By Bilal Hafeez 13-08-2019

Peak Energy, Peak Oil, and the Rise of Renewables: An Executive’s Guide to the Global Energy System (The McKinsey Podcast, 31 mins)

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(You can listen to the podcast by clicking here)

This podcast continues the discussion around oil that we initiated last week, with McKinsey Partners examining the deceleration in conventional energy demand. The composition of GDP is changing – services will overtake manufacturing, which will then consume less energy. We are also becoming more efficient in our use, with smarter appliances and electric vehicles driving energy demand down. At the same time, however, they predict rapid electrification globally, with dependence on electricity ever-present (we clearly saw this last week, when a nine-hour power cut left everyone crippled) – but this will be fuelled by renewables. As such, energy demand will fall behind GDP growth. They make the optimistic projection that 75% of electricity will come from solar and wind by 2050, driven by their lowering cost. At 15 mins into the podcast they turn to oil, which they still see growing by 10m barrels a day for the next 10-15 years, peaking in 2033 (much earlier than previous models). Eventually, however, it will be eventually phased out.

Why does this matter? Renewables are becoming the sensible economic choice for anyone building new capacity. However, it’s not all so straightforward, especially given that China is currently building 200 new coal plants. Renewables are not always reliable, and governments will always need to maintain an ‘emergency’ energy base of coal and gas.

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