Renewable energy is increasingly abundant and is becoming cheaper. But the pace and nature of growth varies significantly from market to market.

To demonstrate how to provide the energy sector with cheap, reliable, sustainable power, leading agency McKinsey divided the world into four main market types. This with the aim of developing paths to make every market type completely carbon-free by 2040 in the most cost-effective way.

50-60% economically optimal

The main conclusion is that achieving 50 to 60% decarbonisation is technically not that difficult and is often the best option economically.

It is also technically feasible to evolve to 90% decarbonisation, but the associated costs are higher. Achieving 100% decarbonisation is very challenging both technically and economically.

Regardless of all of this, technological progress can reduce costs and accelerate the transition paths to a carbon-free society. Electric vehicles seem to play an important role in this. Also in terms of battery storage, a breakthrough is needed to evolve from 90 to 100% decarbonisation.

Time frames of decades

To achieve a fully low-carbon energy sector by 2040, it is important that all parties involved start operating within time horizons of decades. The implication is that the strategic decision-making of utilities, governments and investors differs from market to market and from company to company because of the existing uncertainties.

Source: McKinsey Quarterly, Powering up sustainable energy

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