A Decade Of Change: McKinsey’s 2025 Outlook On A Pragmatic Global Energy Transition

This year marks the tenth anniversary of McKinsey’s Global Energy Perspective, which reflects on lessons learned from the past decade and outlines the key themes shaping the next phase of the global energy transition. The 2025 edition emphasizes that cost competitiveness and economic practicality will continue to define the pace of change. Affordability, reliability, and emission reduction remain the three main priorities driving global energy decisions. However, the report warns that without making clean technologies affordable and bankable, large-scale adoption will remain slow, regardless of policy ambitions.

The report highlights that there is no single path to decarbonization. Each country and region will move forward based on its unique economic conditions, resource availability, and industrial priorities. The energy transition, therefore, will not be uniform. Instead, it will follow distinct and diverse trajectories shaped by local realities and geopolitical contexts.

McKinsey notes that unforeseen developments continue to influence the energy landscape every year. Breakthroughs in solar and wind technologies, as well as innovations like artificial intelligence, are driving unexpected changes, including a rapid rise in electricity demand. Yet, despite progress, global emissions reached record highs last year, widening the gap between current trends and the 1.5°C target set by the Paris Agreement. According to the report’s projections, global temperatures could rise by 1.9°C under the Sustainable Transformation scenario, 2.3°C under Continued Momentum, and 2.7°C under Slow Evolution by the year 2100. These numbers are slightly higher than previous forecasts, showing that the global transition toward clean energy is not moving fast enough.

Fossil fuels are expected to retain a significant share of the global energy mix beyond 2050. While demand for coal may remain higher than previously estimated, natural gas will likely experience growth due to its role in replacing higher-emission fuels. McKinsey expects global fossil fuel demand to plateau between 2030 and 2035 under its Continued Momentum scenario.

The report also finds that key alternative fuels, such as green hydrogen and other sustainable options, may not become widely competitive until after 2040 unless supported by strong policy mandates. The focus on affordability continues to delay their adoption. Regional differences will also shape energy outcomes. China is likely to remain the leader in electrification, followed by North America and India.

Global power demand is projected to rise steadily, driven by electrification and the growing use of data centers, especially in the United States, Europe, and China. Emerging markets will continue to see growth in traditional electricity consumption from buildings and industries, while Europe’s demand will increasingly come from the transport sector.

Variable renewable energy sources, such as solar and wind, combined with gas-powered generation, are expected to dominate new capacity additions. Clean, firm power sources like nuclear, geothermal, and hydropower, along with storage technologies such as batteries and pumped hydro, will also play an expanding role.

Finally, McKinsey emphasizes that adopting a system-wide approach could enable faster and more cost-effective emission reductions. Redirecting investment toward sectors beyond power generation could deliver greater impact without significantly compromising global temperature targets.

A decade after its first publication, the Global Energy Perspective finds that while urgency around climate action remains, achieving the Paris goals has become more complex. Economic and geopolitical realities continue to shape decisions, and global emissions are still rising. Yet, with resilience and agility, energy leaders can still guide the world toward a more sustainable and balanced energy future.