The global energy landscape is going through major shifts

We publish this long-term energy outlook at the start of 2021, after a year that has brought extraordinary challenges. The COVID-19 pandemic and subsequent economic crisis caused unprecedented disruption in the energy landscape—and the path to recovery remains uncertain.

At the same time, the world’s energy systems are going through rapid transitions that are triggered by simultaneous shifts in technological development, regulations, consumer preferences, and investor sentiments. Our Reference Case sheds light on these developments and provides a synthesis on how energy demand will evolve.


In the short term, a return to pre-COVID-19 levels is projected in one to four years

The impacts of COVID-19 have permanently shifted energy-demand curves. Although demand rebounds to 2019 levels in one to four years, it does not return to the previous growth path. Electricity and gas rebound more quickly than oil demand, and coal does not return to pre-COVID-19 demand levels.

Recent work by McKinsey on the effects of the COVID-19 crisis on economic growth introduces a set of scenarios, reflecting varying levels of effectiveness of the public-health response and speed and strength of policy interventions.

From these scenarios, two were selected as most likely outcomes by a group of more than 2,000 executive respondents globally: “Virus Contained; growth returns” and “Muted Recovery.” At the time of this report’s publication
(January 2021), the latest actual numbers show a trajectory that comes closest to “Virus Contained; growth returns.” Consequently, this scenario underlies the projections in our report.

Given the unparalleled size of many economic-recovery packages, the focus of the stimulus measures plays a key role in shaping energy systems in the decades to come.


Source: Mckinsey



Source: Mckinsey



Source: Mckinsey



Source: McKinsey



In the longer term, fundamental shifts already emerging pre-COVID-19 are going to be the key drivers of the energy transition

As economies and energy markets recover from the short-term impact of COVID-19, fundamental shifts in the energy system continue, and the coming decades will likely see a rapid acceleration of the energy transition.






Power wins and hydrogen changes the landscape . . .

Power consumption doubles by 2050 as energy demand electrifies, wealth increases, and green hydrogen picks up momentum.


. . . and low-cost renewables dominate power markets

Renewables become cheaper than existing fossil plants within the next decade. This triggers a sharp uptake in the installed capacity of solar photovoltaics and onshore and offshore wind (5 TW of new solar and wind capacity installed by 2035—which is equivalent to fivefold growth).


Peaks in fossil-fuel demand keep coming closer

Projected peaks in demand for hydrocarbons have come forward. Oil demand peaks in 2029 and gas in 2037, whereas coal shows a steady decline.

Yet in the Reference Case fossil fuels continue to play a major role in the energy system by 2050, driven by growth in areas such as chemicals and aviation.

In the Accelerated Transition scenario, demand for fossil fuels continues to decline, particularly oil and coal. Peak oil demand could move forward by five years to the early 2020s, at a level less than 1 MMB/D above 2019 levels.


Source: McKinsey


After a long period of growth, global liquids demand peaks in the late 2020s, followed by a 10% decline in demand by 2050. This is mainly driven by slowing car-park growth, enhanced engine efficiency in road transport, and increased electrification.

Global coal demand peaked in 2014 and continues to decline by almost 40% from 2019 to 2050. Under increasing regulatory and financial pressure, coal’s role in the power sector diminishes, contributing to the overall decline in demand.

Gas continues to increase its share of global energy demand in the next ten to 15 years—the only fossil fuel to do so—and then peaks in the late 2030s. Even in the Reference Case, gas demand in 2050 is 5% higher than today.


Source: McKinsey



Source McKinsey

April 12, 2021