‘Energy shift hit by new hurdles’
Wednesday 18 September 2024
A new report has emerged, shedding light on the intricacies and challenges that lie ahead in the energy transition journey.
The latest research conducted by McKinsey and Company delves into the complexities of the global energy landscape, revealing a phase characterised by escalating costs, technological hurdles, and an urgent need for strategic rethinking.
The Global Energy Perspective report unveils a concerning forecast, indicating that the surging energy demand coupled with resultant emissions could impede the momentum of the energy transition. This grim reality necessitates a profound reconsideration of both low-carbon and fossil fuel strategies to align with the objectives articulated in the Paris Agreement.
Projections outlined in the report paint a picture of global energy demand soaring by up to 18 per cent by 2050, predominantly fuelled by the budding economies of ASEAN nations, India, and the Middle East.
The future trajectory anticipates renewables to claim a substantial share, comprising 65-80 per cent of the global power generation mix by 2050, contingent upon the varying scenarios.
Interestingly, the report highlights a significant downward revision in the estimated demand for hydrogen, attributed to escalated costs ranging between 20-40% and regulatory ambiguities.
Conversely, fossil fuels are anticipated to retain a sizeable chunk, accounting for 40-60 per cent of the total energy demand till 2050. Significantly, fossil fuel demand is poised to hit a plateau sometime between 2025-2035, ushering in a subsequent phase of decline.
An alarming revelation brought to the forefront by the report is the sluggish pace at which clean energy technologies are evolving to cope with the skyrocketing demand. The current landscape reflects a skewed focus of renewable energy projects on the low-hanging fruit, where policies and financial backing have flowed more freely.
Diego Hernandez Diaz, a Partner at McKinsey, articulated his contemplations on the research findings: ‘To navigate through this critical juncture of the energy transition whilst upholding the tenets of affordability, reliability, and sustainability, immediate action and an accelerated pace of transformation are imperative.’
‘Despite the surge in global net-zero commitments, the requisite technologies essential to achieve these objectives are not pacing ahead rapidly enough. The low-carbon solutions demand rapid scaling, yet they encounter an uphill struggle hampered by escalating interest rates and disruptions in the supply chain, constraining access to capital.’
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