A reality check
for renewable energy
Wind,
solar, and geothermal energy are growing rapidly. Yet the world’s reliance on
fossil fuels isn’t changing any time soon.
The clean- and
safe-energy revolution is
not imminent. In fact, according to the information compiled by Looking
Ahead: The 50 Global Trends That Matter, an annual compendium of data and
graphics on subjects ranging from economics to demography to energy, the
majority of the planet’s electricity needs will still be fueled by coal and
natural gas in 2040—despite strong growth in nonhydro renewables such as wind,
solar, and geothermal. The report also expects the shale phenomenon to abate,
with Saudi Arabia reasserting itself as the world’s leading oil producer in
2030.
Looking Ahead, which is produced by an
independent think tank supported by Abu Dhabi’s Crown Prince Court, does not
take a view on these trends; instead, it simply lays out the best available
information from a wide variety of sources, including governments,
consultancies, think tanks, corporations, and multilateral institutions. The
overriding aim of the publication is to highlight issues that matter in
compelling visualizations that make it easier for readers to grasp a large
amount of interlinked data—and thus better understand both the nature of the
problems the world faces and how to address them.
The book details an energy world of
disruption and contradiction, mingled with continuity and a dash of hope. For
example, as the world again seeks to devise ways and means to curb the
greenhouse gas emissions associated with climate change, we find nonhydro
renewables could more than triple their share of the global power supply by
2040. And the development of renewables isn’t just a rich-country trend. Among
the members of the Organisation for Economic Co-operation and Development
(OECD), which mostly includes highly developed countries, renewables are
expanding by 4.6 percent a year. Among those outside the OECD, the figure is
7.4 percent. In the next 25 years, renewables will account for an estimated 43
percent of Africa’s new power plants, 48 percent of Asia’s, and 63 percent of
Latin America’s. Asia alone is projected to add 1,587 renewable-power plants,
almost as many as the rest of the world combined.
Here’s the contradiction. Even
after that boom in renewables, the sector’s total share of global electricity
generation is estimated to be only 17 percent by 2040, because coal (31
percent) and natural gas (24 percent) will continue to be low-cost and reliable
sources of power.
When it comes to another big fossil
fuel—oil—there has been change, but the long-term outlook is more of the same.
Preliminary estimates are that the United States has overtaken Saudi Arabia as
the world’s largest oil producer, thanks to the gusher of production from shale
assets. Indeed, the development of shale has been truly disruptive to world oil
markets, contributing to sustained low prices. Yet Looking Ahead believes
that history, or at least geology, will reassert itself. By 2030 or 2035, shale
production is likely to begin to decline and the Organization of Petroleum
Exporting Countries (OPEC) could be back to producing half the world’s oil .
In a world that is not short of
problems, it can be easy to overlook success. One positive trend is that more
people than ever have access to electricity—about 82 percent of the global
population. Since 1990, India has improved access by 25 percentage points, and
in China electricity is now close to universal. Unfortunately, Africa will
continue to lag behind. About 1.3 billion people today lack electricity, and
almost all of them are in South Asia and sub-Saharan Africa. About a billion
will still lack ready access in 2030—and sub-Saharan Africans will comprise
almost three-quarters of that population Getting more power to more people
isn’t just a matter of convenience, it’s necessary for both economic
development and health. People without electricity often burn wood or dung for
cooking, which are indoor sources of air pollution that kill more people every
year than malaria and tuberculosis combined.
And here is a final example of
contradiction and continuity. The contradiction: if curbing greenhouse gas
emissions is an urgent priority, why isn’t nuclear-power generation more
popular? At the moment, nuclear power is the only zero-emissions way to keep
the lights on 24/7, but its share of capacity is projected to stay at 12
percent for the next quarter century. As for continuity: nuclear fusion is
still promising. The potential of fusion has always been tantalizing. It could
be 20 times more efficient than fission, and the waste created is in the form
of nonradioactive helium. In partnership with six other countries, France,
which generates more than 75 percent of its power with nuclear, is scheduled to
open a demonstration fusion plant in 2019. However, uncertainty still exists about
the viability of the technology—which is precisely what has been said since the
1950s.
For the foreseeable future, then,
the data contained in Looking Ahead: The 50 Trends that Matter point
to a world energy strategy—to the extent that there is one—that will remain
“all of the above.” Or, more precisely, more of all of the
above. More renewables, and more fossil fuels. More access to power, and more
deaths related to lack of access. Lots of American oil, and more OPEC oil. If
there is a single thread connecting all these trends, it is that a global
energy revolution is not nigh. But an energy evolution is very much under way.
-
Scott Nyquist is a director in McKinsey’s Houston
office; James Manyika is a director of the McKinsey Global
Institute and a director in McKinsey’s San Francisco office.
FOR EXHIBITS PLEASE SEE http://www.mckinsey.com/industries/oil-and-gas/our-insights/A-reality-check-for-renewable-energy?cid=other-eml-alt-mip-mck-oth-1603
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