Rede zur Eröffnung der Funkausstellung 1930
\n“Weak people take revenge, strong people forgive, intelligent people ignore.”
\nAttributed to Albert Einstein
\n", "image": "https://wernerzimmermann.eu/media/posts/9/Pixabay_science-g10f288e27_1920-4.jpg", "author": { "name": "Werner Zimmermann" }, "tags": [ ], "date_published": "2026-04-09T20:56:00+02:00", "date_modified": "2026-04-09T21:56:16+02:00" }, { "id": "https://wernerzimmermann.eu/financial-system.html", "url": "https://wernerzimmermann.eu/financial-system.html", "title": "Financial System", "summary": "The financial system (Ref. 2 and 4) of…", "content_html": "The financial system (Ref. 2 and 4) of a country has a layered structure (Fig. 1):
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/26/financialsystem-2.png\")
In today's globalized world, every level of a country's financial system has partners in other countries. Central banks collaborate, particularly during times of crisis. Large commercial banks have international branches that help companies finance their international operations. Private households purchase goods from online stores in other countries, book hotels, and rent cars, thereby creating their own streams of exports and imports.
\nFig. 1 does not show two factors that may have a growing influence on the financial system in the future:
\nThe commercial banks hold part of their \"money\" in accounts at the central bank for operational purposes. In most countries the central bank and government regulations define a minimum value for these reserves to ensure liquidity of the commercial banks, but they do not set a direct limit on the total size of the loans the commercial banks can issue. In normal times, the commercial banks will grant far more loans than they have in reserves at the central bank or deposits from their customers. Like the deposits, these loans are nothing more than numbers in the bank's computer system. Thus granting loans is called creating money out of thin air.
\nTo describe and quantify this system, economists use some technical terms:
\nBroad money, that is, credit created money, is what fuels the economy. The more money flows the better for the economy, as one man's spending is another man's income (Ref. 1). The total credit volume depends on the interaction of the commercial banks with the private sector, that is the willingness and ability to take and grant loans. If companies see business opportunities that promise higher returns than the interest on their loans, they will take out new loans. If the banks believe, that the debtors are able to repay the loans plus interest cost, and if the interest revenue is higher than the banks own costs, they will grant the loans. Thus, capital-market interest rates, which ultimately depend on the key interest rate set by the central bank, play a decisive role in credit creation. The total credit volume is limited by the capital that is available to the banks:
\nWhen looking at Fig. 1 from a bookkeeping perspective that requires assets and liabilities to be balanced, it is easy to see that we live in a fiat currency system where money actually is sort of a circular credit scheme:
\nAs is easy to see, one man's debt is another man's asset:
\nThe primary monetary policy instruments for the central banks to ensure the stability of the financial system are the required size of commercial bank reserves and the key interest rate (Fed Funds Rate, Leitzins), which the central bank pays to the commercial banks for these reserves:
\nGovernments care less about inflation in their fiscal policy, but more about consumer, aka voter, sentiment. Their main instruments are taxes and government spending:
\nEconomists prefer monetary dominance, where central banks can set interest rates freely to control inflation and currency exchange rates. However, when governments accumulate large deficits, central banks may be forced to keep interest rates low and even monetize the debt. This is called fiscal dominance, for more details see this post.
\nCurrency exchange (FX) rates indicate the real or perceived relative strength of an economy, at least in theory. In the real world, FX rates depend on supply and demand dynamics and react volatile to changes in a lot of economic variables:
\nExport-oriented companies often prefer a weaker home currency, because it makes their exports look cheaper for foreign buyers of their products. Private households however tend to prefer a stronger home currency, as it makes imported goods and services or traveling to foreign countries cheaper.
\nBecause FX rates influence local inflation and deflation, most central banks manage their currency exchange rate, even if few will openly admit it:
\nBecause international trade is often settled in U.S. dollars, non-U.S. commercial banks in many countries allow their customers to hold deposits or loans in U.S. dollars (or other currencies) instead of their home currency. Companies often take credit in dollars to finance their international activities and households in countries with high inflation and weak currencies tend to hold savings in dollars. This so-called Eurodollar market, despite its name, is not restricted to Europe but extends to the Middle East and Asia. The Bank for International Settlements BIS estimates the amount of offshore dollars to be in the same range as the broad money supply inside the U.S. While the Eurodollar market functions well in normal times, the Fed and the U.S. Treasury cannot control its size and regulate it. In a crisis situation like the GFC or the Covid crisis the market can dry up and the non-U.S. banks and companies may have problems servicing their U.S. dollar liabilities. In such a scenario, their local central bank is expected to step in as lender of last resort, if necessary with printed money. But a non-U.S. central bank cannot print dollars, so it may not be able to help. In past risk situations, the U.S. central bank Fed used to install emergency swap lines with the non-U.S. central banks, e.g. the ECB. Swap lines are essentially time-limited credit agreements between central banks, so that the non-U.S. central banks can forward dollars to their local commercial banks.
