Global Energy Perspective 2025 Global Energy Transition Reshapes Path Amid Multiple Real-World Constraints
McKinsey’s Global Energy Perspective 2025 points out that the current global energy transition is taking place within a highly uncertain macro environment. Unclear economic growth prospects, shifting geopolitical landscapes, and fluctuating policy directions have led countries to adopt more cautious decision-making in the energy sector.
On the geopolitical front, nations are placing greater emphasis on energy independence and supply security. New trade corridors and supply chain reconfigurations are affecting the cost structures of energy and climate technologies. In some markets, the priorities of energy affordability and security have risen significantly in policy trade-offs, squeezing near-term decarbonization targets.
At the same time, global energy demand continues to grow. On one hand, energy consumption is expanding in emerging economies such as India, ASEAN nations, and Africa. On the other hand, new types of energy demand, such as from data centers, are rapidly emerging and have become a major source of electricity demand growth in developed economies. This trend is further intensifying the pressure to expand power systems.
Furthermore, rising equipment and infrastructure costs are altering previous expectations of continued cost declines for clean energy. Supply chain constraints are slowing down or even reversing the downward trend in the levelized cost of electricity in the near term, posing challenges to the rapid deployment of some clean technologies.
The Widening Gap Between Climate Goals and Realistic Pathways
The report notes that global greenhouse gas emissions have reached a new record high over the past year, further widening the gap between all scenario projections and the 1.5°C temperature control target. Compared to the 2024 edition, the projected temperature rise by 2100 has been revised upward across all three scenarios.
Even under the most aggressive Sustainable Transition scenario, long-term global warming is still projected to reach 1.9°C, significantly above the target set by the Paris Agreement. This reflects a structural gap between current policy ambition, technology deployment speed, and the required emissions reductions.
In terms of energy mix, the phase-out of fossil fuels has been further delayed. Under the Continued Momentum and Slow Evolution scenarios, fossil fuel demand may not peak until between 2030 and 2035, and will still account for 41% to 55% of global energy consumption by 2050. Natural gas demand, in particular, is set to grow most significantly, partially displacing higher-emission fuels, while coal consumption levels may also be higher than previously anticipated.
From a technology and investment perspective, several key low-carbon technologies are struggling to meet 2030 targets in Europe, the United States, and China. Apart from some areas of nuclear power and electric vehicles, there remain significant gaps between the construction progress of renewable energy and energy storage projects and planned goals. Alternative fuels such as hydrogen face challenges in achieving large-scale application in the near term due to insufficient cost reductions and policy support.
The report also highlights the significant marginal cost challenge of deep decarbonization in power systems. The cost of achieving 95%–100% decarbonization is substantially higher than earlier stages, relying on high-cost technologies such as carbon capture and long-duration energy storage. From a systemic perspective, allocating limited resources across different sectors for more cost-effective emissions reductions may be more realistic than pursuing "full decarbonization" in a single sector.
Source:
https://www.mckinsey.com/industries/energy-and-materials/our-insights/global-energy-perspective