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Global fossil fuel demand should peak in 2027, says consulting firm McKinsey

Alternative Energy

Aggregate fossil fuel demand on a global-scale is set to peak in 2027 – with oil peaking in 2029 and gas in 2037 – partially due to the impacts of COVID-19, according to new research by leading global consultancy McKinsey & Company. Its Global Energy Perspective 2021 report finds that while coal demand peaked already, peaks in demand for oil and gas are not far behind.

The pandemic has resulted in a profound reduction in energy demand, from which McKinsey expects it will take between one to four years to recover – with electricity and gas demand expected to bounce back more quickly than demand for oil. However, demand for fossil fuels will never return to its pre-pandemic growth curve. Over the long-term, the impacts of behavioral shifts due to COVID-19 are minor compared to “known” long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend toward electric vehicles, whose impact is estimated to be three- to nine-times higher than the pandemic’s by 2050.

“While the pandemic has certainly provided a substantial shock for the energy sector across all fuel sources, the story of the century is still a rapid and continuous shift to lower-carbon energy systems,” said Christer Tryggestad, Senior Partner at McKinsey. “The share of electricity in the energy mix is set to grow by around 50% by 2050, and it’s set to capture all global energy growth as hydrocarbon consumption plateaus. However, in our Reference case, fossil fuels continue to play a significant role for the foreseeable future.”

Indeed, while energy systems around the world will shift to renewables, which are able to compete with the marginal cost of fossil power already today in most places, by 2050 more than half of all global energy demand continues to be met by fossil fuels in McKinsey’s Reference Case scenario.

As a result, while the earlier peak of hydrocarbon demand means a substantial reduction in forecasted carbon emissions, the world remains significantly off of the 1.5ºC pathway and will run out of its carbon budget for 2100 in the early 2030s.

“There is still a long way to go to avert substantial global climate change. According to our estimates, annual emissions would need to be around 50% lower in 2030 and about 85% lower by 2050 than current trends predict to limit the global temperature increase to 1.5ºC,” said Tryggestad. “The importance of policies has increased in the past year. Despite the increased momentum toward decarbonization, many governments still need to translate ambitious targets into specific actions. Additionally, given the unparalleled size of many economic recovery packages post COVID-19, the focus of the stimulus measures will play a key role in shaping energy systems in the decades to come.”

The findings are taken from four scenario outlooks, conceived by McKinsey:

  • 1.5ºC Pathway: McKinsey’s top-down view of how a pathway that limits global warming to 1.5ºC could look across sectors and energy products, taking economic and technical feasibility into consideration.
  • Accelerated transition: A progressive view, driven by governmental response to COVID-19 and “next normal” behavioral changes. This scenario assesses the impact of 10 conceivable shifts happening at an accelerated pace (e.g., uptake of EVs, recycling, renewables and hydrogen).
  • Reference case (RC): McKinsey’s outlook on the continuation of existing trends. This scenario reflects McKinsey’s expectations of how current technologies can evolve and incorporates current policies and an extrapolation of key policy trends.
  • Delayed transition: Post-pandemic, the societal focus is on economic recovery; energy transition continues at a lower speed; lower incentives to invest in decarbonization technologies, and low fossil fuel prices delay cost parity.

The report presents specific outlooks per fuel type such as natural gas, oil, coal and hydrogen. It also discusses carbon emissions and offers a detailed perspective on the McKinsey 1.5ºC pathway. This includes a look at the implications for business leaders and policy makers, comprising a view on value pools and an energy investment outlook.

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6 Comments on "Global fossil fuel demand should peak in 2027, says consulting firm McKinsey"

  1. Cloggie on Mon, 18th Jan 2021 1:31 am 

    All developed societies are moving towards renewable energy, as conventional fossil fuel is running out.

    Peak oil (demand or supply, it doesn’t matter much) means the end of the oil & gas age and a new chapter in the history of energy generation will be opened. It won’t be as affluent and comfortable as fossil fuel, but it is workable. Developed society won’t collapse, but will continue in the 4th rather than the 5th gear. And even that may be too pessimistic for those who started the transition early and as a consequence own all the patents, supply chains, companies, storage technologies. Europe’s card look good in this respect.

    From the viewpoint of the energy transition, COVID-19 is a great help, as cynical as it may sound. It pushed the idea of home office and people got rid of their commuting and mass tourism addiction, no green politician could ever have hoped to achieve on his own. It also diminished the attraction of big cities; living there is no longer necessary to have a high-profile job.

  2. FamousDrScanlon on Mon, 18th Jan 2021 11:54 am 

    clog, that time ‘my’ developed society tried ‘renewable energy’ buses.

