+ All Categories
Home > Documents > The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights;...

The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights;...

Date post: 19-Mar-2020
Category:
Upload: others
View: 24 times
Download: 2 times
Share this document with a friend
38
The future energy landscape Global trends and a closer look at the Netherlands CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited Occo Roelofsen June 2017 Presentation to Dutch Financial sector, Rotterdam
Transcript
Page 1: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

The future energy landscapeGlobal trends and a closer look at the

Netherlands

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company

is strictly prohibited

Occo Roelofsen

June 2017

Presentation to Dutch Financial sector, Rotterdam

Page 2: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

2McKinsey & Company

PV auctions ~50% price drop

29.129.9

35.4

48.0

58.4 -50%

Aug 2016:

Solarpack

May 2016:

Masdar/FRV

Jan 2015:

ACWA

Mar 2016: EnelFeb 2015: Enel

200

MW

144

MW

427

MW

800

MW

120

MW

LCOE, USD/MWh

Lowest

winning

solar

PV bids

Page 3: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

3McKinsey & Company

Onshore wind -45%

30

37

44

48

51

55

2016: EGP/GR

Paino/

GR Taruca

2016: Various

bidders, incl.

WPD

2015: Various

bidders

-45%

2016: Various

bidders

2016: Various

bidders,

incl. Enel

2015: Neoen

100

MW

90

MW

986

MW

620

MW

162

MW

850

MW

LCOE, USD/MWh

Winning

onshore

wind bids

Page 4: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

4McKinsey & Company

… and offshore wind tenders have dropped by over 60%

5054

64

73

103

Borssele

3+4

(Dec’16)

Borssele

1+2 (Jul’16)

>60%

DNS

Vesterhav

Nord/Syd

(Sep’16)

Horns Rev 3

(Feb’15)

East Anglia

One/Neart na

Gaoithe (Feb’15)

Danish Kriegers

Flak (Nov ’16)

~ 135

Offshore

wind

tenders

have

dropped

~60%

LCOE, EUR/MWh

Page 5: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

5McKinsey & Company

269

600

300

800

400

100

700

500

200

02010 15 2520 2030

Battery priceUSD/kWh

SOURCE: Expert interview, SNE research, Navigant, Avicenne Energy, Berstein

Source of insight , Unit: $/kWh (Pack cost)

McKinsey BreakthroughMcKinsey Base case

120

100-120

150

170

190

2020 estimates 2025 estimates

125-140

70-85

100

N/A

135

2010 outlook 2015/2016 outlook

93

53

190

269

135

112

And Battery costs continue to fall, faster than expected

Page 6: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

6McKinsey & Company

Investments in the energy system are shifting

16-35

Oil & Gas

06-15

Other

Page 7: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

7McKinsey & Company

Are we going back to the ‘normal’ levels for resource cost?

Resource expenditures as share of global GDP, Percent

0

7

3

1

5

6

4

2

1910 20001900 1980 ‘101960195019301920 19901940 ‘151970

Iron ore

Crude oil CopperThermal coal

Natural gas

Page 8: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

8McKinsey & Company

Economic profit evolution of upstream

O&G, 1995-2015, % per annum

Quintiles

40

100

-20

80

60

0

20

Upstream

Oil and

Gas

15

0

20

10

25

5

05 201520001995 10

11

Economic profit per year, 1995-2015

$Bn, per annum

High Tech

PharmaceuticalsAirlines

Power

Economic profits in Upstream oil and gas

Page 9: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

9McKinsey & Company

After 4 years of bleeding cash, consensus is that the Majors will have cash

available for discretionary spending in 2017

SOURCE: CapitalIQ, team analysis

“Committed” cash flow for Majors1,2, USD billion

1 Including Exxon, Shell, Chevron, Total and BP; 2 Cash flow from operations split in uses - capex and dividend payments which are defined as committed usages; cash flow source/ usage

