Why the Global Energy Shift Is a Marathon, Not a Sprint: Insights from McKinsey’s 2025 Report

The race to decarbonise the global energy system has captured headlines for over a decade. The journey toward net-zero emissions, however, is proving far longer and more complex than anticipated, according to McKinsey's latest Global Energy Perspective 2025. 

As the world marks ten years since the Paris Agreement set ambitious climate targets, the gap between aspiration and reality continues to widen, with all three modelled transition scenarios now projecting global temperature increases of 1.9°C to 2.7°C by 2100, higher than any previous projection.​

This isn't a story of failure, but rather one of recalibration. The energy transition resembles a marathon more than a sprint, and requires sustained effort, economic pragmatism, and the recognition that there is no silver bullet for decarbonization. 

Trio of Priorities: Affordability, Reliability, and Decarbonization

McKinsey's 2025 report identifies a fundamental shift in how governments and policymakers are approaching the energy transition. While decarbonisation remains important, energy affordability and security are increasingly carrying more weight in decision-making. 

The report analyses three plausible transition scenarios - Slow Evolution, Continued Momentum, and Sustainable Transformation. These are a range of possible outcomes based on policy ambition, technology evolution, and system constraints like supply chain bottlenecks and grid investment.​

Notably, even in the most optimistic Sustainable Transformation scenario, emissions remain meaningfully above net-zero targets through 2050, and emissions aren't predicted to decline substantially until after 2030 in the Slow Evolution scenario. 

Fossil Fuels: A Persistent Presence Through 2050

Perhaps the most significant finding in McKinsey's 2025 analysis is the continued role of fossil fuels in the global energy mix. 

Depending on the scenario, fossil fuels are projected to account for 41 percent to 55 percent of global energy consumption in 2050. While this is a significant decline from today's 64 percent, it is higher than previous McKinsey projections.​

Fossil fuel demand is expected to plateau between 2030 and 2035 in the Continued Momentum and Slow Evolution scenarios. 

Gas

Natural gas, in particular, could see the strongest growth, displacing higher-emission fuels in many cases. 

Global gas demand is projected to increase by up to 170 billion cubic meters by 2030. Asia will account for approximately 75 percent of gas demand growth by 2040. This growth stems largely from a cost- and emission-driven coal-to-gas switch in Asia's power sector.​

Oil

Oil demand tells a similar story of gradual transition. Global demand for liquid fuels could peak around 2030 at between 103 million and 109 million barrels per day, with demand in 2050 ranging from 72 million to 100 million barrels per day across scenarios. The road transportation sector remains the largest contributor, though electric vehicle adoption creates the biggest divergence across scenarios.​

Coal

Even coal, which is often viewed as the fossil fuel most rapidly approaching obsolescence, persists at higher levels than previously anticipated. 

While thermal coal demand for power generation is expected to decline as low-cost renewables and clean, firm solutions gain traction, demand may remain resilient in regions like Southeast Asia due to abundant domestic resources, coal's role in local economies, and stakeholder support.​

Electrification Surge: Power Demand Doubles by 2050

Electricity demand by 2050 could double from 2023 levels, driven by traditional sources like buildings and industry, as well as emerging demand centres including electric vehicles and data centers.​

Notably, the electrification story varies dramatically by region. 

China is expected to lead the world in electrification through 2050, with electrification rates approaching 45 percent of final energy consumption. 

Europe and North America are projected to reach similar levels by mid-century, accelerating particularly after 2030. Meanwhile, India could see the fastest growth in both GDP per capita and energy consumption per capita, with dramatically increased final energy demand making it the third-largest energy consumer globally by 2050.​

Data centers emerge as a transformative segment in electricity demand projections. After analyzing detailed project pipelines, McKinsey predicts an average global growth rate of 17 percent per year in data-center-related power demand between 2022 and 2030. 

Regional Realities: No One Size Fits All

One of the most important insights from McKinsey's analysis is that countries and regions will follow distinct decarbonisation trajectories based on local economic conditions, resource endowment, and the realities facing particular industries. 

