As the global energy transition enters a new phase, McKinsey’s Global Energy Perspective 2024 presents a data-driven view of the possible road ahead.
Progress since the Paris Agreement and the evolving energy transition
While significant progress has been made in the nine years since the landmark Paris Agreement, the global energy transition is entering a new phase, marked by rising costs, complexity, and increased technology challenges. To successfully navigate this next phase and meet the Paris Agreement goals, urgent action will be needed, and the pace of change must accelerate. The clean energy transition will also need to be balanced with affordability, energy system resiliency, and energy security in an increasingly uncertain macroeconomic environment.
Fossil demand is set to decrease, but fossil fuels are expected to continue to help meet growing energy demand across all scenarios.
According to the report, despite progress in renewable energy sources (RES) build-out, the energy transition has been slower than expected in certain areas, and key transition levers are not yet mature, scalable, or cost-effective. This, combined with the constraints facing renewables build-out and growing energy demand, means renewables alone are not currently projected to be sufficient to meet the world’s future energy needs in all McKinsey’s bottom-up scenarios.
Fossil fuels’ evolving role in the energy system to 2050
Fossil fuels, including oil, natural gas, and coal, are therefore projected to continue to play a role, albeit a moderating one, in the global energy system to 2050, meeting between 40 and 60 percent of global energy demand in 2050, depending on the scenario, down from 78 percent in 2023. McKinsey’s analysis of the data shows that investment and capital flow into fossil fuels are projected to continue for at least the next ten years to ensure the global energy system can keep up with demand.
This means that future fossil fuel demand in 2030 is best characterized as a decade-spanning plateau rather than a peak, with the duration of this plateau varying by scenario. Reducing the duration of this plateau will depend on several levers, including accelerated electrification of the economy, particularly in transport (electric vehicle adoption) and faster industrial heat pump deployment, enhanced adoption of bio and synfuels in difficult-to-abate sectors such as heavy transport and other industrial segments, and accelerated build-out of RES in the power sector.
This trend is also evident in shipping. As ABS noted in their Outlook report, fossil fuels, even at that low percentage, are projected to still be around.
Balancing fossil fuels and renewables: A mixed energy future
It is increasingly clear from McKinsey’s analysis that the energy system is not a zero-sum game—McKinsey’s analysis shows that both fossil fuels and RES will form part of the energy mix for the foreseeable future, with fossil fuels projected to meet the demand unable to be met by RES due to slow build-out, and to provide firming capacity for renewables-based energy systems.
Focusing beyond a single solution or technology
Successfully navigating the transition away from fossil fuels will require focusing beyond a single solution or technology. There are no silver bullets—the future calls for a holistic transformation of the global energy system by incorporating a range of proven and emerging levers. To do this, considerations beyond technological feasibility will need to be addressed, spanning capital deployment, improving business cases, ensuring economic returns, adjusting regulation, and establishing continued political and public support in the face of competing economic and societal priorities.
