Exploring Hydrocarbon Depletion
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New report suggests rapid advances in data analytics and artificial intelligence could dramatically reshape energy and industrial sectors and save global economy up to $1.6tr
Rapid advances in smart technology could fundamentally reshape the global economy and spell an end to future growth in carbon intensive coal, oil, and iron ore consumption by 2035, according to a major new report from McKinsey Global Institute (MGI).
The paper, released today, suggests smart technologies such as artificial intelligence, automation, data analytics, and the Internet of Things will transform the energy and resources sectors, saving the global economy between $900bn and $1.6tr by 2035 through reduced costs and productivity gains.
“Changes in the resource sector in the past often came about as a result of regulation, but now it is technology that is driving the shifts,” Jonathan Woetzel, director of the MGI, said in a statement. “Our new research shows that the global economy has a significant opportunity to make substantial savings on energy in the next two decades by adopting and embracing technological change.”
MGI – which is wholly funded by global management consultancy McKinsey & Company – mapped two scenarios for the future through to 2035. The first was for a ‘moderate’ technology adoption case, which assumes improved energy productivity delivered by the rollout of energy efficiency technologies and a continued fall in the cost of renewables. The second ‘tech acceleration’ scenario assumes a faster rate of technological adoption by consumers and producers. Under this latter scenario, demand for oil, thermal coal and iron ore could peak before 2035.
New technology is expected to significantly lower the energy intensity of the global economy and increase efficiency, according to MGI, potentially boosting energy productivity by 40 per cent under the moderate scenario or 70 per cent under the tech acceleration scenario.
Renewable energy is highlighted as one of the big winners, with solar and wind expected to play a “substantially larger” role in the energy mix than today thanks to their falling costs and increased competitiveness against fossil fuels.
MGI predicts renewables could grow from four per cent of power generation today to 36 per cent by 2035 under the tech acceleration scenario.
Smart technology to improve energy efficiency is also expected to have a major impact. MGI predicts oil demand from light vehicles will decline from 2015 levels thanks to increasing adoption of electric vehicles, saving between $150bn and $280bn by 2035, depending on the scenario.
The report follows a similar study from the Carbon Tracker Initiative, which earlier this month predicted that the rapid roll out of solar and electric vehicle technologies could lead to a peak in coal and oil demand as early as 2020.