Roxana Asadimanesh
OPEX Research Analyst
The Global Energy Perspective is
mckinsey's long-term scenario analysis on the future of investments in the
energy sector. These wide-ranging scenarios sketch a range of outcomes based on
varying underlying assumptions—for example, about the pace of technological
progress and the level of policy enforcement. The scenarios are shaped by more
than 400 drivers across sectors, technologies, policies, costs, and fuels, and
serve as a fact base to inform decision makers on the challenges to be overcome
to enable the energy transition.Total annual investments in the energy sector
are projected to grow by up to 4 percent per annum until 2040, reaching between
$2.0 trillion and $3.2 trillion. Decarbonization technologies are projected to
show the highest growth in investments at 6 to 11 percent per annum, driven by
strong uptake of EV charging infrastructure (EVCI) and CCUS. The EVCI market
for hardware components is projected to reach between $17 billion and $35
billion by 2030, representing a growth of at least 10 percent per annum.
While the overall shift toward
more capex-intensive technologies, such as renewables, means higher investments
are expected in faster energy transition scenarios, these are projected to be
mostly offset by the lower total operating expenditure of renewable assets,
such as saving the fuel costs that fossil plants require. Going forward, there
is projected to be a substantial shift in investment from fossil fuels to
renewables. However, despite the increasing push for decarbonization and the
declining demand for fossil fuels projected in the medium term, around 20 to 40
percent of investments (excluding power T&D) in 2040 are projected to still
be deployed in fossil fuels, across all scenarios. As such, a further shift in
investments would be needed for a 1.5° pathway. Even with lower projected
volumes of oil or gas for power generation, continued investment in fossil
fuels is mainly driven by the fact that marginal fossil fuel projects are
increasingly expensive with higher development costs, and will still see
significant investment, while marginal costs and capex for low-carbon
technologies continue to decline with technological learning curves.
Even with lower projected volumes
of oil or gas for power generation, continued investment in fossil fuels is
mainly driven by the fact that marginal fossil fuel projects are increasingly
expensive with higher development costs, and will still see significant
investment, while marginal costs and capex for low-carbon technologies continue
to decline with technological learning curves.
Global
EBIT in the energy sector is expected to stabilize at around $1.6 trillion
to $2.0 trillion by 2040. EBIT for low-carbon technologies is projected to see
growth of 3 to 8 percent CAGR until 2040, mostly driven by strong volumes
uptake. Nonetheless, margins are expected to remain tight due to strong
competition in the market. By the end of the decade, a decline in EBIT from
fossil fuels is projected, resulting in a total pool of $1.5 trillion to $1.9
trillion. Nonetheless, after 2030, the decline may be partially offset by
significant EBIT growth from low-carbon technologies (a growth between 2.0 and
3.5 times by 2040 compared to 2021). EBIT for fossil fuels is projected to
stabilize at different levels in the long term, at around $1.4 trillion by the
end of the next decade in the Fading Momentum scenario compared to $0.4
trillion in the Achieved Commitments scenario.
[FM= Fading Momentum, CT= Current Trajectory, FA= Further
Acceleration, AC= Achieved Commitments]
[FM= Fading Momentum, CT= Current Trajectory, FA= Further
Acceleration, AC= Achieved Commitments]
[FM= Fading Momentum, CT= Current
Trajectory, FA= Further Acceleration, AC= Achieved Commitments]