Does McKinsey's forecast take physical reality into account?

McKinsey, one of the world's most renowned strategy consulting firms, has just published its report on foresight on the Global Energy Situation by 2050 : Global Energy Perspective 2019. This publication, intended for an audience of business leaders, was preceded by a very thorough work:

• The level of detail in the analysis—covering 146 countries, 30 sectors, and 55 types of energy—is exemplary
• The network of experts we draw upon is vast, international, and multisectoral
• The musical score for the storytelling is exceptionally fluid and powerful

Nevertheless, this exercise ignores from consistency checks intended to verify that the proposed change of the energy model remains physically possible. Like many economic forecasters, McKinsey assumes that past trends in prices will continue. This makes it possible to pinpoint the moment when the electric vehicle will be more competitive than a gasoline-powered vehicle, or the point at which the energy sources renewable will be cheaper than fossil fuels. Their penetration speed in the market is then deduced from this, and this loops back to a vision of a economy in growth which extends the history. Unfortunately, the foundation of the system underlying physics is not never questioned : these developments, which require flow matter and energy withoutcroissants on a finite planet, would necessarily have to be confronted with the physical limits known to the system. For example, McKinsey arrives at the following scenario for the energy landscape in 2050:

Energy limit

McKinsey thus forecasts that global oil and gas consumption in 2050 will be virtually the same as it is today. A brief case study on oil: given that the peak conventional oil production (the one that is “easy and inexpensive to extract”) has been in 2008 [1], that the current growth of the production depends on only on the unconventional oil (shale oil in the U.S. and oil sands in Canada), and that we must 5 times more energy to extract the unconventional oil than the conventional one [2], is it physically realistic to still consider such volumes oil in 2050 ? Similarly, McKinsey’s approach does not take into account the increasing energy penalty for to have a metric ton of metal, due to the steady decline in ore grades. Take copper, for example—which is essential for the large-scale electrification advocated by the authors. We now need Twice as much energy to extract onemetric ton of this metal than it was 20 years ago [3]. And this energy intensity increases exponentially as the copper content of the ore decreases. Let's summarize. It will therefore take five times as much energy to produce a barrel of unconventional oil, which will yield half as much copper, that is, 10 times more energy per metric ton of copper mined than 20 years ago, from the perspective of the physical-thermal-industrial system [4]. Looking at our production from a physical perspective reveals numerous other examples where declines in the quality of residual resources rapidly increase the energy required to access them. How, then, can we be sure that the a doubling of electricity demand the scenario projected by McKinsey for 2050—which relies on copper—is compatible with a ever-increasing energy intensity of extraction ?

Global Warming

Another obvious conclusion from this scenario is a global warming of approximately +3°C on average worldwide by the end of the century compared to preindustrial levels [5]. However, science now provides more precise information on some of the consequences: virtually No more coral at +1.5°C, 100 million additional climate migrants at +2°C, and above 2°C, we will likely set in motion the breakup of the West Antarctic Ice Sheet, leading to nearly An additional 10 meters of water for the world's oceans within a few centuries [6][7].

Toward a forward-looking approach that takes physical limits into account

McKinsey's Future Scenario, very simply titled “Reference Case,” is therefore probably not compatible with physical limits from our Earth system : limited resources that require ever-increasing amounts of energy to extract, and our environment’s finite capacity to “absorb” the waste generated by our economic activities … We should also ensure that the current global material flows – on which this study is based – may continue from grow "Business as Usual" when, at the same time, some millions of workers will flee some regions have become uninhabitable and that the agricultural yields and energy prices will fall. In short, a script including the physical consistency has not not summer verified cannot not to be considered as having a predictive value. So it is in incorporating explicitly these limits that we will restore all their letter of nobility at the strategy. It is this challenge has much greater future potential that we offer to our customers ! The more time passes, the less the Resilient business models of the future may be designed using approaches that assume economic trends will continue, without having assessed the physical factors underlying these trends! See also our publication Business Strategy in (and for) a Decarbonized WorldSources:

• McKinsey Publication
• [1] International Energy Agency, World Energy Outlook, 2018
• [2] EROI of different fuels and the implications for society, C. Hall, J. Lambert, S. Balogh, *Energy Policy* 64, 2014
• [3] ADEME, Copper Alliance, C4 Analyses
• [4] If we consider the physical-thermal-industrial system as a whole, 10 times more energy must be input; if we consider all the energy required, 3 times more is needed.
• [5] C4 analyses: 1,250 GtCO2 emitted between 2017 and 2050 and 1,150 GtCO2 emitted between 2050 and 2100, following a downward trend that reaches 0 EJ of coal by 2100, 60 EJ of natural gas, and 100 EJ of oil.
• [6] De Conto et al., Nature, 2016
• [7] Global Warming of 1.5°C, IPCC, 2018