Global energy systems are undergoing rapid transitions due to concurrent shifts in technological development, regulations, consumer preferences, and investor sentiment. These transitions are likely to accelerate exponentially in the coming decades, as evidenced by the most recent wave of announcements from public and private-sector leaders in the run-up to COP26 and thus opening up more jobs in Canada.
Economics of energy systems
- The economics of energy systems will change as demand and supply for different energy carriers in different regions change fundamentally. The current price spikes on many commodities show the short-term effects of demand-supply imbalances. In light of this shifting landscape, business leaders and investors across the energy value chain are confronted with critical strategic decisions:
- What is the perspective (global) energy value pool, and how will it evolve?
- And how would that affect my specific industry within the energy sector and those adjoining it?
- Where should I look for investment opportunities in which countries and industry sectors?
- When is the most appropriate time for me to act? What portfolio changes should I think about?
Our research examines the economic implications of shifting technological, economic, and regulatory forces driving the energy transition.
Four possible scenarios for the energy transition
In our research, we look at four possible outcomes of the energy transition:
1. The Reference Case is a “continuation of existing trends” outlook. This scenario incorporates current policies and extrapolation of key policy trends and expectations for how current technologies will evolve. It excludes anticipated policies that will almost certainly result in additional acceleration.
2. The Accelerated Transition scenario depicts the impact on the overall energy system, often possible shifts, such as faster renewables cost declines or EV adoption.
3. The McKinsey 1.5°C Pathway provides a perspective on the changes required to restrict emissions to level it beyond 1.5°C.
4. The Delayed Transition case is similar to the Accelerated Transition case. It assumes that on a global scale, stakeholder acceptance is lacking, or COVID-19 recovery measures fail to work in tandem with green policies to enhance the energy transition.
5. Each of these scenarios would result in significantly different CO2 emissions. According to a Reference Case scenario, global CO2 emissions peak at around 33 GtCO2 in 2023, depleting the global carbon budget for a 1.5°C Pathway by 2030. Despite a rapid acceleration of the energy transition across multiple sectors, the Accelerated Transition case has only 20% lower emissions than the Reference Case. In contrast, a 90% reduction in emissions is required to comply with a 1.5°C Pathway.
The world is experiencing an energy transition, from a fossil-fuel-based system to a renewable-energy-based system, to reduce global greenhouse gas emissions and the consequences of climate change.
How will this transition affect the geopolitical situation?
The previous transition resulted in an energy system based on geographically dispersed resources. This enabled the exercise of geopolitical power over the distribution of those resources, resulting in economic benefits for the countries that extracted those resources.
However, almost every country in the world is now transitioning from an inadequate supplies energy system to one with potential abundance. This is because every country has some degree of energy independence in the system we transition to, as almost every country harnesses renewable energy.
This shift is a major shift for the entire planet, and it will have a significant effect on the world economy.
A shift in the landscape of global green energy
The growth of renewable energy will undoubtedly play an important role in the coming years. Although it may take up to 30 years to transition to a fully sustainable global energy landscape, researchers believe we can achieve at least 80% global renewable energy generation by 2030.
Green Hydrogen is expected to grow in popularity
Green hydrogen is a fuel created by water electrolysis using renewable energy resources such as solar or wind power rather than fossil fuels. One of the best characteristics of green hydrogen is its versatility. It can be used in liquid or gas form, and it can provide clean electricity or fuel to a variety of industries. Green hydrogen can benefit ammonia production, chemical and fertilizer production, food processing, metallurgy, oil refining, steel manufacturing, transportation, and many other industries.
The Gasoline and Diesel Trends Will Determine Biofuel Recovery
Bioenergy is derived from biomass, which is organic matter, deduced from recently living organic materials found in ponds and landfills. Biomass provides power in various ways, including combustion to produce heat and methane gas conversion to biofuels such as biodiesel and ethanol.
Economic activity has been reduced due to Covid-19 lockdown measures, which have significantly impacted the global biofuels market. As long as lockdowns are lifted, biogas is expected to recover along with gasoline and diesel fuel, returning to pre-pandemic levels.
Geothermal Energy Will Become More Popular Because of the source’s dependability.
Although solar energy is one of the most well-known renewable energy sources, the sun does not always shine. Geothermal energy may be the most dependable renewable energy source available today. The temperature of the Earth’s surface varies and can feel cool or even frozen at times. However, there are extremely valuable and reliable thermal energy just two meters beneath the surface. Regardless of whether it’s sunny or not, the temperature at this depth remains constant at 52-53 degrees Fahrenheit, which is warm enough to generate geothermal heat.
Fresh Inventive Methods Will Accelerate Green Efforts source
You’d be hard-pressed to find who hasn’t heard of the phrase “going green.” But how many of your friends use hydroelectric power, windmills, solar panels, or other renewable energy resources to power their home or business? The answer will differ depending on where you live. However, while many people have heard of green energy, most of us still rely on fossil fuels for electricity generation, heating, and cooling.
It may appear to be a lofty goal to achieve a fully sustainable global energy landscape in only 30 years. Still, innovation is the secret weapon that has enabled the significant advances we’ve already witnessed. As new innovative renewable energy solutions continue to hit the market, they will become more affordable. Expect to see eco-friendly, low-cost adaptations in everything from consumer marketing to infrastructure.
