Momentum toward renewables is growing but
without a corresponding decrease in global emissions. This is one of the insights of the McKinsey & Company study “The energy transition. A region-by-region agenda for near-term action” (Dec 2022).
Nonetheless, the potential for renewables regarding local conditions remains huge (see grafic below).
“The world’s progress toward cleaner energy has been accelerating. Over the past decade, the production of renewable energy has more than doubled globally, and its share of total primary energy consumption has grown from 9 percent in 2011 to 13 percent in 2021. (…) Despite the growth in renewable energy, the use of fossil fuels is also expanding to meet growing demand for energy. Global energy demand grew by 14 percent from 2011 to 2021, driven mainly by emissions-intensive sources. As a result, global energy-related emissions have increased in the past decade by about 5 percent (…) and the current share of primary energy from fossil fuels remains preponderant, at 82 percent.”
The study points out, that “globally, eight sets of common actions are needed for a more orderly transition”:
Physical building blocks
1. Streamlining access to land, accelerating permitting and simplifying processes to accelerate time to deployment for renewables and cleantech.
2. Modernizing and repurposing legacy infrastructure and creating new assets to accelerate the integration of renewables and cleantech into the energy system.
3. Strengthening global supply chains to secure critical raw materials, components, and labor competencies.
4. Decarbonizing the industry and transportation sectors by investing in new technologies such as hydrogen and carbon capture, utilization, and storage (CCUS), alongside electrification and energy efficiency.
Economic and societal adjustments
5. Limiting and mitigating emissions-intensive generation, to reduce the carbon footprint of fossil fuels and lower the risk of stranded assets.
6. Managing economic dislocations to promote energy affordability and create fair opportunities for affected and at-risk communities.
Governance, institutions and commitments
7. Developing stable and attractive remuneration frameworks, market designs, and offtake structures to encourage investments in renewables and cleantech.
8. Scaling frameworks and standards to measure carbon intensity of energy and final products and develop a global, new carbon economy.
We expect a variety of management challenges in the energy industry. There is a lot to do. The use of experienced interim managers will be part of the solution to manage this transformation.
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