    BC Transit’s $90M hydrogen bus fleet to be sold off, converted to diesel

    20 vehicles were part of high profile plan to showcase clean hydrogen power during 2010 Winter Olympics

    CBC News · Posted: Dec 04, 2014

    BC Transit is now taking bids on the buses and will either sell them off or have them converted to use diesel or other fuel. They have been in storage for several months and each has roughly 200,000 kilometres on the odometer.

    According to Burnaby’s Ballard Power Systems, which manufactures fuel cell engines, Whistler’s hydrogen buses cost $1.34 per kilometre to maintain, versus 65 cents per kilometre for diesel-powered buses.

    Denhoff says B.C. is Canada’s hub for the industry and it now employs almost a thousand people in the Vancouver area.

    He points to Ballard Power Systems manufacturing thousands of fuel cell engines for use in commercial forklifts, one of the early commercial successes for hydrogen power.

    “We’re selling our stuff all over the world and you would think that the management of the transit company would be helping us,” he said.

    https://www.cbc.ca/news/canada/british-columbia/bc-transit-s-90m-hydrogen-bus-fleet-to-be-sold-off-converted-to-diesel-1.2861060

    Hmmm Ballard Power Systems…..sound familiar?

    Ten more hydrogen buses planned for the Netherlands

    By Molly Burgess on Dec 17, 2020

    Ballard Power Systems’ fuel cell modules will power another ten Van Hool A330 model fuel cell electric buses in Emmen, the Netherlands, as part of the JIVE2 funding programme.

    The Vancouver-based company today (17th Dec) said it will deliver the modules in 2021. The buses are planned for deployment in 2022, with the Groningen-Drenthe and Qbuzz, Emmen’s public transport agency.

    https://www.h2-view.com/story/ten-more-hydrogen-buses-planned-for-the-netherlands/

    Perhaps y’all will do better since the Dutch are so advanced & Canadians are so primitive & backwards.

    Besides, we have plenty of renewable energy already.

    Only China (Pop 1.4 billion) produces more hydro electric power than Canada (Pop 37 million).

    More on the way….

    Site C dam

    The Site C Dam is an under construction run-of-the-river hydroelectric dam on the Peace River near Fort St. John in northeastern British Columbia, Canada. It is located approximately 80 kilometres downstream from the W. A. C. Bennett Dam. Wikipedia

    Opened: 2024

    Construction cost: C$20 billion, est

    Location: British Columbia, Canada

    Surface area: 9,330 ha (23,100 acres)

    Annual generation: 5,100 GWh

    Province: British Columbia

    https://en.wikipedia.org/wiki/Site_C_dam

    I’m pretty sure it’ll cost more than C$20 billion in the end.

  3. makati1 on Mon, 18th Jan 2021 4:09 pm 

    “…All developed societies are moving towards renewable energy”.

    Yes, Cloggie, they are. It is called muscle power and will require that everyone actually physically works and sweats to stay alive. No financial careers unless you are a local banker. Think 1800s with better medicine.

    But, telling you this for the 1,000th time will not change your brainwashed small mind. If you are under 40, you will likely see that world. If you are older, you will see and feel the pain of adjustment … down. Ah well…

    There is an advantage in living in a “less developed” country. There is a smaller adjustment down as we are still near the bottom of the ladder, and most people here still sweat for a living. They are very self sufficient in the necessities. Many will not even notice the difference.

  4. I AM THE MOB on Mon, 18th Jan 2021 5:13 pm 

    Clogg

    Well put and I agree.

  5. Cloggie on Tue, 19th Jan 2021 12:06 pm 

    The energy transition in the Netherlands is now beginning for real. And it is going to hurt. The entire landscape will change:

    https://deepresource.wordpress.com/2021/01/19/res-energy-transition-in-the-netherlands-until-2030/

    “RES – Energy Transition in the Netherlands Until 2030”

    Think 5000 turbines and 0.5% of the area of the entire country is going to be solar park. Most people support the project in theory, but turn into a NIMBY if it comes too close.

    My solution: tell the calculating citizens that no wind turbine or solar park could ultimately mean no electricity. Duh. Additionally, households near new infrastructure should be financially compensated by those households who profit from the new infrastructure. If the price is right, there will always be volunteers.

  6. Cloggie on Wed, 20th Jan 2021 8:18 am 

    Interesting fact for techies: the German offshore wind turbines scored a capacity factor of 60% last year, which is spectacular

    https://www.spiegel.de/wirtschaft/unternehmen/windparks-in-der-nordsee-produzieren-so-viel-strom-wie-nie-a-06c8ab2e-46d2-46a9-938e-7b0a5f2ad9d5

    “Windparks in der Nordsee produzieren so viel Strom wie nie”

    (Wind parks Northsea produced more than ever)

    Increase 12.4%

    Expect a capacity factor of 65% or higher if these 15MW giants come online in a year or 2.

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