Global Energy Perspective 2023

Weekly Business Insights from Top Ten Business Magazines

Week 322 | Shaping Section | 2

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 322 | November 10-16, 2023

Global Energy Perspective 2023

McKinsey & Company | October 18, 2023

Extractive Summary of the Article | Listen

In the past two years, the war in Ukraine and the subsequent energy crisis have changed the energy conversation. Energy security, affordability, and industrial competitiveness are now critical focus points alongside sustainability.

The outlook for the energy transition depends on multiple variables and interdependencies. Uncertainties in cost evolutions, speed of technological progress, and policy developments translate into a wide range of possible scenarios, particularly regarding the outlook for fossil fuels.

What is clear, however, is that the pathway to keep warming below 1.5°C looks increasingly challenging. The world is nonetheless making progress toward a net-zero future, with record growth in areas such as electric vehicle (EV) sales and renewable energy. By 2040, McKinsey expects solar and wind together to contribute the largest share of the world’s energy mix.

Substantial investments will be needed to support the build-out of renewable energy—and to provide sufficient fossil fuels to complement these sources. McKinsey expects total energy investments to increase from 1.5 trillion USD in 2021 to between 2 and 3.2 trillion in 2040. While this represents a big increase, investment levels are likely to remain stable as a proportion of GDP.

The question now is whether supply chains can keep up with the pace of the energy transition. Materials shortages and production bottlenecks—and even land availability—all threaten to slow momentum. 

Three main insights from the report are:

1. Fossil fuel demand is projected to peak soon, but the outlook remains uncertain
2. Renewables will make up the bulk of the power mix by 2050.  Solar is the biggest contributor of renewable energy, followed by wind.
3. Total annual investments in the energy sector are projected to grow by between 2 and 4 percent per annum—roughly in line with global GDP growth—to reach between $2 trillion and $3.2 trillion in 2040.

The energy transition is well underway, but how it will unfold in the decades ahead is difficult to predict. Decision makers in government and business face a challenging time planning for a future energy mix that remains unclear.

Organizations can work now to shape transition strategies that account for uncertainty and are robust under a range of future scenarios. Those strategies, aggregated across countries and sectors, will determine how the global energy landscape takes shape in the years ahead. They will also be crucial in driving progress on sustainability while safeguarding energy security, affordability, and industrial competitiveness.

3 key takeaways from the article

1. In the past two years, the war in Ukraine and the subsequent energy crisis have changed the energy conversation. Energy security, affordability, and industrial competitiveness are now critical focus points alongside sustainability.
2. The outlook for the energy transition depends on multiple variables and interdependencies. Uncertainties in cost evolutions, speed of technological progress, and policy developments translate into a wide range of possible scenarios, particularly regarding the outlook for fossil fuels.  What is clear, however, is that the pathway to keep warming below 1.5°C looks increasingly challenging. 
3. The energy transition is well underway, but how it will unfold in the decades ahead is difficult to predict. Decision makers in government and business face a challenging time planning for a future energy mix that remains unclear.

Full Article

(Copyright lies with the publisher)

Topics:  Energy, Environment, Risk