The new one McKinsey Technology Trends Outlook 2022 revealed that clean energy technology, with a $257 billion investment in 2021, leads the way in investments when compared to the 14 most important technology trends affecting the world today.
McKinsey Technology Council experts found that clean energy technology, which will drive zero-carbon solutions and reduce greenhouse gas emissions, could see investments of up to $1,500. $5 trillion by 2035. Clean energy dominates all sectors including, mobile at $236 billion, artificial intelligence (AI) at $165 billion, 5G and 6G at $166 billion dollars, Web3.0 at $110 billion and metaverse technology at $30 billion.
But what clean energy technologies are driving this massive wave of global investment? What challenges does the industry face? And where will it go?
Clean Energy: Rapid Energy Development
Energy is the backbone of our global society. By 2022, as world leaders pledge to reduce carbon emissions, the energy sector is rapidly evolving from fossil fuels and non-renewables to new green energy sources.
The clean energy technology sector focuses on the design, development and operation of new energy solutions that help achieve net-zero global emissions. These solutions must be implemented across the entire energy chain, from power generation to storage and distribution.
Inside Climate News reported on September 1, 2022, that the energy transition is happening rapidly. In the state of California, regulators passed new regulations banning the sale of new gasoline-powered vehicles by 2035. California historically sets the precedent for laws then passed by other states.
Washington, Massachusetts, Virginia and twelve other states, including Colorado, Connecticut, Maryland, New Jersey, New Mexico, Pennsylvania and New York, are expected to implement California’s version of the new law.
McKinsey says environmental regulations have increased by 20% in the US, China and Europe in less than two years. The pressure to drive this energy transition now lies with the development of solar, wind, nuclear, ocean and other alternative energy sources such as nuclear fusion. In addition, energy storage and distribution have become important areas.
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Energy grid and energy storage technology
The latest McKinsey report ensures that 84% of global electricity demand can be met by renewable energy projects by 2050. Solar is expected to provide 60% while power wind will account for 24%.
The aviation, shipping and heavy cargo industries are also turning to sustainable fuels such as hydrogen. On the other hand, the grid that distributes electricity to households, businesses, organizations and industries around the world is not prepared for the clean energy transition and requires major modifications.
An AI smart grid management system that can balance the supply and demand of the energy grid is under development to avoid power outages and network outages and ensure a constant flow of energy. But, the main problem of green energy distribution is energy storage.
Solar and wind energy are intermittent power generation technologies. Their power generation is reduced when the wind is not blowing and when the sun is not shining. Storing excess energy is the solution.
However, electricity cannot be stored, but must be converted into another force for later use. Battery technology has proven to be efficient, but building batteries for large-scale energy storage plants is expensive.
Hydroelectric pumps are the current leading system in the US for energy storage. Pumped-storage hydroelectricity (PSH) works like a giant battery because it can store energy and then release it when needed, Energy saving and renewable energy office of the US government explained.
The Hydropower market report in 2021 revealed that PSH accounts for 93% of total utility-scale energy storage in the US. The country has 43 PSH plants and the potential to double capacity by adding new plants.
These large-scale technology projects act like a dam and a reservoir. They pump water upstream when there is excess energy and release it to flow through turbines to generate power when needed.
Other energy storage systems gaining traction include gravity-based energy storage technology. Energy Storage is one of the companies working in this new field. It builds high-tech gravity storage facilities using environmentally friendly and waste-reusable materials. The company specializes in energy storage for utilities, independent power producers and large industrial energy users.
In February 2022, the company began trading on the New York Stock Exchange. Its gravity energy storage system lifts large and heavy blocks when there is a need for energy and releases them to generate energy from dropping blocks when the demand is high.
McKinsey explains that energy storage technology is key to renewable energy adoption. Without it, the plan to scale the world’s clean energy technology to meet demand is just a pipe dream.
“Long-term energy storage technologies are expected to drive about 20 percent of renewable energy use, enabling a reduction of about 2.4 gigatons (Gt) of renewable energy,” McKinsey said. “Short-to-medium-term storage is expected to expand renewable energy penetration by 30 to 80 percent, indirectly allowing for a reduction of about 6 Gt.”
Just as power grids and storage systems need to be upgraded, the global network of gas stations faces an unprecedented growth. Hundreds of millions of electric vehicles (EVs) will require a global network of EV charging stations.