excludes Acquisition/ sale, change in debt balance, equity issuance, share repurchases, other investing/ financing and forex activities; 3 Cash flow from operations, capex based on analyst

consensus, dividends are grown at 5% each year from 2016 levels

29229

-49-48-13-36

6

18F14 1615 2019F17E132012

Operating

cash flow

Capex

Dividends

Discretionary

spending

16815613880

117179170190

95928991126149167147

4341393839423836

Page 10: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

10McKinsey & Company

Post-tax ROIC1

Percent

However, fundamental upstream performance remains weakBreakdown of upstream returns on invested capital 2010-2016

UPSTREAM

1 ROIC based on year end IC; based on SEC O&G reporting; Invested capital based on reported capitalised costs 2 Based on net production

3 Based on reported proved reserves 4 Based on year end reserve by production ratio

Source: Company filings; Team analysis

NOPLAT margin2

$/boe

Invested capital/Reserves3

$/boe

Invested capital/Production2

$/boe

Reserves/Production (R/P)4

Ratio

2 SOURCES OF VALUATION GAP

12

911

13

1817

12 13 20161514112010

12

141416

18

14

151412112010 13 2016

145145146133

122101

84

201615112010 1412 13

12.211.710.8

10.19.47.9

6.9

152010 1211 20161413

12.312.913.913.613.113.012.4

13 201615142010 11 12

Page 11: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

11McKinsey & Company

The 3 trends shaping the energycompany of the future

1

2

3

‘The shifting energy landscape’

Lower for longer for oil, gas, power prices as a base case?

A closer look at the Netherlands

11McKinsey & Company

Page 12: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

12McKinsey & Company

Our latest outlook is lower than “base case”-like views

SOURCE: IEA World Energy Outlook 2015; Shell New Lens Scenarios 2013; Greenpeace Energy Outlook 2015, ExxonMobil Energy Outlook 2015

Primary energy demand

Index, 2014 = 100

CAGR

2014-2040

1.5 Shell Oceans

1.4 Shell Mountains

1.4 IEA Current Policies

0.8 McK BaU (Q4 ’16)

1.0 ExxonMobil

1.0 IEA New Policies

1.5 Greenpeace Reference

0.3 IEA 450

-0.1 Greenpeace Revolution

Scenario

Page 13: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

13McKinsey & Company

We see structural shifts in fundamental energy demand drivers

Overall GDP growth is depressed

G19 and Nigeria GDP CAGR; %

Structure of GDP shifts towards

services

Services as % of GDP

The growth is becoming

increasingly energy-efficient

Liters/kilometer for passenger cars

Page 14: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

14McKinsey & Company

The energy mix remains reliant on fossil fuels despite the rapid growth of

non-fossil sources

BAU SCENARIO

SOURCE: McKinsey Energy Insights’ Energy Demand Intelligence, Business As Usual Scenario, 1Q2017

82%

17%

1%

73%

22%

5%

Primary energy demand by energy source

Million terajoules

Share

2014 2050

Page 15: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

15McKinsey & Company

Among fossil fuels, gas is a relative winner and oil demand remains resilient,

however coal use peaks around 2025

BAU SCENARIO

Peak in global

coal use

Primary energy demand by energy source

Million terajoules

1.1%

0.4%

-0.2%

0.8%

1.9%

CAGR

2014-50

SOURCE: McKinsey Energy Insights’ Energy Demand Intelligence, Business As Usual Scenario, 1Q2017