\nGovernments (and many households especially in countries with weak currencies or high inflation) keep part of their savings in gold. As a commodity, gold has limited industrial use. But gold is considered to be a store of wealth which compared to normal currencies does not have counterparty risk (for the private sector this is only true as long as the government does not forbid them to hold gold). It is said to keep its purchasing power over the long term, i.e., to keep up with inflation. However, in the early stages of a crisis its price often tends to decrease in parallel to the stock or credit market, rather than being a safe-haven asset. This behavior may be due to gold's liquidity, as in a crisis many financial market participants may sell part of their gold to meet margin calls for declining stock or bond positions, which they do not want to sell or cannot sell. And sometimes people simply sell gold (or U.S. Treasury bonds) to finance their living costs, which may be the case in the 2026 Iran-U.S. war, where countries around the Persian Gulf seem to sell gold to substitute missing income from oil exports, which are not possible due to the blockade of the Strait of Hormuz.
\nA country's trade balance can be managed with the same well-known sales strategies that individual companies use for their products:
\nUnfortunately, most products today fall into the latter category. What could you do if you want to increase exports for your price-sensitive products:
\nThe 1970s saw the beginning of three major developments in the global monetary system:
\nAs the USD is the ultimate currency for trade and for other kinds of cross-border financing such as loans, all countries need to hold reserves in USD, no matter what their local currency is. To acquire these USD reserves, they try to run trade surpluses. As the global trade volume grows, to keep the system afloat, the U.S. must permanently provide more dollars. At first glance, this looks like a comfortable situation, because the U.S. can import goods by exporting USD, which in a FIAT monetary system it can print without natural limits. However, there are two conflicting views:
\nNo matter which argument you follow, when a country has a deficit in its trade balance and thus in its current account, it must have a surplus in its capital & financial account, that is, an influx of capital - and vice versa. This is a direct consequence of the fact that the balance of payments, which is the sum of current account and capital account, must always be zero, as we discussed in our post on macroeconomics.
\nWhether this influx of capital is good or bad from an economic perspective depends on how it is used. If the capital flows into treasuries, that is, government debt, it is questionable because governments tend to consume rather than invest. However, if the capital flows into stocks or companies as investments, it can help the economy grow and create jobs, and thus is positive.
\nBy the way, trade deficits and capital inflows are not only a U.S. topic. The EU, which also has an impressive trade deficit vs. China (see here), gets capital inflows, with China investing in automakers such as Volvo , MG Rover or Mercedes-Benz, buying world-class automation and robotics companies like Kuka, or purchasing infrastructure such as parts of the ports of Athens or Hamburg.
\n Werner Zimmermann ![\"Translate\"](\"UNFlag.png\" "\\"\\"")
Some of my old lectures:
\nComputer Architecture: Basics of Microprocessors and Microcontrollers (Computerarchitektur)
\nEinführung in die Informationstechnik (Information Technology)
\nEinführung in die Regelungstechnik (Control Engineering)
\nSpezielle Regelungstechnik * (Advanced Control Systems)
\nSichere Systeme (System Safety)
\nAutomotive System Design - E/E System and Software Architecture
\nIndustrial Automation System Design *
\nDigital- und Rechnertechnik 1 * (Digital Systems)
\nDigital- und Rechnertechnik 2 (Computer Systems)
\nWindows Systemprogrammierung (Windows System Programming)
\n* Due to respect for coauthors and some ongoing projects not all topics described here are included in the PDFs available on this page.
\n", "image": "https://wernerzimmermann.eu/media/posts/3/Pixabay_Altmann_board-g89627ecca_1920-2-2.jpg", "author": { "name": "Werner Zimmermann" }, "tags": [ ], "date_published": "2026-04-09T17:23:00+02:00", "date_modified": "2026-10-23T16:45:38+02:00" }, { "id": "https://wernerzimmermann.eu/global-energy-facts.html", "url": "https://wernerzimmermann.eu/global-energy-facts.html", "title": "Global Energy Facts", "summary": "The Energy Institute (energyinst.org) does publish an annual…", "content_html": "The Energy Institute (energyinst.org) does publish an annual statistical review of the world's energy production and consumption. The 2025 edition (with data for year 2024, graphics by ourworldindata.org) contains some interesting facts:
\nThe world consumed ≈ 177 000 TWh of primary energy in 2024. Oil, coal and natural gas are the dominant sources (Fig. 1). CO2-free sources such as solar and wind (\"renewables\"), bioenergy, hydro- and nuclear power delivered less than 20% (for the statistical methods used see the note below).
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-primary-sub-energy-source-2.png\")
Despite all the talk about global warming caused by CO2 emissions, energy consumption, including fossil fuels, is still rising steeply (Fig. 2)
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-global-energy-substitution.png\")
About half of the energy is consumed in Asia-Pacific countries (Fig. 3).
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-primary-energy-consumption-by-region.png\")
China's energy consumption has surpassed that of the United States by far. China and India together now consume more energy (≈ 60 000 TWh) than North America and Europe combined (≈ 45 000 TWh) (Fig 4):
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-primary-energy-consumption-selected-countries.png\")
Energy-poor European countries are less energy intense, as indicated by low energy consumption relative to GDP (Fig. 5). North America is close to the world average, while energy-rich Russia or production rather than service-oriented economies like China need not or cannot care so much about energy intensity.
