The new McKinsey Technology Trends Outlook 2022 reveals that clean energy technology, with an investment of $257 billion in 2021, leads investments when compared to the 14 most significant technology trends impacting the world today.
Experts on the McKinsey Technology Council found that clean energy tech, which will drive zero-carbon solutions and mitigate greenhouse gas emissions, could see investments peak to $1.5 trillion by 2035. Clean energy overpowered all sectors including, mobility at $236 billion, artificial intelligence (AI) at $165 billion, 5G and 6G at $166 billion, Web3.0 at $110 billion and metaverse tech at $30 billion.
But what clean energy technology is driving this massive global investment wave? What challenges does the sector face? And where is it going?
Clean energy: The fast-moving energy evolution
Energy is the backbone of our global society. By 2022, as world leaders commit to reducing carbon emissions, the energy sector is rapidly evolving from fossil fuels and non-renewables to new sources of green energy.
The clean energy tech sector is focused on designing, developing and operating new energy solutions that help achieve net-zero global emissions. These solutions must be implemented across the entire energy chain, from power generation to storage and distribution.
Inside Climate News reported on Sept. 1, 2022, that the energy switch is happening fast. In the state of California, regulators adopted new rules that will ban the sale of new gasoline-powered vehicles by 2035. California historically sets precedents for laws that are later adopted by other states.
Washington, Massachusetts, Virginia and twelve other states, including Colorado, Connecticut, Maryland, New Jersey, New Mexico, Pennsylvania and New York, are expected to implement their own version of the new California law.
McKinsey says environmental regulations have increased by 20% in the U.S., China, and Europe in less than two years. The pressure to drive this energy transformation now rests on developing solar, wind, nuclear, oceanic and other alternative energy sources like nuclear fusion. Additionally, energy storage and distribution have become key sectors.
SEE: Edge and field IoT storage strategies (TechRepublic)
Energy grids and energy storage technology
McKinsey’s latest report assures that 84% of the global power demand can be met by renewable energy projects by 2050. Solar energy is expected to lead providing 60% while wind power generation will cover 24%.
The aviation, maritime shipping and heavy freight industries are also switching to sustainable fuels such as hydrogen. On the other hand, the electric grids that distribute electricity to homes, businesses, organizations and industries worldwide are not prepared for the clean energy shift and need major modifications.
AI smart grid management systems that can balance the supply and demand of an energy network are being developed to avoid blackouts and network collapses and to ensure a continual flow of energy. But, the main problem with green energy distribution is energy storage.
Solar and wind are non-continual energy generation technologies. Their generation capacity drops when winds do not blow and when the sun does not shine. Storing surplus energy is the solution.
However, electricity cannot be stored, it must be converted into another force to be saved for later use. Battery technology has proven efficient, but building batteries for large-scale energy storage plants is costly.
Hydroelectric pumping is the current leading system in the U.S. to store energy. Pumped storage hydropower (PSH) acts like a giant battery because it can store power and then release it when needed, the Office of Energy Efficiency and Renewable Energy of the U.S. government explains.
The 2021 Hydropower Market Report reveals that PSH accounts for 93% of all utility-scale energy storage in America. The country has 43 PSH plants and the potential to double capacity by adding new plants.
These large-scale technology projects work like a dam and reservoir. They pump water upstream when there is a surplus of energy and release it to flow through turbines that generate energy when there is demand.
Other energy storage systems gaining traction include gravity-based energy storage technologies. Energy Vault is one of the companies working in this new area. It builds gravity storage high-tech facilities using eco-friendly and waste-reused materials. The company specializes in energy storage for utilities, independent power producers and large industrial energy users.
In February 2022, the company began trading on the New York Stock Exchange. Its gravity energy storage systems lift large and heavy blocks when energy is in demand and release them to generate energy from the drop of the block when demand is high.
McKinsey explained that energy storage technology is the key to renewable energy adoption. Without it, the world’s plan to scale clean energy technologies to meet demands is nothing but a void dream.
“Long-duration energy storage technologies are expected to drive about 20% of renewables adoption, enabling approximately 2.4 gigatons (Gt) of renewables abatement,” McKinsey said. “Short- to mid-duration storage is expected to expand renewables penetration from 30 to 80%, indirectly enabling up to about 6 Gt of abatement.”
Just like power grids and storage systems need to be uplifted, the gasoline-global-charging station network also faces an unprecedented evolution. Hundreds of millions of electric vehicles (EVs) will require a global network of EV charging stations.
