Renewables will provide 50 percent of electricity generation by 2035, McKinsey says
Energize Weekly, February 27, 2019
Renewable generation will meet 50 percent of world electricity demand by 2035 as electricity consumption doubles until 2050, according to McKinsey & Co.’s 2019 energy analysis.
“The role of renewable resources in power generation grows at an accelerated pace,” the consulting firm’s analysis said. “From 25 percent today, renewables will grow their share of global generation to around 50 percent by 2035 and close to 75 percent by mid-century.”
The McKinsey renewable generation forecasts are on the high side when compared to other analyses.
The International Energy Agency (IEA) projects renewables will reach 40 percent of the worldwide generation by 2040. Oil company BP’s 2018 Energy Outlook put renewables’ share at 30 percent in 2040.
Still, even BP’s study sees renewables as the “fastest growing energy source,” at a 7.6 percent annual growth rate, accounting for half of the growth in global energy supplies and becoming the single largest source of electricity generation.
“Renewables are set to penetrate the global energy system more quickly than any fuel previously in history,” according to the BP outlook.
Natural gas continues to grow its share at about 2 percent a year—the only fossil fuel to do so— from now until 2035 when it plateaus, according to the McKinsey forecast. “It will be particularly under pressure in the power sector where its share of generation will drop to 33 percent from 41 percent between 2015 and 2050,” the report said.
The BP Outlook sees natural gas growth in large part due to the creation of more liquefied natural gas (LNG) terminals, which increase export markets, particularly in Asia.
China’s growth in natural gas demand is greater than that of the next 10 countries, including the U.S. and represents half of demand through 2035, according to McKinsey.
Oil growth peaks even earlier in 2030 at a volume of 103 million barrels a day. “In an accelerated scenario with increased electrification of transport and plastics recycling the peak is moved ahead to 2025,” the forecast said.
Coal demand, which is seen as on the rise through 2025, falls by 40 percent by 2050—largely due to a sharp drop in demand from the Chinese power sector, according to the McKinsey analysis.
In 2050, renewables provided 34 percent of primary energy demand, natural gas 22 percent, oil 29 percent and coal 14 percent, according to McKinsey.
The BP Outlook agrees saying that coal is “the main loser,” and in its scenario, coal suffers an even sharper drop in 2040 to 5 percent of all primary energy from 40 percent in 2017.
By 2030, renewable resources will become cheaper than existing coal and natural gas in most regions, McKinsey said.
McKinsey sees global primary energy demand plateauing after 2035—with a 14 percent increase overall between 2017 and 2050, even as gross domestic product (GDP) doubles over that period.
“It is the first time in history that growth in energy demand and economic growth are decoupled,” the McKinsey analysis said.
The BP Outlook projects energy demand growing by around a third by 2040— “a significantly slower rate of growth than in the previous 20 years or so.” That is even with world GDP more than doubling by 2040.
The one energy sector that sees rapid growth, according to McKinsey, is in the use of electricity, where it projects demand doubling to 2050 as transport and buildings become electrified.
Electric vehicles’ share of total energy consumption rises to 27 percent in 2050 from less than 1 percent in 2016, and buildings increase to 41 percent from 31 percent, according to McKinsey.