McKinsey’s Global energy perspective 2021 reveals that the decarbonization of the economy must be accelerated

The world is clearly becoming electrified. A particularly important part of this process is due to the development of renewable energies, especially wind and solar generation. However, efforts in this area are still not enough to stop global warming. It is necessary to accelerate the main vectors of decarbonization of the economy to avoid an environmental scenario of undesirable and catastrophic consequences.

This is the conclusion that can be drawn from the report prepared by the McKinsey consultancy with the title Global energy perspective 2021. The main messages that make up this conclusion are:

  1. The impact of COVID-19 on demand in the long term will be modest.
  2. Electrification progresses, and hydrogen becomes the great player of change for the future.
  3. Peaks in demand for fossil fuels occuring earlier than projected.
  4. The change is too slow to reach a scenario of growth in temperatures limited to 1.5 degrees.
  5. Investment flows will remain stable for the next 15 years.

According to McKinsey, energy demand will rebound rapidly after the pandemic. The impacts that COVID-19 is having on consumer behavior in relation to energy use are small compared to the advancement of electrification. The great driver of this process is energy efficiency and renewable energy. In fact, energy intensity (the amount of energy that is needed for each point of Gross Domestic Product) will decline by 40% by 2050 as a consequence of the gains in efficiency that derive from better use of energy and electricity and the shift of fuels.

Green energies will represent half of the total energy generation by 2035. The prominence will focus on wind and solar technologies, although green hydrogen is beginning to appear as the agent with greatest capacity to revolutionize the energy industry in the future. In fact, it will begin to have a competitive cost by 2030.

The advancement of green energies occurs at the same time as the anticipation of peaks in demand for hydrocarbons. Oil and gas will peak in 2029 and 2037, respectively, but will continue to play an important role in the energy system until 2050 driven by growth in chemicals and aviation areas.

The great challenge comes from the fourth matter pointed out by the consultancy. If greenhouse gas emissions are only reduced by 25% between now and 2050, we will be aiming for a growth in temperatures of 3.5 degrees, extremely far from the 1.5 degrees that is targeted by the Paris Agreement since November 4, 2016. “Turning to this 1.5 degree scenario requires stronger ambitions and accelerated implementation on a global scale”, the report states.

There will be no shortage of capital to finance this change, as energy investment flows will remain stable for the next 15 years. Although renewables will continue to gain share over fossil fuels, these will continue to represent 50% of investments  by the year 2035 in the scenario taken by the researchers as a reference.