McKinsey’s Global Energy Perspective Finds Energy Transition Momentum may be Slowing Due to Growing Affordability Gap and Diverging Regional Energy Mixes

McKinsey & Company (McKinsey) launches its tenth annual Global Energy Perspective, which offers a comprehensive analysis of the forces shaping the energy sector and projects energy demand and supply trends across a range of fuel types and regions through 2050.  

The report reveals that the world may be moving closer towards a slower energy transition across all scenarios, as governments and policymakers increasingly emphasize energy affordability and security amid geopolitical uncertainty. 

The Global Energy Perspective aims to highlight the gap between the world’s current trajectory and what would be needed to avoid the worst effects of climate change as defined by the Paris Agreement. It describes three plausible scenarios for how a transition to a system of lower carbon energy could play out: Slow Evolution, Continued Momentum, and Sustainable Transformation. Key insights include:

• Clean, firm power sources and renewable storage technologies are likely to expand: These sources, such as geothermal power, hydropower and nuclear power are expected to grow at 3% per year through 2050 in the Continued Momentum scenario. 

• Crucial alternative fuels are not likely to achieve broad adoption before 2040 unless mandated: Clean hydrogen is not yet cost competitive at scale, so it is expected to play a limited role in the energy mix across scenarios, with no certainty around the completion of clean hydrogen projects in the next 10 years. 

• Fossil fuels are projected to retain a large share of the energy mix beyond 2050: They could make up approximately 41% to 55% of global energy consumption by 2050 depending on the scenario.  

• Low-carbon power will grow steadily: In most regions, low-carbon power could account for more than 65% of power generation by 2050 in a continued momentum scenario.  

• Global power demand is expected to increase, driven by electrification: Data centers could contribute a transformative new share of demand in the near term (average 17% global growth per year between 2022-2030, especially in OECD countries). 

• A system-wide view could offer a faster and more cost-effective path to emission reduction: The final 5% decarbonization of the power sector could cost $90-170 per metric ton of CO2, compared to $20 per metric ton for 45-70% decarbonization. 

Diego Hernandez Diaz, Partner at McKinsey reflected on the findings: “Ten years on from the inaugural Global Energy Perspective, our view of the energy transition has matured. The transition is no less urgent, but the pathways to closing the gap to Paris Agreement targets are now more complex. The current and evolving affordability challenge means that some alternative energy sources may not be competitive with traditional fuels in the near term, but a local or regional pathway made up of a mix of emerging technologies and “triple win” technologies—those that provide affordable, low-carbon, and secure energy simultaneously – may allow for an economically pragmatic transition.” 

The report shows that there is no silver bullet for decarbonization and that different countries and regions will increasingly follow distinct trajectories based on their local economic conditions, resource endowment, and the realities facing particular industries.  

Humayun Tai, Senior Partner at McKinsey, added: "Looking ahead, global energy demand is expected to rise as access to energy expands. The challenge for the industry and policymakers will be to ensure the energy system is affordable, reliable, and resilient to price spikes, outages, and geopolitical instability while expanding to meet new demand centers. The journey toward decarbonization remains long, but there is still considerable opportunity for energy stakeholders to act now and get back on track.” 

Download the Global Energy Perspective here. In parallel, McKinsey has also recently released its Global Materials Perspective 2025 underscoring the intertwined nature of these vast global value chains. 

McKinsey | https://www.mckinsey.com/