Energy
While significant progress has been made in the nine years since the landmark Paris Agreement, the global energy transition has entered a new phase, marked by rising costs, growing complexity, and increased demands on system security and resilience. Global energy demand is projected to continue to increase—between 11 and 18 percent—to 2050. Low-carbon energy sources are set to grow, but business case viability and other challenges will prevent them from growing fast enough to meet net-zero goals.
In the coming days, stakeholders at COP29 will continue to discuss collaborative solutions to help speed the energy transition. As one example, on November 11, the COP29 Presidency, in partnership with the International Energy Agency (IEA), shared five key opportunities to demonstrate positive progress on energy goals identified at COP28, including the scale-up of energy storage and electricity grids to enable the goal of tripling renewable-energy capacity this decade.
Energy insights from our events
On November 12, we convened energy leaders to discuss ways to navigate this next phase of energy transition and meet the Paris Agreement goals. The discussion also addressed emission reductions, affordability, energy system resilience, and energy security in an increasingly uncertain macroeconomic environment.
Some progress has been made in the energy transition, but emission reductions, affordability, competitiveness, and reliability remain significant challenges.
- The energy transition has thus far been more expensive than anticipated and is further complicated by an evolving geopolitical landscape. Leaders will need to find solutions to drive down system and project costs, identify the right financing mechanisms, ensure equitable access to energy, and consider policies that create demand signals and incentives for investment.
The global energy mix is changing and renewables are growing, but reliance on fossil fuels will continue.
- Renewables are projected to account for 65 to 80 percent of the global power generation mix by 2050. Solar is projected to make up the biggest share of the global renewable-power mix in 2050 but will require significant new dispatchable resources and grid expansion to make that happen.
- However, the slower than expected energy transition could result in continued fossil fuel use to provide firmness for increased penetration of intermittent renewables, with fossil fuels accounting for 40 to 60 percent of total energy demand to 2050, depending on the speed of the transition (see our Global Energy Perspective scenarios).
Surging adoption of digitalization and AI technologies has amplified the demand for data centers across the United States and Europe.
- To keep pace with the current rate of adoption, the power needs of data centers are expected to grow to about three times higher than current capacity by the end of the decade, going from between 3 and 4 percent of total US power demand today to between 11 and 12 percent in 2030. In Europe, at the current rate of adoption, data center power consumption is expected to almost triple.
Addressing these challenges requires understanding and addressing physical challenges, including technological performance gaps and the speed of innovation.
- An upgraded and expanded electric grid will be the backbone of the energy transition. This would require a dramatic increase in capital spending on both traditional energy delivery assets, such as transmission and distribution grid upgrades, and new asset classes, such as renewables and storage. It will also be important to develop solutions to overcome long lead times to provide access and connections to grids.
- Broader system-level changes would also be needed, shifting the way technologies mesh together. For instance, the potential increased variability of low-emission power supplies could be balanced by making demand for power more flexible and using gas plants as backup power.
- Even the way energy and materials are consumed could be adapted. For instance, alternative materials could replace industrial materials that are difficult to decarbonize.
Watch the video of our session Where are we really? A conversation on McKinsey’s Global Energy Perspective.
Mobility
Mobility accounts for 30 percent of all global greenhouse gas emissions. On November 13, we convened stakeholders from across the integrated mobility value chains to discuss the evolution of the sector as a key strategy in achieving decarbonization.
The mobility sector continues to face changing headwinds as investment patterns, consumer preferences, and technology continue to evolve. Even as the industry sees some bright spots—such as the continued growth of micromobility, steady progress on vehicle electrification, and continued investment in autonomous vehicles—concerns persist about the pace of investment in the industry, slowing sales in the EV market, and other challenges.
Mobility insights from our events
Amid another year of big changes for the mobility sector, McKinsey partners and panelists discussed the trends that will shape the industry in the year ahead.
EVs are here to stay.
- McKinsey projects that worldwide demand for passenger cars in the battery electric vehicle (BEV) segment will grow sixfold from 2021 through 2030, with annual unit sales increasing to roughly 40.0 million, from 6.5 million, over that period.
- EVs are becoming increasingly cost-competitive, and as battery costs continue to drop, the economics will continue to improve. While Europe is currently seeing a slowdown in EV adoption and growth in the United States is stagnant, 50 percent of vehicles sold in China today are electrified—demonstrating that widespread adoption is possible with the right combination of technology, pricing, and infrastructure. The divergence in global markets highlights both the progress and the challenges in EV adoption, with consumer hesitation remaining a significant barrier.
To accelerate EV adoption, companies should focus on three key efforts.
- Reducing costs: As battery prices fall, automakers should pass on those savings to consumers to lower the up-front price of EVs.
- Protecting residual values: Creating stronger resale value models for EVs can help ease consumer concerns about long-term depreciation.
- Investing in infrastructure: Expanding charging networks and improving their reliability will address a major consumer pain point.
Consumer expectations of battery range are growing faster than battery range capabilities.
- The McKinsey Battery Insights team projected in 2022 that the entire lithium-ion (Li-ion) battery chain, from mining through recycling, could grow by more than 30 percent annually from 2022 to 2030, when it would reach a value of more than $400 billion and a market size of about 4,700 gigawatt-hours (GWh).
Autonomous vehicles are nearing mass-market adoption, and this could drastically shift the balance between owning a car and using ride-hailing services.
- Despite the promising potential of autonomous driving, several barriers to adoption remain, including safety concerns, insufficient regulation, and the need for improved road infrastructure. A continued and steadfast focus on safety improvements in battery technologies and rapid expansions of urban charging infrastructure will help accelerate the adoption of autonomous driving.
Watch the video of our session Mobility disruption stalling? How to re-accelerate the transition.
Beyond why to how: Three questions for leaders
- How is my organization prepared to meet decarbonization targets with a range of emerging and developed levers?
- How is my organization accelerating uptake of low-carbon technologies? Are we clear about the bottlenecks we face—and the solutions?
- How is my organization prepared to respond to both the consolidation and scaling of the mobility sector?
McKinsey at COP29: Looking ahead
November 15: Leading for adaptation and resilience: Strategic decision making for a changing climate
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