Page 16: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

16McKinsey & Company

Chemicals drive almost 60% of liquids demand growth through 2035, while

light vehicles and power demand declines

BAU SCENARIO

Other

Asia &

OceaniaChina India

Aviation

Other

transport

Other

industry

Chemicals

2014-2035

Δ5.6 4.6

Total

Residential/

Commercial

Light

vehicles

Power

2014-2035

ΔTotal

Russia

& CIS Europe

North

America

Latin

America

Middle

East

2.9

0.6

0.6

7.2

12.90.51.6 -1.8 -1.81.70.9 1.6

0.8

-0.6

-1.8

Africa

3.1Heavy

vehicles

5.1 17.6 12.8 19.9 10.9 16.6 8.5 9.5 5.3

8.6

6.1

15.3

19.4

105.8

8.9

24.9

4.3

18.6

5.7

5.5

14.7

12.2

93.2

8.1

25.6

6.1

15.5

11.0 3.8 21.714.64.69.215.93.78.6

Δ< -0.1 mb/d

Δ > 1 mb/d Δ-0.05 - -0.1 mb/d

Δ 0.5 - 1 mb/d2035

2014 Δ 0.05-0.5 mb/d

-0.05<Δ<0.05 mb/d

Primary liquids demand

Million barrels per day

SOURCE: McKinsey Energy Insights’ Energy Demand Intelligence, Business As Usual Scenario, 1Q2017

Page 17: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

17McKinsey & Company

Could peak crude demand be in sight?

BAU SCENARIO

Liquids demand by product

Million barrels per day

SOURCE: McKinsey Energy Insights’ Energy Demand Intelligence, Business As Usual Scenario, 1Q2017

Page 18: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

18McKinsey & Company

The Thought experiment: technology disruption

TECH DISRUPTION

Energy use is optimized by

IOT and smart devices

Mobility electrifies and

becomes more efficient

The power sector is

transformed by renewables

Page 19: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

19McKinsey & Company

The assumptions in the Tech Scenario

TECH DISRUPTION

SOURCE: McKinsey Energy Insights’ Energy Demand Intelligence

Thought experiment assumptions

2035

Global average efficiency improvement by

sector in 2035 % savings relative to 2014

Industry

Residential

buildings

Global power generation by source

% of total

EV adoption in 2035,

% new car sales

Car-sharing in 2035,

% total car fleet

L4 AVs in 2035,

% new car sales

Trucks fuel

economy gain,

2014-35, % p.a.

Aviation fuel

economy gain,

2014-35, % p.a.

Global mobility

Page 20: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

20McKinsey & Company

The technology disruptions significantly reduce energy demand

SOURCE: McKinsey Energy Insights’ Energy Demand Intelligence; IEA World Energy Outlook 2015

TECH DISRUPTION

Global primary energy demand by energy

source, Million TJ

Global final energy consumption by end-use

sector, Million TJ

Global energy-related emissions

Gt CO2-equivalent

2013 2035

BAU TECH

2025

BAU TECH

2 ⁰C

3.6 ⁰C-9%

-8%

-12%

Page 21: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

21McKinsey & Company

Such a scenario would accelerate peak oil (not just crude) demand

Million barrels/day

-3,3

2025

97,5

Disruption

due to

Chemicals

and Electric

Vehicles

BaU

2,2

97,3

-2,4

Disruption

due to

Chemicals

and Electric

Vehicles

2035

94,1

6,7

2015 BaU

Page 22: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

22McKinsey & Company

Technology acceleration leads to tipping point around 2025 for oil and gas

Last M

odifie

dP

rinte

d

6McKinsey & CompanySOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis

Primary energy demand could peak in 2025 as a result of efficiency

improvements, changes in the transport sector, and the shift to renewables

577

10118

606

473

18

85

427

30

2030

14 28

493

2035

29

69

2013

58

462

17

615

76

600

488

16

561

27

2025

30

2020

Total primary energy demand

Million terajoules

640

516

30

2030

95

33 3519

524

2035

529

85

680

21

1458

462

27

661

61277

16

68

2013 2020

17

500

28

2025

561

NuclearHydroRenewables1 Fossil fuels

Moderate case scenario2 Tech acceleration scenario2

1 Includes biomass and geothermal as well as solar and wind.

2 Both scenarios assume annual average global GDP growth of 2.7%.

NOTE: Numbers may not sum due to rounding.

