The first energy transition can be traced back to the 18th Century, when we started moving from wood to coal. Now, in 2024, what progress have we made in the latest shift from fossil fuels to renewable energy sources, and how much more work needs to be done?
In recent years, the world has certainly seen significant momentum in some aspects of the energy transition. Innovation, for example, has made many new technologies more viable. About 90% of all battery EV sales and 60% of all solar and wind capacity additions happened in the last five years alone. Sustaining such growth rates for these sectors could certainly be compatible with the envisaged energy transition by 2050.
Despite the momentum, however, our research finds that the transition is still very much in its early stages. For example, the world has been electrifying, but slowly. Between 2005 and 2022, the share of electricity in total final energy consumption grew by fewer than five percentage points, from about 16% to 20%, according to the IEA.
And when you look across different domains – from the way our power is generated to the way our buildings are heated – our research finds that only about 10% of the low-emissions technologies that would be needed by 2050 to meet global commitments have been deployed thus far. In some areas, like low-emissions hydrogen production or point-source carbon capture, only about 1 percent of the needed transition has been completed.
The task at hand now is to identify how to get the remaining roughly 90% of the job done.
What are the biggest challenges facing the energy transition?
Consider today’s energy system, which is massive and complex. The world has well over 60,000 power plants, delivering electricity to more than six billion people. The length of the global oil and gas pipeline network is about two million kilometers, equivalent to traveling from the Earth to the moon and back—twice. The energy system enables the production of about seven billion tonnes of industrial materials every year. It also delivers high performance, for example, energy that is dense, transportable, capable of delivering high heat, to name a few important attributes.
However, it has a critical flaw, which is its high emissions. About 85% of global emissions of carbon dioxide come from the energy system. Success relies on recognizing that – given the physical nature of the energy system – at its core, the energy transition is a physical transformation. The world needs to develop and deploy new low-emissions technologies, and the infrastructure and supply chains they need to operate. We need to a blueprint for that physical transformation.
Our research has done just that and identified 25 physical challenges across seven domains that would need to be addressed to achieve the 90 percent of the transition that remains ahead.
About half of global CO2 emissions would depend on addressing the 12 most demanding challenges, or what we’ve been calling the “demanding dozen.” Examples are managing power systems with a large share of variable renewables, addressing range and payload challenges in electric trucks, finding alternative heat sources and feedstocks for producing industrial materials, and deploying hydrogen and carbon capture in these and other use cases. These are challenges where there are gaps in technological performance (often with demanding use cases), large interdependencies with other hard challenges, and massive scaling requirements – where the transformation is just beginning.
Long-haul trucking is one such example. Today, battery electric trucks cannot drive the same distance as diesel trucks without stopping to recharge. As a result, our estimates suggest that even the best heavy-duty battery electric trucks available today could fail to meet roughly 20% to 45% of current long-haul trucking use cases with a single charge if weight regulations are not changed. Moreover, the transformation is just getting started—fewer than 1% of trucks on the road today are electric, and almost none of those run on long-haul routes. Improving the energy density of batteries, and even reimagining trucking routes and charging infrastructure entirely, could be needed to enable electric trucks to cover the hardest range-payload use cases.
Another example is cement. Today, fossil fuels are a critical ingredient in cement production and are also used to generate the high heat needed for its production. Replacing fossil fuel use would require new technologies and processes to be massively scaled, or even the use of alternative materials to replace cement.
We are seeing progress on these most challenging issues, but more work is needed to continue to improve performance, address interdependencies and achieve scale.
How can business leaders and policymakers navigate a successful energy transition?
Understanding these physical challenges can enable CEOs and policy makers to navigate a successful transition.
For challenges where technologies are mature, business leaders and policymakers could consider how to play offense to capture viable opportunities. For some of these, there may be bottlenecks to scaling, and stakeholders will need to consider how to tackle constraints – from the land that will be needed for solar and wind assets to the pace with which grids will need to expand to accommodate increasing electrification.
For the “demanding dozen,” or the most difficult challenges, business leaders and policymakers will need to consider the role of innovation for individual technologies and reconfigure how the system overall works to manage performance gaps. Examples could include reconfiguring trucking routes or alternate materials for cement, as discussed above.
As physical challenges for the transition are tackled, it would also be important to consider how best to run two energy systems—the old and the new—in parallel in the near term, and to ensure that the ramp-down of the current high-emissions system and ramp-up of a low-emissions one is smooth.