McKinsey Energy Perspective: The Transition is underway but not fast enough to reverse Climate Change

April 26, 2022
Sixty percent of Fortune 500 companies also promise to reach those decarbonization goals, and yet those efforts likely are not enough to avoid a dangerous heating up of the planet

The global energy transition is a gathering force, but events beyond control can always let the steam out of the battle to combat climate change.

More than 60 nations have pledged to achieve Net Zero in carbon emissions within the coming decades. Sixty percent of Fortune 500 companies also promise to reach those decarbonization goals.

And yet it likely is not enough to avoid a dangerous heating up of the planet, according to a new report by research firm McKinsey & Company.

McKinsey’s newest Global Energy Perspective annual report offers outlooks on the direction of multiple fuel resources in the energy mix. It anticipates that renewables such as wind and solar are going to grow three-fold by 2050 and account for a majority of power generation by that time.

“In the past few years, we have certainly seen the energy transition pick up pace,” Christer Tryggestad, a senior partner at McKinsey, said. “Every year we’ve published this report, peak oil demand has moved closer. Under our middle scenario assumptions, oil demand could even peak in the next three to five years, primarily driven by electric-vehicle adoption.

“However, even if all countries with net zero commitments deliver on their aspirations, global warming is still expected to reach 1.7°C. To keep the 1.5°C pathway in sight, even more ambitious acceleration is needed.”

Key findings of this year’s report include:  

·        Going forward, the global energy mix is projected to shift towards low-carbon solutions, with a particularly strong role for power, hydrogen and synfuels:

o    Renewables are projected to grow 3x by 2050, accounting for 50% of power generation globally already by 2030 and 80-90% by 2050

o    Hydrogen demand is expected to grow 4-6x by 2050, driven primarily by road transport, maritime, and aviation

o    Hydrogen and hydrogen-derived synfuels are expected to account for 10% of global final energy consumption by 2050

o    Rapid technological developments and supply chain optimisation have collectively halved the cost of solar, while wind costs have also fallen by almost one-third. As a result, 61% of new renewable capacity installation is already priced lower than fossil fuel alternatives. Battery costs have also fallen by nearly half in the past four years

·         Global oil demand is projected to peak in the next three to five years, primarily driven by EV uptake

·         By 2050, carbon capture, utilization and storage capacity could grow more than 100-fold from an almost non-existent footprint today, with investment opportunities exceeding LNG markets today.

·         Future growth in energy investments will almost entirely be driven by renewables and decarbonisation technologies

·         Despite net-zero commitments from governments and corporations, an 85% renewable power system by 2050, and the rapid update of EVs and decarbonisation technologies, global warming is projected to exceed 1.7 degrees

About the Author

Rod Walton, EnergyTech Managing Editor | Senior Editor

For EnergyTech editorial inquiries, please contact Managing Editor Rod Walton at [email protected].

Rod Walton has spent 15 years covering the energy industry as a newspaper and trade journalist. He formerly was energy writer and business editor at the Tulsa World. Later, he spent six years covering the electricity power sector for Pennwell and Clarion Events. He joined Endeavor and EnergyTech in November 2021.

Walton earned his Bachelors degree in journalism from the University of Oklahoma. His career stops include the Moore American, Bartlesville Examiner-Enterprise, Wagoner Tribune and Tulsa World. 

EnergyTech is focused on the mission critical and large-scale energy users and their sustainability and resiliency goals. These include the commercial and industrial sectors, as well as the military, universities, data centers and microgrids. The C&I sectors together account for close to 30 percent of greenhouse gas emissions in the U.S.

He was named Managing Editor for Microgrid Knowledge and EnergyTech starting July 1, 2023

Many large-scale energy users such as Fortune 500 companies, and mission-critical users such as military bases, universities, healthcare facilities, public safety and data centers, shifting their energy priorities to reach net-zero carbon goals within the coming decades. These include plans for renewable energy power purchase agreements, but also on-site resiliency projects such as microgrids, combined heat and power, rooftop solar, energy storage, digitalization and building efficiency upgrades.