+1.1% p.a.

+0.6% p.a.

+0.8% p.a. -0.6% p.a.

Last M

odifie

dP

rinte

d

7McKinsey & CompanySOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis

Oil demand

Million terajoules

Oil demand could peak by 2025 under a tech acceleration scenario,

although demand would continue to grow with moderate adoption

2013

179

91

79

99

89

2020

183

105

84

2035

106

73

2025

184176

107

179

68

-2%

2030

Tech acceleration scenario

2020

91

195

89

179190

103

84

2013

111

87

2030

122

80 77

+11%196 198

2025

116

2035

Moderate tech scenario

OECDNon-OECD

NOTE: Numbers may not sum due to rounding.

Last M

odifie

dP

rinte

d

8McKinsey & CompanySOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis

Natural gas demand would remain flat vs. 2013 demand under a tech

acceleration scenario, but grow rapidly under the moderate adoption caseGlobal primary natural gas demand

Million terajoules

134

121

2035

50

+1%

71

2030

63

57

120

79

2020

131

5559

7972

60

2013 2025

139

Tech acceleration scenarioModerate tech scenario

Non-OECD OECD

63

57

+39%

66

2030

68

98

158167

203520252020

145

9283

134

74

60

120

2013

63

NOTE: Numbers may not sum due to rounding.

Last M

odifie

dP

rinte

d

9McKinsey & CompanySOURCE: McKinsey Energy Insights; World energy outlook 2016, IEA; McKinsey Global Institute analysis

In both our technology adoption scenarios, greenhouse gas emissions will

not meet international reduction targetsGreenhouse gas emissions by scenario

Gigatonnes CO2 equivalent

373734

203520252015

29

3533

20352015 2025

22

2832

2015 20352025

Moderate case

Emissions continue to grow until

2035

Tech acceleration case

Emissions peak in 2025

450 ppm scenario1

Emissions drop resulting in 450 ppm

atmospheric CO2 by 2035

1 This chart has been adapted from IEA data about the levels of CO2 from greenhouse gases required to limit global temperature in 2100 to two degrees

Celsius above pre-industrial levels. We took IEA data for 2020, 2030, and 2040 and interpolated midpoints assuming a linear trajectory.

Primary energy demand to peak by 2025 …peak oil by 2025…

…and even gas demand decline by 2025… …even whilst CO2 targets are not being

met.

Page 23: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

23McKinsey & Company

The 3 trends shaping the energycompany of the future

1

3

‘The shifting energy landscape’

Lower for longer for oil, gas, power prices as a base case?

A closer look at the Netherlands

23McKinsey & Company

2

Page 24: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

24McKinsey & Company

Recent years have been focused on survive

1.5

-53%

0.2

0.6

0.8

2013

Government take

3.2

2016

Cost (CAPEX + OPEX)

