McKinsey & Company, The hard stuff: Navigating the physical realities of the energy transition

The energy transition is a physical transformation in its early stages. What challenges lie ahead?

At a glance

• The energy transition is in its early stages, with about 10 percent of required deployment of low-emissions technologies by 2050 achieved in most areas. Optimized over centuries, today’s energy system has many advantages, but the production and consumption of energy accounts for more than 85 percent of global carbon dioxide (CO₂) emissions. Creating a low-emissions system, even while expanding energy access globally, would require deploying millions of new assets. Progress has occurred in some areas, but thus far has largely been in less difficult use cases.
• Twenty-five interlinked physical challenges would need to be tackled to advance the transition. They involve developing and deploying new low-emissions technologies and entirely new supply chains and infrastructure to support them.
• About half of energy-related CO₂ emissions reduction depends on addressing the most demanding physical challenges. Examples are managing power systems with a large share of variable renewables, addressing range and payload challenges in electric trucks, finding alternative heat sources and feedstocks for producing industrial materials, and deploying hydrogen and carbon capture in these and other use cases.
• The most demanding challenges share three features. First, some use cases lack established low-emissions technologies that can deliver the same performance as high-emissions ones. Second, the most demanding challenges depend on addressing other difficult ones, calling for a systemic approach. Finally, the sheer scale of the deployment required is tough, given constraints and the lack of a track record.
• Understanding these physical challenges can enable CEOs and policy makers to navigate a successful transition. They can determine where to play offense to capture viable opportunities today, where to anticipate and address bottlenecks, and how best to tackle the most demanding challenges through a blend of innovation and system reconfiguration…

Click on the tiles for summaries of 25 challenges across 7 domains…

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