According to the report, even though the population will continue to grow reaching ten billion by midcentury, the energy demand is likely to plateau around 2030.
Energy demand and economic growth has always been positively correlated — faster the economic growth, higher the demand for energy. However, a change of pattern is visible with decoupling between the rates of economic growth and energy demand, which in the decades ahead will become even more pronounced, says a report.
This would not be due to reduction in energy demand but on the account of new technologies and larger trends which will cause the energy demand curve to flatten, said McKinsey in a recent report based on its latest global energy perspective. McKinsey said the research is part of an effort spanning several years, examining the supply and demand of 55 types of energy across 30 sectors in some 146 countries.
According to the report, even though the population will continue to grow reaching ten billion by midcentury, the energy demand is likely to plateau around 2030 with reduced demand for fossil fuels, mainly due to the penetration of renewable energy sources into the energy mix.
Renewables to the rescue
The diversion in the rising economic growth rate which and flattening of energy demand will be influenced by four factors such as a steep decline in energy intensity of GDP, a marked increase in energy efficiency, the rise of electrification and the growing use of renewables, said the report.
Renewables, including wind, solar, and hydro power will provide more than half of the world’s electricity and would cost less than electricity generated via fossil fuels by 2035, according to the McKinsey report.
While the decline in energy intensity of GDP would be due to the consequence of a continuing shift from industrial to service economies in fast-growing countries such as India and China, the rise in energy efficiency will be due to the result of technological improvements and behavioral changes, the report noted.
Further, the increase in electric vehicles (EVs) will help shift the demand from petroleum and curb the total amount of energy required for road transportation, added the report.
These factors will have a significant impact on the world’s growth and energy story and thus have big implications for a range of industries.