Cash profit 0.6

1.6

1.0

Decline in oil industry revenue

USD Trillion

-25%

-64%

-73%

Page 25: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

25McKinsey & Company

Several oil price scenarios –

Price recovery case example

97.8

2014

98.3

20182016

98.8

97.2

20192015

96.797.0

20202017

93.8

Demand

Production

Inventories1

SOURCE: Energy Insights by McKinsey

99

Brent oil price,

USD/bbl

X

52 43 50-55 65-7055-60

Market switches to

undersupply by Q3 2017

SHORT-TERM

65-70

Lack of upstream investment

accelerates legacy declines

affecting supply stack to 2020

Existing inventories keep the

market well-supplied and put

downward pressure on prices

OPEC plays a role as the

balancing actor

LTO production returns to strong

growth by 2020

Cost compression of 30-40% is

partially maintained in short term

Flattened global economic growth

leads to slow down in oil demand

Global oil market balance – price recovery scenario

MMb/d What you need to believe

Page 26: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

26McKinsey & Company

High drilling activity growth in LTO plays was complemented by increased

drilling and completion efficiency

SOURCE: Baker Hughes, Energy Insights

1,1961,001951

658 82%

1412 132011

# of rigs

Kb/d1 per rig, annual average

264%

12

2.00

2011

2.95

1.08

13 14

3.94

New production from rig count increase

Production from existing wells

New production from efficiency gainsMb/d

North America Horizontal Rigs North America LTO Production

New Production per Rig

xx p.a. growth, Mb/d

0.9 0.95 1.0

1 Rig productivity includes two factors: rig efficiency as number of wells per year per rig, and well productivity as production per well

2.22.1

1.61.2

2014

82%

12 132011

Page 27: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

27McKinsey & Company

Following near term growth, we expect US LTO production to remain

economically competitive, but plateau due to resource constraints

SOURCE: Energy Insights, NavPort

LTO is projected to remain competitive in the global supply curve through 2030…

…However, production is likely to plateau post 2021 as Eagle Ford and Bakken resource

becomes constrained

1

2

MMb/d

Forecast

PRICE RECOVERY

Near-term recovery

and growth

Longer-term plateau in LTO production

US light tight oil production outlook

Page 28: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

28McKinsey & Company

The 3 trends shaping the energycompany of the future

1

2

3

‘The shifting energy landscape’

Lower for longer for oil, gas, power prices as a base case?

A closer look at the Netherlands

28McKinsey & Company

Page 29: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

29

0

60

50

70

90

100

80

110

10

30

40

20

2040 2050203020202010 ‘1420001990

To achieve EU 2050 ambition of GHG emission reduction of 80 percent, the

Netherlands would need to accelerate with factor 3

SOURCE: CBS

-40% -80%-20% -60%-16%

‘15

CO2 equivalent emission, % change as of 1990

11

179

2240.7%./yr

45

87

134

2%/yr = 3x

196

187

Page 30: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

30

Until now, most of the GHG emission reduction was realized through

reductions in non-CO2 emissions

SOURCE: CBS – Emissieregistratie (1990 – 2014)

14

10

8

14149 163CO2

HFK/PFK/

SF610

N2O 18

CH4 33

Reduction 1990-2014

Emissions from (industrial) processes 2014

Focus today

43%

56%

75%

9%

CO2 equivalent emission, MTon

Page 31: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

31

Our current energy system

Trans-

port

Industrial

energy use

Power sectorAgri,

Fishing,

& other

Residential &

commercial

Renewables

Gas

Oil

Coal

Nuclear

37 22 30 9 51 149 Mton

SOURCE: Centraal Bureau voor de Statistiek (2014), “Energiebalans” and “Energieverbruik” databases

Power &

Heat

CO2 emissions, 2014, CO2e, MTon

Page 32: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

An investment of ~ EUR 135 billion is required to decrease and decarbonize

the energy demand of the Dutch economy towards 2040

Magnitude of investment,

EUR billions

Transport

Residential

&

Commercial

Industry

ShipsTrucks

30

Light duty vehicles

Busses

Insulation

Fuel switch

85

20

Energy demand by energy

carrier, PJ

LPG

Electricity-40%

260

Liquids

Biofuel

Hydrogen

2040Current

438

-35%Other

688

455

2040Current

Electricity

GasGeo-

thermal/DH

Heat

pumps

Biogas

Oil

RES

675Electricity

Other-20%

Gas

Coal

840

Current 2040

Scale of measure - assumptions

▪ All houses and services buildings are insulated to at least Label B

▪ Half of the current building stock and all of new built switches to a low carbon energy source

▪ Electricity becomes the principle heating source (54%), followed by (geothermal) district heating (28%), and biogas (18%)

