At a glance
- The energy transition is in its early stages, with about 10 percent of required deployment of low-emissions technologies by 2050 achieved in most areas. Optimized over centuries, today’s energy system has many advantages, but the production and consumption of energy accounts for more than 85 percent of global carbon dioxide (CO2) emissions. Creating a low-emissions system, even while expanding energy access globally, would require deploying millions of new assets. Progress has occurred in some areas, but thus far has largely been in less difficult use cases.
- Twenty-five interlinked physical challenges would need to be tackled to advance the transition. They involve developing and deploying new low-emissions technologies and entirely new supply chains and infrastructure to support them.
- About half of energy-related CO2 emissions reduction depends on addressing the most demanding physical challenges. 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.
- The most demanding challenges share three features. First, some use cases lack established low-emissions technologies that can deliver the same performance as high-emissions ones. Second, the most demanding challenges depend on addressing other difficult ones, calling for a systemic approach. Finally, the sheer scale of the deployment required is tough, given constraints and the lack of a track record.
- Understanding these physical challenges can enable CEOs and policy makers to navigate a successful transition. They can determine where to play offense to capture viable opportunities today, where to anticipate and address bottlenecks, and how best to tackle the most demanding challenges through a blend of innovation and system reconfiguration.
Today’s energy system, encompassing both the production and consumption of energy resources, is massive and complex. The system has been optimized over centuries, is deeply embedded in the global economy, and serves billions of people, if not yet all of humanity. And it is high-performing. Energy can be dispatched relatively easily where and when it is needed because current fuels are energy-dense and easily transportable. Supply can be ramped up and down quickly.
For all its advantages, today’s system also has critical flaws. About two-thirds of energy is currently wasted. And the system generates more than 85 percent of global emissions of carbon dioxide (CO2).
Companies and countries are now engaged in an effort to transition the energy system and reduce those emissions—and to do so in just a few decades. That is a big ask. In the digital age, we have become accustomed to lightning-fast transformations. TikTok took nine months and ChatGPT only two months to gain 100 million users. But an energy system is a physical entity, and historical energy transitions have taken many decades or even centuries. Complicating the task of building a new low-emissions energy system is that it coincides with the need for it to continue to grow to expand access to energy for billions of people who still do not have it, thereby economically empowering them.
Real progress has been made, but the transition remains in its early stages. Thus far, deployment of low-emissions technologies is only at about 10 percent of the levels required by 2050 in most areas, and that has been in comparatively easy use cases. More demanding challenges are bound to emerge as the world confronts more difficult use cases across geographies.
Low-emissions technologies such as solar and wind power and electric vehicles (EVs) have advantageous properties and can be brought together to deliver high performance. But deploying them well and progressing the transition further requires understanding the physical realities of the energy transition—the “hard stuff.” Recognizing that the energy transition is first and foremost a physical transformation is a truth that can get lost in the abstraction of net-zero scenarios. But it is vital if the new energy system is to retain, or even improve on, the performance of the current one and secure an affordable, reliable, competitive path to net zero.
The observation has widely been attributed to Albert Einstein that, given an hour to solve a problem, he would spend 55 minutes defining the problem and five thinking about solutions. It is in that spirit that this research builds on the vast body of literature on the energy transition and pathways to net zero. Across seven domains, it identifies 25 significant physical challenges that must be overcome if the transition is to succeed. Three aspects stand out across these challenges: the maturity and performance of low-emissions technologies; the degree of scaling these technologies and their support infrastructure and supply chains would need as this massive energy system is transformed; and interdependencies across the different parts of the system.
Click on the tiles for summaries of 25 challenges across 7 domains
Download the full report for an in-depth review of each domain and associated physical challenges.
Seven domains of the energy system would need to be transformed, and this effort is in its early stages
Wide view image of wind turbines in the ocean with turbulent cloudy skies and an oil tanker going by in the distance.
The energy transition involves the physical transformation of seven deeply interlinked domains. The first is the power domain, which needs to reduce its own emissions and to scale dramatically to provide low-emissions energy to the three large consuming domains: mobility, industry, and buildings. The final three domains are enablers of the energy transition: raw materials, especially critical minerals; new fuels, such as hydrogen and other energy carriers; and carbon and energy reduction (see sidebar, “Why understanding the physical realities of the transition matters”).
