McKinsey: aggregate fossil fuel demand to peak in 2027
Aggregate fossil fuel demand is set to peak in 2027 – with oil peaking in 2029 and gas in 2037 – partially due to the impacts of COVID-19, according to new research by McKinsey & Company.
The Global Energy Perspective 2021 report finds that while coal demand peaked already, peaks in demand for oil and gas are not far behind.
The pandemic has resulted in a profound reduction in energy demand, from which McKinsey expects it will take between one to four years to recover – with electricity and gas demand expected to bounce back more quickly than oil demand.
However, demand for fossil fuels will never return to its pre-pandemic growth curve. Over the long-term, the impacts of behavioural shifts due to COVID-19 are minor compared to “known” long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend towards electric vehicles, whose impact is estimated to be three-to-nine times higher than the pandemic’s by 2050.
Christer Tryggestad, Senior Partner at McKinsey, says: “While the pandemic has certainly provided a substantial shock for the energy sector across all fuel sources, the story of the century is still a rapid and continuous shift to lower-carbon energy systems”.
“The share of electricity in the energy mix is set to grow by around 50 percent by 2050 and it’s set to capture all global energy growth as hydrocarbon consumption plateaus. However, in our Reference case, fossil fuels continue to play a significant role for the foreseeable future.”
- Power consumption to more than double by 2050 as energy demand electrifies
- Green hydrogen will become cost competitive by 2030 - a game changer for the sector
- Low-cost renewables will dominate the power market by 2030 as they become cheaper than existing fossil plants
- Almost half of global capacity will be in solar and wind by 2035
Indeed, while energy systems around the world will shift to renewables, which are able to compete with the marginal cost of fossil power already today in most places, by 2050 more than half of all global energy demand continues to be met by fossil fuels in McKinsey’s Reference Case scenario.
As a result, while the earlier peak of 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.
Tryggestad concludes: “There is still a long way to go to avert substantial global climate change. According to our estimates, annual emissions would need to be around 50 per cent lower in 2030 and about 85 per cent lower by 2050 than current trends predict to limit the global temperature increase to 1.5ºC”.
“The importance of policies has increased in the past year. Despite the increased momentum towards decarbonization, many governments still need to translate ambitious targets into specific actions. Additionally, given the unparalleled size of many economic recovery packages post COVID-19, the focus of the stimulus measures will play a key role in shaping energy systems in the decades to come.”
The findings are taken from four scenario outlooks, conceived by McKinsey:
- 1.5ºC Pathway McKinsey’s top-down view of how a pathway that limits global warming to 1.5ºC could look across sectors and energy products, taking economic and technical feasibility into consideration
- Accelerated transition A progressive view, driven by governmental response to COVID-19 and “next normal” behavioural changes. This scenario assesses the impact of 10 conceivable shifts happening at an accelerated pace (e.g., uptake of EVs, recycling, renewables and hydrogen)
- Reference case McKinsey’s outlook on the continuation of existing trends. This scenario reflects our expectations of how current technologies can evolve and incorporates current policies and an extrapolation of key policy trends
- Delayed transition Post-pandemic, the societal focus is on economic recovery; energy transition continues at a lower speed; lower incentives to invest in decarbonization technologies, and low fossil fuel prices delay cost parity
The report presents specific outlooks per fuel type such as natural gas, oil, coal and hydrogen. It also discusses carbon emissions and offers a detailed perspective on the McKinsey 1.5ºC pathway. This includes a look at the implications for business leaders and policy makers, comprising a view on value pools and an energy investment outlook.
Protium Green Solutions targets Scotland hydrogen potential
Protium Green Solutions (Protium), a leading UK-based green hydrogen energy services company, has expanded its UK footprint with the opening of Protium Scotland, led by newly appointed Jon Clipsham as Chief Commercial Officer.
Following a year of "significant growth" for the London-based firm, Protium’s activity across the green hydrogen space continues to demonstrate the viability of green hydrogen for businesses accelerating their net zero strategies and its CAPEX totals more than £1 billion for projects across aviation, road transport, alcoholic manufacturing and food & beverage sectors.
Protium’s Scotland presence has been established to support its growing projects in the region, with three clients currently based in Scotland and additional projects in the pipeline. Clipsham will lead Protium’s client engagement team across all UK regions, further supporting existing clients’ decarbonisation efforts across its accelerating projects.
Clipsham has been hired to spearhead the Scotland-based office, bringing with him over 30 years’ experience having spent more than 25 years in the chemicals industry and more than five years in the green hydrogen space.
Previously he developed and led many of the projects which have driven the growth of the green hydrogen eco-system in Orkney, and he also plays an influential role in shaping Scotland’s hydrogen policies and regulation, as a Board member of the Scottish Hydrogen and Fuel Cell Association (SHFCA). He also holds various lecturing positions at notable Scottish universities and educational institutes (covering hydrogen and renewable energy).
Clipsham said he is fully aligned with Protium’s mission of taking action and delivering change while policy and industry catches up. "I look forward to working with the team and its clients in supporting the national energy transition and am proud to be joining forces with other experts in the field who share the same vision," he said.
Chris Jackson, CEO of Protium, said: “We can see first-hand how the appetite for green hydrogen is increasing so leveraging Jon’s expertise and technical capabilities will be instrumental in delivering the best result for our clients - I am confident we’ll be able to demonstrate how green hydrogen is an exciting solution for these organisations overhauling their decarbonisation efforts.
“As we approach the second year of the business this milestone marks an important step for Protium as our client portfolio continues to grow, government support steadily increases and as UK-brands explore sustainable energy alternatives.”
With Protium’s senior leadership team holding external decision-making roles in relevant hydrogen Associations and Institutions, together Clipsham with Jackson, and Head of Policy and Innovation, Jen Baxter, the team will play an influential role in championing hydrogen and its place in the green economy. Jackson is currently the Chairman of the UK’s Hydrogen & Fuel Cell Association and Baxter is on the Board of Industry Wales.
The Hydrogen Map lists the following projects in Scotland: Big Hit (phase 2); Acorn Aberdeenshire (Blue Hydrogen); Hydrogen Bus Project (Aberdeen); Aberdeen Exhibition and Conference Centre; and Levenmouth Community Energy project.