This regional variation underscores why the energy transition is a marathon requiring tailored strategies rather than a sprint toward universal solutions.​

ASEAN countries present a different picture, with industrial energy demand expected to grow 57 percent and power demand by more than 50 percent by 2050. These rapidly developing nations currently have low energy consumption rates but will have the greatest influence on future energy demand growth as living standards rise.​

China, despite being the world's largest energy consumer, is projected to see relatively flat energy demand through 2050. However, China is expected to maintain its electrification leadership, potentially reaching more than 90 percent low-carbon power by 2050.​

In developed economies like Europe and North America, AI and cloud-computing workloads are negating energy efficiency gains, making single-digit but meaningful contributions to overall energy demand. This represents a fundamental shift - regions that had expected declining energy intensity may instead face growing demand.​

The Renewable Energy Acceleration: Solar and Wind Lead the Charge

Despite the persistence of fossil fuels, renewable energy sources represent the fastest-growing segment of the global energy mix. Solar and wind power are expected to grow nearly threefold by 2030 and more than ninefold by 2050 compared with 2023 levels. This means renewables could account for 61 percent to 67 percent of the 2050 global power mix depending on the scenario.​

Renewables and energy storage technologies represent cost-competitive decarbonisation solutions due to continuing cost declines and increasingly mature supply chains. 

Solar photovoltaic, in particular, is expected to meet 2030 targets even without current capacity being underway, thanks to short installation cycles and continued cost declines.​ 

The intermittent nature of solar and wind requires firm and dispatchable power sources to build a reliable system cost-effectively.​ The analysis notes that Battery energy storage systems (BESS) will increasingly support intermittent renewables, with capacity expected to grow approximately 15-fold by 2050. China, India, European OECD members, and the United States are expected to lead in storage capacity deployment.​

Supply Chain Bottlenecks

Even where the economics and technology are ready, physical supply chain constraints are slowing the energy transition. 

Lead times for critical clean-energy-tech components like transformers, generators, and uninterruptible power supplies now range from six months to two years in some markets. ​

The supply chain bottlenecks for clean-technology equipment represent a factor that could constrain the energy transition, particularly in Europe and the United States. High-voltage transformers, for example, have seen cost increases of two- to threefold since 2020. 

These supply chain constraints are temporarily slowing or reversing declines in the levelized cost of energy (LCOE), putting short-term uptake of clean technology at risk. 

The Investment Gap

McKinsey's analysis of low-carbon technology deployment reveals noteworthy progress but also significant shortfalls. 

The 2025 analysis shows that only a few areas have enough capacity underway (built, under construction, or with final investment decision taken) to meet 2030 targets - specifically nuclear power in the European Union and United States, and electric vehicles in China.​

Renewable power investments still fall short of 2030 targets in the European Union, United States, and China. 

Wind energy has seen large cost increases leading to many project cancellations, especially in offshore wind. Supply chain constraints, like raw material shortages, are causing lag in regional targets.

For many technologies across most regions, capacity is planned or announced, but final investment decisions haven't been made. 

This investment reality highlights a crucial insight that, in most areas, deployment of low-emission technologies is only at about 10 percent of the level required by 2050, and that has been in comparatively easy use cases. As the transition targets more difficult applications, the challenge intensifies.​

The Cost of Perfection: Why 100% Decarbonisation May Not Make Sense

One of the most thought-provoking insights from McKinsey's 2025 report concerns the economics of complete decarbonisation. 

The analysis reveals that the final 5 percent decarbonisation of the power sector could cost USD 90 to USD 170 per metric ton of CO2, compared with USD 20 per metric ton for 45 percent to 70 percent decarbonization.​

At lower reduction targets, lower-cost renewables can replace high-carbon sources like coal. But the last share of the sector requires higher-cost technologies such as carbon capture with biomethane, direct air capture, and long-duration energy storage.​

Investment dollars for decarbonizing the energy system could potentially go further if, rather than pursuing the final few percentage points in the power sector, they were instead applied to decarbonization in other sectors. This would avoid the higher costs of final power sector decarbonization without compromising Paris Agreement temperature targets.​

Geopolitical Uncertainty and Policy Volatility

The global energy landscape in 2025 is shaped by significant geopolitical uncertainty, evolving climate policies, recession risks, rising energy costs, tariffs, and technology innovation. Geopolitical and policy volatility has added uncertainty to the near-term evolution of energy systems, resulting in a slower energy transition across all scenarios.​

Governments and policymakers are increasingly prioritising energy affordability and security over meeting Paris Agreement targets. Importantly, the greater emphasis on supply security doesn't necessarily come at the cost of decarbonisation; in many regions, the two are interlinked, with supply security driving more policy for renewables.​