The Hard Stuff of the Energy Transition: Challenges and Pathways Forward

Speaker:

Dr. Mekala Krishnan, Partner, McKinsey Global Institute

With Core Programming Sponsor

“The energy transition is not replacing a light bulb; it's rewiring the entire house, and that will take collaboration from the public sector, the private sector, and the financial sector as well as broader society.” Dr. Mekala Krishnan

Key takeaways:

  • Only 10% toward our 2050 energy goals: Despite meaningful progress and momentum in deploying low-emission technologies, we have achieved only 10% of what is needed by 2050 to meet global commitments for the energy transition.
  • The energy system overhaul is physical: The energy system today is a massive and complex physical entity with high inefficiencies,with approximately two-thirds of all energy wasted, the transition is fundamentally about building and ensuring the functionality of physical infrastructure. 
  • 25 physical challenges identified: McKinsey has conducted a comprehensive stocktake, identifying 25 physical challenges that need to be addressed to succeed in the energy transition.. 
  • Tech gaps  in hard-to-abate sectors: Current batteries are effective for passenger electric vehicles but are not yet suitable for long-haul trucking,due to limitations in current battery technologies, and  heavy industries like cement production require technological advancements to reach high temperatures (up to 1500°C) for decarbonization. 
  • Innovation and system redesign needed: Overcoming the hardest challenges will require “Innovation with a capital ‘I’”,not just in individual technologies but in reconceiving how we design the entire energy system. 
  • Collaboration critical for success: The energy transition is akin to rewiring an entire house, not just replacing a light bulb. Success will depend on collaboration across the public sector, private sector, financial sector, and broader society to address the complex, interdependent challenges. 
  • Understanding physical realities is crucial: Recognizing the physical nature of the energy system and its transformation is essential. By understanding these realities, we can craft a more affordable, reliable, and competitive energy future. 

Action items:

  • Accelerate innovation in hard-to-abate sectors: Invest in research and development to advance technologies for sectors where current solutions are insufficient, such as heavy industry and long-haul transportation. 
  • Redesign energy systems: Reconceive the design of energy systems to address performance gaps, focusing on system-wide solutions rather than isolated technologies. 
  • Foster cross-sector collaboration: Establish partnerships among governments, businesses, financial institutions, and communities to coordinate efforts and share best practices for the energy transition. 
  • Invest in flexible solutions: Scale up flexibility solutions like energy storage at a pace two to seven times faster than the growth in power demand to support the expansion of renewable energy sources. 
  • Enhance awareness of physical realities: Educate stakeholders about the physical challenges and requirements of the energy transition to align expectations and actions accordingly. 
  • Challenge misconceptions: Correct common misconceptions, such as overestimating current progress or believing current technologies are sufficient for all sectors, to garner broader support for a low-emissions future. 
  • Develop execution track records: Build and share success stories and best practices to create a track record of execution that can inspire confidence and further investment in the energy transition. 

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