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2022-energy-intensity-2.png\")
If we look at per capita consumption, the picture is somewhat different, as countries such as China or India consume enormous amounts of energy in absolute terms, but also have huge populations with still relatively modest living standards (Fig. 6).
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-per-capita-energy-source-stacked.png\")
We expect living standards in the Global South to rise further as they did in the past, perhaps reaching per capita levels similar to those in Europe by mid to end of this century. In the past, all world regions with major economic growth saw a steep upward trend in CO2 emissions (Fig. 7). There is no reason why this trend would stop.
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-annual-co-emissions-by-region.png\")
Will consumption of oil, coal and natural gas decline? Probably not, if the trend of the past continues, where increases in GDP have always been accompanied by increases in energy consumption (Fig. 8, 9 and 10). The best we can hope for is that the trend becomes less steep with energy used more efficiently and the gradual shift to renewables.
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-oil-production-by-region.png\")
![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-natural-gas-production-by-region-terawatt-hours-twh.png\")
![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-coal-production-by-region.png\")
\nSince 2000, nuclear power generation has remained more or less constant (Fig. 11). A sharp increase in China compensated a slight decline in Europe. This decline is due to Germany, which did completely shut down all nuclear power plants.
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2024-nuclear-energy-generation.png\"){kind=spacer}
\nWhile the Energy Institute's report concentrates on energy production, the International Energy Agency's World Energy Outlook gives us an idea which sectors use this energy (Table 1):
\n| Industry | \nraw materials, production | \n40 % | \n
| Buildings | \nheating, cooling, lighting | \n30 % | \n
| Transport | \nroad, rail, air, ship | \n27% | \n
| Miscellaneous | \nagriculture etc. | \n3% | \n
When examining energy data, it is important to determine whether it refers to primary or final energy. The former is typically used when discussing production data, while the latter often refers to consumption data. Some energy is lost during the process of drilling for oil and natural gas, mining coal, refining it, and transporting it to the end user. The end user then converts the energy from one form to another with associated conversion losses. Processes that use oil, natural gas, or coal to generate heat can be more than 90% efficient. However, if this heat is used to generate mechanical energy, as in combustion engines, or electric energy, as in thermal power plants, the efficiency does not exceed 40%. Due to physical limits, we cannot expect major improvements in this area.
However, we theoretically do not need primary energy at all for ongoing electricity production from renewables once solar and wind parks and grids have been built. This drives the trend toward electrification.
(Note: This section has been updated with data up to 2025 from the 2026 report)
\nAs part of the rising global energy demand, electrical energy production has more than tripled in the past 40 years (Fig. 12). In 2025 the world needed about 31 770 TWh (2024: 31 250 TWh) of electric energy, i.e. a bit less than 20% of total energy.
\n![\"\"](\"https://wernerzimmermann.eu/media/posts/19/2025-electricity-prod-source-stacked-2.svg\")
\nTechnically, solar or wind are the most promising sources to further increase electric energy production. But in 2025 57% (2024: 60%) was still generated by fossil fuels (Table 2). Yes, renewable sources have been rising faster than other sources in recent years. But this is normal for any new technology which starts from a low base. So renewables (and perhaps nuclear) have a long way to go. Especially if other areas of primary energy consumption, such as cars and trucks, were to switch from fossil fuels to electric energy. For more details about global trends in the electricity mix see this article.
\nAnd with more electric energy generated by renewables, the intermittent and seasonal nature of solar and wind creates further stress for our electric grid. A topic which I discussed in another post.
\n| Fossil Fuels | \nCoal | \n33% | \n≈ 57% | \n
| Natural Gas | \n22% | \n||
| Oil | \n2% | \n||
| CO2-free Sources | \nWind, Solar, Bioenergy | \n20% | \n≈ 43% | \n
| Hydropower | \n14% | \n||
| Nuclear | \n9% | \n||
| Total Electric Energy | \n100% = 31770 TWh | \n
To learn more, get the Global Energy Report, download the data yourself or play with the charts on ourworldindata.org to do your own analysis.
\nMany thanks to the Energy Institute and ourworldindata.org for collecting all the data, providing the report and creating all these informative charts. For older reports see BP's Energy Economics website.
\nWhen you compare data of the EI Energy Report, values on ourworldindata.org or from the IEA or other sources, please note that there are various methods to convert energy from different sources into a comparable primary energy value (see pg. 69 of the 2025 edition). This especially affects renewables. Another source of confusion is bioenergy with \"modern\" sources like biogas and biofuels and \"traditional\" bioenergy like wood or manure. As for the latter no real trade data exist, estimates for traditional bioenergy may or may not be included in published energy statistics.
\n", "image": "https://wernerzimmermann.eu/media/posts/19/pexels-pixabay-414320-2.jpg", "author": { "name": "Werner Zimmermann" }, "tags": [ ], "date_published": "2026-04-09T17:20:00+02:00", "date_modified": "2026-07-27T23:04:16+02:00" } ] }