▪ Cooking becomes electric for 82% of the houses that switch heating source

▪ Efficiency improvements of ~1% p.a.1

▪ By 2040, 50% of the vehicle fleet reaches zero CO2

emissions▪ Conventional ICE vehicles are replaced at end of life▪ All vehicles will be BEV except trucks, which will

switch to hydrogen▪ Efficiency improvements of ~1% p.a.1

▪ 50% of gas furnaces and boilers replaced by electric furnaces and boilers

▪ 50% of steel production capacity (one Blast Furnace) decarbonized

▪ Efficiency improvements of ~1% p.a.1

1 Efficiency improvements only affect share of energy use (and thus CO2 emissions) that are not impacted by other measures

Page 33: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

33

Power sector: “80% renewable power supply” by 2040 would be needed

illustrative scenario, other choices also possible

1 45% capacity factor, turbines of 3 GW 2 1.65 m2 per solar panel, 235 kW 3 17 MJ/kg biomass, 2 ktons/km2

Wind

62% of

production

Solar

12% of

production

Biomass

8%

~63 million solar panels2

▪ Third of current roof area

8,500 kton dry biomass3

▪ Conversion of existing coal

plants to biomass

~11 thousand turbines1

▪ 6% of Dutch North Sea

Flexibility

measures

▪ As illustration, 5 GW of

(seasonal) storage

Other choices would also be

possible, e.g. with larger role

for (coal/gas) CCS, imports

Page 34: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

34

Energy sources Sectors

1,114

709

377

136

77

53

160

840

315

373

438

In 2014 the energy system is largely dependent on fossil fuels

Netherlands energy demand in 2014; flow between energy sources and sectors, PJ

1 Includes: hydro, geothermal, solar, wind, and biomass2 Only includes net use for central power production (320 PJ) and transmission and distribution losses (23 PJ); energy sector own use (e.g., oil consumption in refining is included in industry)

Source: Centraal Bureau voor de Statistiek (2014), “Energiebalans” and “Energieverbruik” databases

Natural gas

Oil

Coal

Renew-ables1

Other

Electricity(net import)

Agriculture, fishing & other

Industry

Commercial

Residential

Transport

Power sector2

343 (net)

Page 35: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

35

Energy sources Sectors

Source: Centraal Bureau voor de Statistiek (2014), “Energiebalans” and “Energieverbruik” databases

Natural gas

Oil

Coal

Renew-ables1

Other

Electricity(net import)

Agriculture, fishing & other

Industry

Commercial

Residential

Transport

Power sector2

In 2040,the energy system would look and function very differently

Netherlands energy demand in 2040; flow between energy sources and sectors, PJ

1 Includes: hydro, geothermal, solar, wind, biomass, and hydrogen2 Includes net biomass use (94 PJ), gas use (111 PJ) and own use and transmission and distribution losses

Page 36: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

36McKinsey & Company

An annual investment of ~EUR 10 billion would be needed to move towards a 60% CO2 reduction by 2040

85

30

Transport

45

Estimate investment need to adjust demand

Networkand connection costs

20

135

Industry Total additional investment

Residential and Commercial

20

200

RES build out (excluding grid)

~10 EUR billion/ year or ~3%

of annualbudget

Indicative net investment need, EUR billions, 2020 to 2040

Demand System and Generation

Page 37: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

37

What could be new economic ‘sectors’ for the Netherlands?

Sustainable building heating – Climate control systems and residential energy management

Heavy industry transformation and CCS/U – Alternative feedstock configurations with innovative processes and technologies

Offshore wind – programmatic wind build out capturing benefits of scale

Integrating renewables with the energy system- Integrating renewables (conversion – storage – transport)

‘New’ transport – Novel solutions to improve urban transport

Page 38: The future energy landscape · SOURCE: Global energy perspective, McKinsey Energy Insights; McKinsey Global Institute analysis McKinsey & Company 8 Natural gas demand would remain

38McKinsey & Company

Potential job creation: the long-term impact comes from new sectors

2020 >2050

Operations and maintenance>20,000 jobs2

Installation >45,000 jobs1

“Realization of new sectors”


Recommended