The global energy transition: a decisive decade for India and the world

McKinsey’s Global Energy Perspective 2025 marks ten years of tracking the energy transition, offering a chance to reflect on the lessons learned over this time and to look ahead to the future challenges and opportunities. Two key themes stand out from this year’s outlook: the transition must remain economically pragmatic, balancing affordability, reliability (including energy security), and emissions, and there is no single pathway to decarbonisation, as countries follow distinct trajectories based on their local economic conditions, resource endowment, and the realities facing particular industries.

Over the past year, emissions reached record highs, widening the gap between our modeled scenarios—Sustainable Transformation, Continued Momentum, and Slow Evolution—and the pathway needed to limit global temperature rise to 1.5°C above preindustrial levels. Our projections now indicate a warming range of 1.9°C to 2.7°C by 2100, which is about 0.1°C higher than in our 2024 outlook, reflecting slower-than-needed decarbonisation.

Our analysis forecasts both energy demand and the supply mix across a range of fuel types and regions to 2050, with several key insights this year:

• Fossil fuels are expected to retain a large share of the global energy mix beyond 2050, with overall demand likely to plateau only between 2030 and 2035 in the Continued Momentum and Slow Evolution scenarios. Natural gas demand could see the most significant increase, potentially displacing higher-emission fuels. Coal may remain in the energy mix for longer, though likely at a moderate level. As coal plants close in Germany, Poland, and the United States, growth in coal use in China, India, and Indonesia will offset this decline. At the same time, key low-carbon alternatives such as green hydrogen and other sustainable fuels are unlikely to achieve broad, cost-competitive adoption before 2040 unless supported by mandates or strong policy intervention, reflecting the current emphasis on affordability.

Global power demand is projected to increase, driven by electrification from buildings, transport, and parts of industry, as well as rapid expansion of data centers. This demand growth is especially pronounced in large, fast-growing economies. India, for example, is expected to see significant increases in electricity consumption over the coming decades, driven by rapid economic growth and rising living standards.

• Regional dynamics will play a big role in future energy demand. China is projected to continue to lead in electrification, followed by North America and India. Coal consumption is expected to grow in both China and India. Although renewables are expanding faster than coal in these regions, the increasing energy demand driven by GDP and population growth could cause coal demand to continue to grow.
• Clean, firm power sources—such as nuclear, geothermal, and hydropower—along with storage technologies such as batteries and pumped hydro, are likely to expand to complement variable renewables and support system reliability. While their large-scale deployment is still years away, these technologies will be essential to complement intermittent renewable energy sources (such as solar power and wind) and offer cost-competitive, resilient power.
• A system-wide approach could offer a faster and more cost-effective path to emission reduction. For example, investment dollars for decarbonising the energy system could potentially be more efficiently used if, instead of focusing on the final few percentage in the power sector, they were instead applied to decarbonisation in other sectors. This strategy would avoid the higher costs of the final stages of power sector decarbonisation while still meeting the Paris Agreement temperature targets.

For rapidly growing economies such as India, the next decade will be pivotal. The challenge for the industry and policymakers will be to ensure the energy system is affordable, reliable, and resilient to price spikes, outages, and geopolitical instability. With resilience and agility, energy sector leaders can prepare for and navigate the challenges.