Fossil fuels to remain dominant after 2050, McKinsey says

Oil, gas and coal will retain a dominant position in global energy supply even after 2050, because electricity demand will grow faster than the shift to renewable sources. That is according to a report by consulting firm McKinsey. The continued use of fossil fuels poses a major challenge to achieving global climate targets.

Electricity demand is expected to rise mainly due to anticipated growth in the industrial and construction sectors. This growth is expected to range from 20 to 40 percent by 2050. Data centers in North America are considered the biggest contributor to this increase.

McKinsey expects fossil fuels to account for 41 to 55 percent of global energy consumption in 2050. Although this is less than the current 64 percent, it is higher than previous estimates. The use of natural gas for power generation is expected to increase significantly. Coal consumption may remain at a higher level.

US data center-related electricity demand will grow by nearly 25 percent a year through 2030. Data center demand worldwide is expected to increase by an average of 17 percent a year between 2022 and 2030, particularly in member countries of the Organisation for Economic Co-operation and Development (OECD).

Alternative fuels are unlikely to achieve widespread adoption before 2040 unless they are mandated. But renewable energy sources have the potential to account for 61 to 67 percent of global electricity supply in 2050, McKinsey added.

McKinsey partner Diego Hernandez Diaz told Reuters that McKinsey no longer expects oil demand to peak before the 2030s. Combined with regional and global economic conditions for some fossil fuels, this means fossil fuels could account for up to 55 percent of global electricity supply in 2050, according to the report.

The global energy outlook is shaped by geopolitical uncertainty and governments prioritising affordable and secure energy over meeting the goals of the Paris Agreement. The report also cites the risk of an energy recession, tariffs and technological innovation as factors behind continued dependence on fossil fuels.