Critical Challenges Revealed for Achieving Net-Zero Goals in the Global Energy Transition

2023-12-21 06:21:16

The analysis of the McKinsey & Company Global Energy Outlook 2023 highlights the need to address technological bottlenecks and other challenges to achieve net-zero goals and limit global warming. The transition will require innovation, infrastructure development and coordinated regulation.

Perspective Writing

In this analysis, the supply and demand outlook for energy products is modeled on a 1.5°C trajectory and four upward energy transition scenarios. It is highlighted that clean energy could represent up to 85% of global electricity generation by 2050 in a Commitments Achieved scenario.

Bram Smeets, Partner at McKinsey, underscores the need for global momentum and collaboration to overcome bottlenecks and meet critical requirements for accelerated decarbonization.

Main Findings

Bottlenecks and Vulnerable Technologies: Obstacles such as the availability of land, infrastructure and labor can slow down the energy transition. Fast-growing technologies such as wind, solar, electric vehicles and hydrogen face significant challenges.
World Energy Consumption: The analysis indicates that global energy consumption could decrease by up to 6% by 2050 in a Commitments Achieved scenario. The electrification of the industry will play a key role.
Energy Vectors of Growth: Electricity and hydrogen will experience significant growth, representing up to 58% of energy demand in 2050 in a Commitments Achieved scenario.
Investments in the Energy Sector: Total annual investments are expected to grow between 2% and 4% annually to reach between $2 and $3.2 trillion in 2040. Decarbonization technologies will lead investment growth.

Impact in Latin America

Clemens Müller-Falcke, partner at McKinsey, highlights the key role of Latin America in the energy transition, with renewable resources to decarbonize its needs and export renewable electricity.

McKinsey emphasizes the need for substantial corrections across industries and geographies, with positive price signals and innovation to overcome challenges and meet global climate commitments.