Technological advances are changing supply as well as demand dynamics in the energy and resource sector. By raising productivity and increasing energy efficiency the technological progress will continue to push the global economy.
Energy consumption is becoming less intense as energy is used more efficiently in homes, businesses, and for transportation. A report from the McKinsey Global Institute published this week titled “Beyond the supercycle: How technology is reshaping resources,” estimates that renewables could climb from 4% of global power generation today to as much as 36% by 2035. But how could renewables reshape the global electricity markets?
New and improved technologies will continue to bring down cost of renewables, as well as the cost of storing them. Hence, giving renewables a more important role in the global economy’s energy mix. Resource producers will be able to deploy a range of technologies including robotics, Internet of Things, and data analytics in their operations increasing their productivity.
Even though technological advances are driving these developments, the rapid growth of renewables is part of a bigger trend of rising global energy productivity. Increased energy efficiency in residential, industrial, and commercial buildings, and lower demand for energy in transportation, as well as falling costs and the growing market share of renewables is transforming the way people consume energy.
But there certainly are regional differences. The US, China, and India for example are major consumers of oil. But all of these counties will develop differently in the future. While the demand in China and India is likely to continue growing strongly (due to their rapidly emerging middles class), it could slow down considerably in the US based on increased energy efficiency.
The wrenching decline in oil and gas prices, beginning in 2008, changed the outlook for the global economy. And it is very likely that it will have a major impact on resource consumption in the years ahead.
A global turning point could be reached as soon as 2025, when renewables (such as solar PV and wind power) could become competitive with the marginal cost of natural gas and coal production. Growth rates in renewable power deployment would very likely accelerate after that point.
One of the big issues for renewables is the technical limits of intermittent power in the grid. Hence, the energy produced will need to be stored. But this is a challenge that can be overcome. A number of promising technologies are being developed to store energy in a cost-effective manner already, and technological developments tend to outperform expectations.