BP announcements this week included a stated intention to reduce its oil production by almost 40% by 2030 at the same time as ramping up to 50 gigawatts of renewables capacity.

Initially I thought this would mean a significant fall in the amount of useful energy produced by the company. Cutting oil output from 2.6m to 1.5m barrels a day will reduce the world total by slightly more than 1%. And in the little spreadsheets below I show that 47.5 GW of extra renewables will probably only produce about 0.5% of world electricity. Given that oil is globally a more important source of energy than electricity today, I assumed that BP was going to see shrinkage its share of the overall world market.

This may well not be true. Less than 20% of the initial energy value in a barrel of oil typically gets translated into useful actions, such as moving a car. Electricity is much more efficient and up to 90% of the energy value is available via an electric motor. As a result, $50bn of investment in renewables will produce almost as much useful energy in 2030 as is lost by BP letting its oil output decline. 128 terawatt hours of useful energy from oil will be lost by the strategy change while 113 hours of renewable electricity is gained.

· The critical assumption in this calculation is the expected capacity factor of the renewables. In a good solar region, PV would produce approximately 25% of the absolute maximum output if the sun shone 24 hours a day 365 days a year. Onshore wind might average 40% in a windy area while offshore wind will go over 50%. BP says it will invest $50bn to achieve an extra 47.5 GW of capacity. This isn’t currently enough to pay for that much offshore wind, so I assume a 50:50 mixture of solar and onshore wind. This would be fundable by an investment of $50bn and an average capacity factor of 32.5%.

This analysis suggests that BP’s output of useful energy will be down by about 7% to around 113 terawatt hours. 113 TWh is about 0.07% of the world’s total current need for energy, or about 1/1500 of the total. In other words, BP will continue to have to invest billions a year to make a truly significant contribution. However we should remember that the vast majority of current needs are provided by burning fossil fuels which captures only a relatively small fraction of the combustion energy. 113 TWh is about 0.4% of world electricity requirements.

What about the value of the output as recorded on the company’s profit and loss statement?

Crude oil trades for about $46 today; let’s call that $50. (BP’s long term assumption for the oil price is $55). BP refines about ¾ of its output which probably adds about $20 to the value of the product although some of the energy content of the original oil is lost. The cash value of the output it is losing by letting oil production drift down by 1.1 million barrels a day is about $24bn.

The equivalent number for the electricity output gained is just under $7bn, so the strategy switch will cut BP’s turnover by about $17bn, or around 7% of its annual total. However a billion pounds of renewable electricity is produced with very low operating costs. A PV farm doesn’t need anybody working on it while an offshore oil rig is expensive to service and operate. So the impact on immediate profitability will be much less, provided the price of electricity stays at around $50 per megawatt hour.