Where energy markets stop making sense

The world fights climate change and reduces greenhouse gas emissions. Renewables could tripple their market share by 2040 but the majority of electricity is still produced using coal and gas. Neither does nuclear power seem an option.

Information compiled by “Looking Ahead: The 50 Global Trends That Matter”, an annual compendium of data and graphics on a diverse set of subjects, draws a picture of disruption and contradiction for the global energy market in 2040. Looking Ahead is produced by an independent think tank and simply lays out the best available information from a wide variety of sources without commenting it.

For the energy market, the report predicts that in 2040, the majority of electricity will still be produced using fossile resources. Still, in attempts to reduce greenhouse emissions associated with climate change, the market share of renewable energy sources could tripple.

The increasing usage of renewables is not just an issue for rich economies. In members of the OECD, renewable energy grows by 4.6 percent per year. Outside of OECD countries, the growth is even steeper with 7.4 percent. In 25 years, 43 percent of Africa’s new power plants, 48 percent of Asia’s and 63 percent of Latin America’s will create energy using renewable sources. 

But besides the boom in renewable energy, the sector’s total share is estimated to account for only 17 percent of total energy production in 2014. Coal and natural gas will still hold a market share of 31 percent and 24 percent respectively as they will continue to be an inexpensive and reliable source for power.

Yet another contradiction outlined in the report is the low market share of nuclear power. Although it being the only emission free method of power generation that is available as needed, it’s market share will remain at about 12 percent over the next quarter of a century. Fusion remains a promising method as it is more effective than fission and produces no nuclear waste. But despite the opening of further test plants, the technology’s viability is still questions. Whether nuclear fusion will ever be a ready to be used for power generation is questions by the report as the concept is known and worked since the 1950s - always with the promise to be ready for usage soon.

Please find the brief summary about the reports finding for the energy market on mckinsey.com.