Global Energy Perspective 2019-Energy Insight by McKinsey. January 2019
Summary
“Energy systems around the world are going through rapid transitions that will bring important changes to the way we fuel our cars, heat our homes, and power our industries. These trends will have widespread implications for businesses, governments, and individuals in the coming decades.
We have made it our mission to help our clients navigate this energy transition. As a compass and tool to support these efforts, we have created a fundamental and granular outlook on global energy systems.
Our outlook is based on contributions from hundreds of McKinsey experts from around the world, from fields including oil and gas, automotive, renewable energy, and basic materials. Through this global network, we are able to incorporate a diverse set of views into one consensus: our Reference Case in front of you.
Many of the trends that shape the future of energy are in reality driven by a multitude of local trends, which will occur with different magnitudes and speeds in specific geographies and sectors. To capture this granularity, our model offers a detailed outlook across 146 countries, 55 energy types, and 30 sectors, and then aggregates these developments to establish a bottom-up global outlook as a basis for our insights.
Reflecting on our work on this outlook and numerous discussions with experts, we find that three important tipping points in the energy landscape will come within reach in the next few years:
A. As the cost of renewables has come down further, many countries will reach a tipping point in the coming five years, where new-build solar or wind capacity is cost-competitive with the fuel cost of existing conventional plants. As a result, we see a further acceleration of the ramp-up of renewables;
B. Similarly, as the cost of batteries continues to decline, within the next 5-10 years, many countries will reach the point at which electric vehicles are more economic than internal combustion engine vehicles. This is true for passenger cars but also for most truck segments;
C. For the first time, we project a peak in global carbon emissions, despite continued economic growth and a growing global population. Triggered by a drop in global coal demand and flattening oil demand, carbon emissions are expected to start to decline by the mid- 2020s.
Comparing our Reference Case outlook to editions from previous years, we find that several developments in the energy transition have shown further acceleration. These technological advancements beyond the expected have been a common theme for forecasters in the past. For a perspective on potential further accelerations, we refer to our recent "Accelerated Transition" outlook.
The current Reference Case outlook is structured around five chapters. Chapter 1 provides a perspective on overall energy demand, followed by chapters 2-4 that dive into electricity, natural gas, and oil, respectively. Chapter 5 looks into greenhouse gas emissions, including projections of coal demand as an important driver.
We hope you have an interesting read that helps you shape your thinking on the energy transition and the implications for your organization.”
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