McKinsey & Company's 2023 Global Energy Perspective underscores the critical importance of addressing bottlenecks related to substitute materials, innovation, infrastructure, and regulation to achieve global net zero targets. The analysis reveals that challenges such as land availability, energy infrastructure, manufacturing capacity, labor, consumer affordability, investment willingness, and materials availability could impede the accelerated deployment of clean energy technologies required to meet net zero commitments.
The report asserts that clean energy technologies, needed to be deployed at five times the current rate, face potential undersupplies, with wind power, electric vehicles, and green hydrogen being the most vulnerable. McKinsey highlights potential shortages of 20 to 50% for electrolyzers and over 50% for certain materials used in wind power magnets. Additionally, a surge of 330% in lithium demand for batteries by 2030 is projected.
However, the report suggests that overcoming these bottlenecks could lead to clean energy accounting for up to 85% of global power generation by 2050, assuming an Achieved Commitments scenario. The analysis models different energy transition scenarios based on a 1.5°C pathway, considering more than 400 drivers across sectors, technologies, policies, costs, and fuels.
Bram Smeets, a partner at McKinsey, emphasizes the need for urgent global momentum and collaboration across the energy value chain to resolve bottlenecks and accelerate decarbonization. The report acknowledges that achieving the goals aligned with the Paris Agreement requires a significant course correction.
Furthermore, McKinsey's analysis indicates that the speed of industry electrification will shape global energy consumption. In an Achieved Commitments scenario, global energy consumption could decline by up to 6% by 2050 compared to 2022, driven by electrification in different sectors. However, in a Fading Momentum scenario with slowed electrification, energy consumption could grow by 24% during the same period.
Electricity and hydrogen emerge as the fastest-growing energy carriers, accounting for 58% and 33% of energy demand in the Achieved Commitments and Fading Momentum scenarios, respectively. The analysis projects a two to fivefold increase in hydrogen demand by 2050, driven by traditional industries and new sectors like heavy-duty trucking and industrial heat.
Luciano Di Fiori, a partner at McKinsey, emphasizes the role of continued investment in green technologies and electric transmission and distribution to enable the energy transition. The analysis projects total annual investments in the energy sector to grow by 2-4% per annum, reaching between US$2 trillion and US$3.2 trillion in 2040.
Ole Rolser, another partner at McKinsey, highlights the need for substantial pivots across industries and geographies, noting that positive price signals and a vibrant innovation landscape provide the necessary ingredients for overcoming bottlenecks and steering toward a 1.5°C pathway.