“The growth of battery demands by 2030 is expected to grow at 30% CAGR, driven by the electrification of mobility applications,” McKinsey experts added.
Innovations: Energy technology and challenges
The annual capacity of solar energy technology is expected to multiply by 8 from 2020 to 2030, and the power generated by wind energy tech is expected to grow by 5x. However, both sectors face challenges.
The wind sector is developing new technologies that would enhance the ability of projects to access new sites where water depth is greater than or equal to 60 meters. These new offshore wind parks are innovating with floating foundations.
The Norwegian startup World Wide Wind recently presented an innovative floating wind turbine technology that is expected to disrupt the sector by dropping costs and scaling production, as reported by Sea Trade. And Odfjell Oceanwind is on track toward full DNV-class approval of its deep-sea semi-floating wind foundation design that operates at water depths of 60 to 1,300 meters.
These are just two examples of the several new wind-solar technologies that are disrupting the offshore wind energy industry. Wind technology is also innovating to generate more power during low-wind scenarios.
The solar sector is also facing different challenges, with cost-efficient manufacturing, improved stability and increased performance being the most noteworthy. The cost of solar panels has been falling, and solar panels have become more efficient as technology gets better. However, cost and efficiency are far from reaching the adoption peak requirements.
As the scientific paper published by Nature reveals, advanced solar panels can achieve a 47.1% conversion efficiency. However, these are expensive to produce and rate. Most solar panels in the market today approach just 20% of conversion efficiency. This means they can only convert to usable energy 20% of the solar energy that hits the solar panel per square meter.
The raw material used to build solar panels is also expensive and can be subject to disruptions like other technology materials. These same disruptions are creating opportunities and bottleneck demands for different clean energy sectors.
As the Russia-Ukraine war extends and gas prices rocket to new heights, EV makers have seen an increase in demand. And in Europe, as CNN reports, solar power installations have jumped by 20% as Russia “turns down the gas.”
SEE: Artificial Intelligence Ethics Policy (TechRepublic Premium)
Another industry poised to transform the energy generation sector is nuclear fusion technology—not to be mistaken with the well-established nuclear fission power sector. The Washington Post reported on August 2022 that scientists are just years from achieving fully operational nuclear fusion power facilities.
Venture capitalist investments are pouring billions into the sector that expects to be up and running by 2030. Governments are also pushing fusion innovation with incentives. In the U.S., the Inflation Reduction Act and the Department of Energy support fusion developments with substantial rebates and tax credits.
Commonwealth Fusion, Helion Energy, General Fusion and TAE Technologies are some of the top nuclear startups testing tokamak nuclear fusion machines and racing to build stable reactors. Scientific improvements, better magnets and technological innovations are driving the new energy sector.
McKinsey experts say there are $4 billion in investments across 35 nuclear fusion projects that are focused on tackling the engineering challenges. McKinsey adds that the solar, wind and nuclear energy uncertainties must be resolved for the trend to achieve scale.
What leaders should pay attention to
The U.S. Energy Information Administration revealed that there is still a long way to go before green energy sources take the lead. About 38% of the electricity generated in the country by 2021 was produced by natural gas. Coal energy production was the second-largest energy source, with about 22%. Nuclear energy produced one-fifth of all U.S. energy (19% of energy).
All renewable energies combined amounted to just about 20% of the total, with hydropower plants producing 6.1%, wind 9.2% and solar just 2.8%.
McKinsey says leaders should pay attention to clean energy tech because the annual capital spending required to make the net-zero 2025 transformation amounts to $1.2 trillion for power generation, $1 trillion for the power grid and $200 billion in energy storage.
Additionally, demand for global electricity is expected to increase exponentially. McKinsey identified over 1,000 corporate clean energy commitments. The number of companies in 2021 that have set science-based targets toward green energy goals continues to increase, representing a market cap of $23 trillion.
Leaders should pay close attention to renewable energy technology, as it is set to contribute up to 84% of the total global demand by 2050. Sustainable fuels, nuclear fusion, and energy storage and distribution innovations are where decision-makers should focus on, McKinsey says.
The sectors that will be directly impacted include: metals and mining (copper, lithium, and cobalt), oil and gas (hydrogen fuel production), construction and building (infrastructure), chemicals (silicon for photovoltaic cells), and public and social sectors. However, as new clean energy technologies rapidly scale, no industry or sector will be untouched by the new trend.
Subscribe to the Innovation Insider Newsletter
Catch up on the latest tech innovations that are changing the world, including IoT, 5G, the latest about phones, security, smart cities, AI, robotics, and more. Delivered Tuesdays and Fridays