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A stacked area chart shows that primary energy consumption grew steadily from 1990 to 2022. Fossil fuels accounted for about 80 percent of the total in 2022. Other non-fossil fuels accounted for most of the rest, and variable renewable energy (VRE) had a very small but growing presence. On the right side, two line charts show energy system emissions have not started to decline, with a six percent increase from 2012 to 2022. But emissions intensity, measured in million tonnes of CO2 per exajoule of primary energy consumption, decreased by 7 percent over the same period.At the bottom, a Gantt chart shows the 2022 deployment of low-emissions technologies as a share of their needed 2050 deployment in each of 7 domains, or sectors. The 2050 deployment needs are based on the McKinsey 2023 Achieved Commitment Scenario, in which most countries reach their net-zero commitments by or before 2050. In the power sector, low-emissions installed capacity is at 8–12 percent of its needed 2050 deployment. In the mobility sector, deployment has reached three percent of its needed deployment for electric vehicles (EV) stock and 15 percent of its needed deployment for EV sales. The industry sector has reached 0–10% of its needed deployment for low-emissions production of steel and cement. The buildings sector has reached 5–7 percent of its needed deployment for heat pump stock and 9–12 percent of its needed deployment for heat pump sales. The raw materials sector has reached 10–35 percent of its needed deployment for the supply of critical minerals. The hydrogen and energy carriers sector has reached less than one percent of its needed deployment for the production of low-emissions hydrogen. Finally, the carbon and energy reduction sector has reached less than one percent of its needed deployment for CO2 capture by point-source facilities.Overall, the charts show that the energy transition is at an early stage.
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Recent years have seen momentum on many—but not all—fronts. For instance, about 90 percent of all battery EV sales and almost 60 percent of solar and wind power capacity added was in the past five years. But overall, the transition is in its early stages. Deployment of low-emissions technologies is currently only about 10 percent of the levels required by 2050 in most domains—and largely in comparatively easy use cases.
While some areas like solar have grown rapidly, others have not. In cases such as low-emissions hydrogen, carbon capture, and low-emissions primary production (excluding recycling) of large industrial materials, less than 1 percent of required deployment by 2050 has been achieved thus far.
Abating about half of energy-related emissions depends on addressing the hardest of 25 physical challenges
Steelworkers in heat protective gear starting a glowing molten steel pour in a steelworks factory.
To progress the transition further, 25 physical challenges—defined as barriers to switching from high-emissions physical assets and processes to low-emissions ones—across the seven domains would need to be addressed (Exhibit 2).
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An hexagon chart presents 25 physical challenges that must be addressed for a successful energy transition, categorized by domain. The challenges are grouped into three levels, according to the level of difficulty of addressing them. Level one challenges require deploying established technologies that face the least physical hurdles. Level two challenges require deploying known technologies to accelerate and scale them. Level three challenges occur when technological performance gaps meet demanding use cases and the transformation is just beginning. The challenges are arranged in a honeycomb pattern. The first domain is the power sector, with six challenges: managing renewables’ variability (level 3); scaling emerging power systems (level 3); flexing power demand (level 2); securing land for renewables (level 2); connecting through grid expansion (level 2); and navigating nuclear and other clean energy (level 2). End-Use Sectors include three domains: mobility, industry, and buildings. Mobility challenges include driving battery electric vehicles (BEVs) beyond breakeven (level 1); going the distance on BEV range (level 1); loading up electric trucks (level 3); charging up EVs (level 2); and refueling aviation and shipping (level 3). The challenges in the industry domain are furnacing low-emissions steel (level 3); cementing change for construction (level 3); heating other industries (level 3); synthesizing low-emissions ammonia (level 3); cracking the challenge of plastics (level 3); synthesizing low-emissions ammonia (level 3); and heating other industries (level 2). Challenges in the buildings domain include facing the cold with heat pumps (level 1); and bracing for winter peaks (level 2). The last three domains are categorized as enablers. They are: raw materials, H2 and other energy carriers, and carbon & energy reduction. Raw materials include one challenge: unearthing critical minerals (level 2). H2 and other energy carriers include harnessing hydrogen (level 3); scaling hydrogen infrastructure (level 3); and managing biofuels footprint (level 2). Carbon and energy reduction challenges are expanding energy efficiency (level 2); capturing point-source carbon (level 3); and capturing atmospheric carbon (level 3).
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Some challenges are harder to address than others, and they have been categorized into three levels of difficulty based on technological performance, interdependencies across different challenges, and scaling needs:
