McKinsey: Fossil Fuels Will Never Return to Their Pre-Pandemic Growth Curve
Date: January 18th 2021
Author: Peter Palčec
“Power consumption will more than double by 2050 as energy demand electrifies; green hydrogen will become cost competitive by 2030; low-cost renewables will dominate the power market by 2030 as they become cheaper than existing fossil plants; and almost half of global capacity will be in solar and wind by 2035.” These are the main findings of the Global Energy Perspective 2021 report published by the global consultancy group McKinsey & Company. Additionally, fossil fuel demand will never return to its growth curve prior to the COVID-19 pandemic.
Over the long term, the impacts of behavioural shifts due to COVID-19 are minor compared to the “known” long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend towards electric vehicles. It is estimated that the impact of these shifts will be three-to-nine times higher than that of the pandemic by 2050, added the report.
According to the report, gas is expected to continue to increase its share of global energy demand in the next ten to 15 years – the only fossil fuel to do so – and is set to then peak in the late 2030s. Gas demand will, nevertheless, be 5% higher in 2050 versus today’s level. Oil demand growth is set to slow substantially, with a projected peak in the late 2020s followed by a 10% decline by 2050, mainly driven by slowing car growth, enhanced engine efficiency in road transport, and increased electrification. Coal demand is projected to decrease almost 40% from 2019 to 2050, driven mainly by the phase-out of coal plants in the power sector across regions, mentioned the report.
In the meantime, as green hydrogen is expected to become cost competitive in the 2030s, “indirect” power demand for electrolysis will account for approximately 40% of electricity demand growth from 2035 to 2050, primarily in industry and transport. To enable this shift to intermittent resources – both traditional and new capacities – flexible capacities will be needed to ensure system security. Batteries play an important role, but gas peakers also remain relevant to cover longer spells of low output for renewables, stated McKinsey in the report.
However, while energy systems around the world will shift to renewables, which today are already able to compete with the marginal cost of fossil power in most places, McKinsey’s Reference Case scenario shows that by 2050 more than half of all global energy demand will continue to be met by fossil fuels. “As a result, while the earlier peak in hydrocarbon demand means a substantial reduction in forecasted carbon emissions, the world remains significantly off of the 1.5ºC pathway and will run out of its carbon budget for 2100 in the early 2030s,” stated the authors of the report.
According to McKinsey, COVID-19 has triggered a drop in global CO2 emissions of around 7%. In the Reference Case, energy-related CO2 emissions peak by 2023, followed by a steady decline of approximately 25% until 2050.
14.01.2021 - Chevron CEO: Still Hard to Find a Big Threat to Oil
20.01.2021 - IEA Revises Down Global Oil Demand Forecast For 2021
12.02.2021 - IEA Forecasts Stronger Oil Demand Growth in H2 2021