Decarbonizing the world’s economy will largely be a matter of overhauling the global energy system. And the necessary changes made to policies, technology, finance, and business models will affect the way that all individuals and all institutions produce and use energy.
Today McKinsey convened leaders from different points in the energy system to share observations on the state of the energy transition and the factors that might accelerate it. A few of the comments made during the session, edited for clarity, appear below. A full replay of today’s session can be found here. To register for our upcoming events, go to our agenda page.
Highlights from day four
Charting green hydrogen’s path to affordability: “The starting point is stone age: little [electrolyzer] units made by hand welding and hand cutting. The minute we are able to automate a process, with robotic welding machines and long factories assembling fast, phenomenal scale will come in. In renewable energy, the price has come down. Producers still need to bring down the cost of the electrolyzer and the balance of the system. We are very confident. … There is no reason why green hydrogen cannot end up competing with gray hydrogen. No reason whatsoever.”
—Paddy Padmanathan, president and CEO, ACWA Power
Rethinking the financial risk of new technologies: “We’ve had a long period when the perceived risk associated with new solutions for the climate problem has been higher than it really is. Now we’re starting to get to a point where that is tipping. It’s becoming obvious how carbon capture and storage, hydrogen, and direct-air capture are fitting into the climate equation. And therefore finance can start to factor them into credible transition pathways for clients.”
—Zoë Knight, managing director and group head, Centre of Sustainable Finance, HSBC
Finding solutions that can scale up: “People think sustainable aviation fuel is a solution. But all of the sustainable aviation fuel that was produced in 2020, wouldn’t serve Delta for one day—we operate thousands of flights around the world. … If it’s not scalable, if it’s not all over the world, if it can’t move through the piping infrastructure, it’s not a solution.”
—Tim Mapes, senior vice president and chief marketing & communications officer, Delta Air Lines
Fostering consumer uptake: “We’d need to distribute [hydrogen]. We’d need to get it to the point of consumption. And frankly, we’d need to encourage people to consume it. Because they may think, ‘I’m going to pay X for natural gas, and I’m going to be asked to pay Y for hydrogen. I don’t know if I want to invest ₤20,000 in my house. I don’t know if I want to spend another 15 percent in fuel costs.’ I think that sentiment is shifting—but for now, people don’t even have the option.”
— Robin Watson, CEO, Wood PLC
From our venue at COP26
Yesterday, during COP26 Finance Day, Cindy Levy, a McKinsey senior partner based in London, shared insights on the outlook for climate finance.
At a glance
For the United States to achieve its emissions-reduction goals, the country’s electric-power sector may need to decarbonize while also increasing electrical load 40 percent by 2035 (Exhibit 1). That translates to load growth of 2.0 percent per year over the next decade, compared with 0.5 percent in the status quo scenario—and virtually zero load growth over the past 15 years.
Read our perspectives on the energy transition in these McKinsey publications: