Exhibit 2 A more orderly transition could save the United States more than $1.5 trillion compared with achieving the same emissions under a less orderly path.
Generation and additional abatement capital investment, 2022–50, $ billions
US cumulative GHG¹ emissions from 2022, Gt CO²e²
Delayed Trajectory without abatement Delayed Trajectory with additional abatement
20,000
Generation
Additional abatement
15,000
0 2,000 4,000 6,000
10,000
Achieved Commitments
Achieved Commitments
5,000
Delayed Trajectory
0
2025 2030 2035 2040 2045 2050
¹Greenhouse-gas. ²Metric gigatons of carbon dioxide equivalent. Source: McKinsey Energy Insights Global Energy Perspective 2022; McKinsey Power Model; McKinsey analysis
McKinsey & Company
reduction in economy-wide GHG emissions by 2030 and 100 percent carbon-free electricity by 2035. See sidebar “Modeled scenarios underlying our analyses.”) Capital that otherwise would have been spent on maintaining coal assets could be significantly reallocated across other asset types, such as solar and wind. 2. Deploying capital more cost-effectively. All companies and utilities along the electric value chain could identify opportunities to reduce costs. The most significant target would likely be capital efficiency, given that investment accounts for 70 percent of overall costs by 2030 under the Achieved Commitments scenario, and there are ways to lower those costs significantly. In our work with renewables developers, we found that they can drive capital productivity through three key levers: design and engineering, contracting and procurement, and project execution. Combined, these could reduce capital expenditure by about 10 to 20 percent. In another example, we found that better planning and project design reduced transmission spending by 13 to 19 percent.
In addition, investments in fossil-fuel assets would best be made based on their anticipated useful life, with a view to ensuring what is needed for a reliable and affordable energy system in the shorter term while aiming to making assets less carbon-intensive, more flexible in their usage, and potentially used for a shorter duration. Asset owners could look for ways to repurpose assets that are no longer used and useful—for example, by using brownfield coal sites for new nuclear assets or upgrading gas pipelines to transport hydrogen. Lean-asset retirement and removal (decommissioning) could improve efficiency of processes and reduce costs. Investing in the right assets could have massive impact. Under the current trajectory, for example, 110 gigawatts (GW) of existing coal capacity would remain online in 2030. However, the Achieved Commitments scenario, in which the United States meets its emissions-reduction goals, would call for only 60 GW, a 45 percent difference. (In the Achieved Commitments scenario, the United States would achieve its stated commitments of a 50 to 52 percent
Accelerating the journey to net zero
16
Made with FlippingBook Online newsletter maker