The McKinsey experts added: “The growth of battery demand in 2030 is expected to accelerate at a CAGR of 30%, driven by the electrification of mobile applications.
Innovations: Energy Technology and Challenges
The annual capacity of solar technology is expected to multiply by 8 from 2020 to 2030, and the capacity generated from wind energy technology is expected to increase by 5 times. However, both of these areas face challenges.
The wind sector is developing new technologies that can enhance the ability of projects to reach new locations where water depths are greater than or equal to 60 meters. These new offshore wind parks are innovating with floating foundations.
Norwegian startup World Wide Wind recently presented an innovative floating wind turbine technology that is expected to disrupt the field by reducing costs and scaling up production, according to reports. of the Sea Trade. And Odfjell Oceanwind is on track to achieve full DNV approval for a semi-floating deep-sea windmill design operating at water depths of 60 to 1,300 meters.
These are just two examples of some of the new wind-solar technologies that are disrupting the offshore wind industry. Wind technology is also innovating to generate more power in low-wind situations.
The solar sector is also facing various challenges, of which cost-effective production, improved stability and increased efficiency are the most notable. The cost of solar panels has come down and solar panels have become more efficient as the technology gets better and better. However, cost and efficiency are far from reaching the highest requirements of adoption.
As scientific articles published by Nature revealed, advanced solar panels can achieve 47.1% conversion efficiency. However, these are very expensive to produce and evaluate. Most solar panels on the market today only achieve 20% conversion efficiency. This means they can only be converted into energy using 20% of the solar energy hitting the solar panels per square meter.
The raw materials used to build solar panels are just as expensive and subject to disruption as other technological materials. It is these disruptions that are creating opportunities and demand bottlenecks for various clean energy sectors.
As the Russo-Ukrainian war dragged on and gas prices rose to new heights, electric vehicle manufacturers saw increased demand. And in Europe, like CNN reportedSolar installations have increased by 20% as Russia “reduces gas”.
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Another industry poised to transform energy production is nuclear fusion – not to be confused with the well-established field of nuclear fission. washington articles reported in August 2022 that scientists are just a few years away from having fully operational nuclear fusion power facilities.
Venture capital investments are pouring billions of dollars into the sector that is expected to be operational by 2030. Governments are also driving innovation that merges with incentives. In U.S.A, The Inflation Reduction Act and the Department of Energy support consolidated development with substantial rebates and tax credits.
Commonwealth Fusion, Helion Energy, General Fusion and TAE Technologies are some of the top nuclear startups testing tokamak nuclear fusion machines and racing to build stable reactors. Scientific improvements, better magnets and technological innovations are driving the new energy industry.
McKinsey experts say there is $4 billion invested in 35 nuclear fusion projects focused on solving engineering challenges. McKinsey adds that solar, wind, and nuclear uncertainties must be addressed for the trend to reach scale.
Things leaders need to pay attention to
The US Energy Information Administration revealed that there is still a long way to go before green energy sources take the lead. About 38% of electricity produced across the country in 2021 is produced by natural gas. Coal power generation is the second largest source of energy, with about 22%. Nuclear power produces 1/5 of the total energy of the United States (19% of the energy).
All renewables combined make up only about 20% of total energy, with hydroelectric plants producing 6.1%, wind 9.2% and solar only 2.8%.
McKinsey says leaders should pay attention to clean energy technology as the annual capital expenditure required to make net zero transition by 2025 amounts to $1.2 trillion for power generation, $1 trillion for the grid and $200 billion for energy storage.
In addition, the global demand for electricity is expected to grow exponentially. McKinsey has identified more than 1,000 business clean energy commitments. The number of companies by 2021 that have set science-based goals to work towards green energy goals continues to grow, accounting for a market capitalization of $23 trillion.
Leaders should pay attention to renewable energy technology, as it is set to contribute up to 84% of total global demand by 2050. Sustainable fuels, nuclear fusion, and other innovations New energy storage and distribution are places that decision makers should focus on, McKinsey said.
The sectors that will be directly affected include: metals and mining (copper, lithium and cobalt), oil and gas (hydrogen fuel production), construction and construction (infrastructure), chemicals (silicon for photovoltaic cells) and public and social fields. However, as new clean energy technologies scale rapidly, no industry or sector will be impacted by the new trend.
