(The Center Square) – The forces shaping the energy landscape include rising demand for power generation, geopolitical uncertainty, and shifting policy priorities, McKinsey & Company said in its Global Energy Perspective 2025.
Global energy demand continues to grow, driven by increasing consumption in emerging markets and by data centers, particularly in the EU, China, and United States, which have become the sector’s largest drivers of both upside and uncertainty, according to McKinsey, ranked the top energy consulting firm in 2025 by Energy Digital.
Fossil fuels consumption is likely to plateau between 2030 and 2035, rather than peak and decline as previously expected, the consultancy said. McKinsey expects fossil fuels will account for about 49% of the world’s energy consumption in 2050, down from 64% today but higher than in previous forecasts.
McKinsey expects natural gas will see the biggest increase in demand among all energy sources through 2050, driven by growing use for electricity generation and for residential and industrial consumption. Global coal consumption will continue at higher levels than previously expected, said McKinsey.
Renewable energy sources and natural gas-fired generation will provide most new power supply through 2050, according to the consultancy. However, local market dynamics will influence the pace at which countries and regions adopt decarbonization policies, the consultancy said.
The power sector is expected to drive much of the growth, with global electricity demand potentially more than doubling by 2050, according to McKinsey. Rising demand from emerging markets and the electrification of transport, particularly electric vehicles, industry, and buildings, is expected to drive global power consumption. McKinsey expects China will continue to lead in electrification, followed by North America and India, while increased coal consumption will be driven by heavy industry in ASEAN countries and China.
Policy makers around the world have increased emphasis on energy independence, leading to the development of new trade relationships, according to McKinsey.
Energy affordability and security are increasingly becoming critical policy priorities, often carrying more weight in decision-making than decarbonization in some markets, according to McKinsey. Examples include the European Commission’s Clean Industrial Deal and Japan’s Seventh Strategic Energy Plan, which moves away from an earlier commitment to lessen the country’s dependence on nuclear energy, the consultancy said.
Many alternative fuels are unlikely to see wide adoption until after 2040, as a greater emphasis on affordability means that some sources, such as green hydrogen and other sustainable fuels, may not be competitive with fossil fuels in the near term, according to McKinsey.
The projected share of hydrogen in the 2050 energy mix has shrunk in recent forecasts due to cost increases and regulatory uncertainty, the consultancy said. However, green hydrogen demand is expected to grow rapidly after 2030 as sectors like transport and chemicals boost consumption.
Clean, firm power sources and renewable storage technologies are likely to expand, the consultancy said.
Nuclear energy, geothermal power, hydropower, battery storage technologies, and pumped hydroelectric energy storage are all expected to grow, although deployment at scale is still years away, according to McKinsey. These power and storage technologies will serve as important complements to intermittent renewable energy sources such as solar and wind power, the consultancy said.
McKinsey said policy makers are focused on cost competitiveness and economic pragmatism when adopting low-carbon technologies. The three most important factors driving decision making are energy affordability and reliability, including energy security at the national or regional level, and emission reduction, according to McKinsey.
