The energy sector stands to save up to $1.6 trillion by 2035, with accelerating use of technology in the sector, according to McKinsey Global Institute's latest report.
Of the total savings, at least two-thirds is derived from reduced demand for energy as a result of greater energy efficiency, while the remaining one-third comes from productivity savings captured by resource producers, the report says.
"Reduced energy demand from transportation, the proliferation of energy efficiency measures, and increased substitution of fossil fuels enabled by cost reductions in renewables could account for as much as $1.2 trillion of the total savings in an accelerated technology adoption scenario," the report estimates.
On the producer side, savings could amount up to $400 billion in 2035.
Technological advances will help bring down the cost of renewable energies, increase efficiency, raise productivity and reduce energy demand, the report forecasts.
With larger integration of technology into the energy sector, consumption of energy will become less intense as people use energy more efficiently in their homes and work spaces.
Transportation, the largest user of oil, will especially be affected, according to the report. Technological advancement such as more fuel-efficient engines, electric vehicles, and autonomous use of cars will lower demand for oil in the transport sector by 4.5 million barrels per day by 2035.
ƒGlobal oil demand will peak in 2025 and drop by 2 percent in 2035.
The cost of renewable energies will come down with technological advances , as well as the cost of storing them, the report says.
"This will hand renewables a greater role in the global economy’s energy mix, with significant first and second order effects on producers and consumers of fossil fuels," according to the report.
Renewables will partially displace fossil fuels in the future, and its share in electricity production will increase to 36 percent by 2035.ƒ
In 2020, coal will reach peak demand, "as China pushes renewables to displace it in the power sector and natural gas advances with cost reduction and supply increases."
Coal demand will drop by 24 percent in 2035. As efficiency and clean energy are more favored, natural gas demand will face strict competition and only rise by 1 percent in 2035.
While technology takes a larger role in the energy sector, sources which were previously inaccessible or expensive will become cheap and accessible.
"Resource producers will be able to deploy a range of technologies in their operations, putting mines and wells that were once inaccessible within reach, raising the efficiency of extraction techniques, shifting to predictive maintenance, and using sophisticated data analysis to identify, extract, and manage resources," the report says.
As a result of lower energy intensity and technological advances that improve efficiency, energy productivity in the global economy will rise up to 40 to 70 percent in 2035.
(Anadolu Agency)
