cost at least 40 percent more (Exhibit 1). This would also likely entail much greater environmental damage than a more orderly energy transition, in which emissions reductions in the near term rapidly put the United States on a path closer to a 1.5°C global warming scenario while balancing affordability, reliability, resilience, and security. (See sidebar “Modeled scenarios underlying our analyses.”) An even more dramatic scenario, in which no abatement action is taken and US emissions are aligned with a 4.8°C warming pathway, would be drastically more costly. McKinsey’s 2022 report on the transition highlights nine critical requirements to reach net-zero emissions. 5 From these, we have identified six action areas that we believe are critical at this point to enable a more orderly energy transition in the United States. Although the following actions will probably not be sufficient in themselves, we believe they constitute the necessary bedrock for this transformation and take priority at this stage:
1. designing and deploying a capital-efficient and affordable system
2. strengthening supply chains to provide stable access to raw materials, components, and skilled labor 3. securing access to adequate land with high load factors for the deployment of renewables while taking into account the needs of local communities 4. reforming transmission development to include proactive planning, fast-track permitting, and systematic consideration of transmission alternatives 5. creating market mechanisms for expanding firm capacity to ensure reliable and adequate clean energy supply
6. accelerating technological innovation to ensure timely deployment of new clean technologies
Exhibit 1 Energy transition investments could increase power sector capital by approximately 40 percent through 2030.
Projected total power sector costs, 2022–30, $ billions
Generation Transmission Distribution
0
500
1,000
1,500
2,000
Current Trajectory scenario
Incremental costs
Achieved Commitments scenario
Incremental cost
Source: McKinsey Energy Insights Global Energy Perspective 2022; McKinsey Power Model; McKinsey Transmission Model
McKinsey & Company
5 The nine critical requirements to reach net zero are: physical building blocks , encompassing (1) technological innovation, (2) ability to create at-scale supply chains and support infrastructure, and (3) availability of necessary natural resources; economic and societal adjustments , comprising (4) effective capital reallocation and financing structures, (5) management of demand shifts and near-term unit cost increases, and (6) compensating mechanisms to address socioeconomic impacts; and governance, institutions, and commitment , consisting of (7) governing standards, tracking and market mechanisms, and effective institutions, (8) commitment by, and collaboration among, public-, private-, and social-sector leaders globally; and (9) support from citizens and consumers. See “The net-zero transition: What it would cost, what it could bring,” McKinsey Global Institute, January 2022.
Accelerating the journey to net zero
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