The first energy transition dates back to the 18th century, when the shift from wood to coal began. Now, in 2024, how far has the latest transition from fossil fuels to renewable energy sources progressed, and how much more needs to be done?
The world has certainly seen great momentum in some aspects of the energy transition in recent years. For example, innovation has enabled many new technologies: Around 90% of battery electric vehicle sales and 60% of the increase in solar and wind power capacity have occurred in the past five years alone. If we can maintain such growth rates in these areas, we will certainly be compatible with the energy transition envisaged by 2050.
But despite the momentum, our research finds that the transition is still in its very early stages. For example, the world is electrifying, but at a slow pace: Between 2005 and 2022, electricity’s share of total final energy consumption is expected to increase by less than 5 percentage points, from about 16% to 20%, according to the IEA.
And when we look at areas ranging from how electricity is generated to how buildings are heated, our research finds that only around 10% of the low-emission technologies needed to meet global commitments by 2050 have been deployed so far. In areas such as low-emission hydrogen production and point-source carbon capture, only around 1% of the necessary transition has been completed.
The challenge now is to identify how to complete the remaining roughly 90% of the work.
What are the biggest challenges facing the energy transition?
Consider today’s large, complex energy systems. There are more than 60,000 power plants in the world, providing electricity to over 6 billion people. The global oil and gas pipeline network is approximately 2 million kilometers long, equivalent to the distance from the Earth to the Moon and back. Energy systems enable the production of approximately 7 billion tons of industrial materials each year. They also enable high performance, such as energy that is dense, transportable, and capable of releasing high heat, to name a few key attributes.
But it has a major flaw: it’s high emissions. About 85% of global carbon dioxide emissions come from the energy system. Given the physical nature of the energy system, the key to success is recognizing that the energy transition is inherently a physical transformation. The world needs to develop and deploy new low-emission technologies and the infrastructure and supply chains needed to operate them. We need a blueprint for that physical transformation.
Our research did just that, identifying 25 physical challenges across seven areas that need to be addressed to achieve the 90 percent of transition that remains.
Nearly half of global CO2 emissions depend on solving the 12 most demanding challenges, or what we call the “Demanding 12.” Examples include managing a power system with high levels of variable renewable energy, addressing range and payload challenges for electric trucks, finding alternative heat sources and feedstocks to produce industrial materials, and deploying hydrogen and carbon capture in these and other use cases. These are challenges with technology performance gaps (often with demanding use cases), high interdependencies with other difficult challenges, and massive scaling requirements, where the transformation is just beginning.
Long-haul trucking is one example. Currently, battery-electric trucks cannot travel the same distances as diesel trucks without stopping to charge. As a result, it is estimated that even the best heavy-duty battery-electric trucks available today may not be able to meet approximately 20% to 45% of current long-haul trucking use cases on a single charge if weight regulations are not changed. Moreover, the transformation is only just beginning: less than 1% of trucks on the road today are electric, and of those, very few run long-haul routes. Improving battery energy density and a complete rethinking of trucking routes and charging infrastructure will likely be necessary to enable electric trucks to cover the most challenging range and payload use cases.
Another example is cement. Today, fossil fuels are a key raw material in cement production and are also used to generate the high heat required for production. Replacing the use of fossil fuels will require a significant expansion of new technologies and processes or the use of alternative materials in place of cement.
Progress has been made on these toughest issues, but more work is needed to sustainably improve performance, address interdependencies, and achieve scale.
How can business leaders and policymakers ensure the energy transition is a success?
Understanding these physical challenges can help CEOs and policymakers ensure a successful transition.
For challenges where technologies are maturing, business leaders and policymakers can consider how to move the gun to capture viable opportunities. Some of these will present bottlenecks to scaling, and stakeholders will need to consider how to address constraints, from the land required for solar and wind generation to the pace at which the electric grid needs to expand to accommodate growing electrification.
For the “twelve most demanding challenges,” or the toughest ones, business leaders and policymakers will need to consider the role of innovation in individual technologies and reconfigure how the whole system works to manage performance gaps. Examples include reconfiguring trucking routes and alternative materials for cement, as discussed above.
As well as addressing the physical challenges of the transition, it will also be important to consider how best to operate two energy systems side by side in the near future, ensuring a smooth phase-out of the current more emitting systems and the phase-in of the less emitting ones.
