McKinsey Analysis Shows, with Energy Demand on the Rise, Energy Transition Requires Systemwide Assessment Rather than Generation Focus

­McKinsey & Company today published, “Investing in the energy transition: Time to look at whole-system value,” examining the state of the global energy transition system through demand, investment, and deployment rather than low-carbon installations alone.

Clean energy deployment continued to advance rapidly in 2025, but not as a simple replacement for fossil fuels at the global level. Industry data cited in McKinsey’s latest research shows that solar capacity grew by about 30 percent in 2025, while oil demand rose by roughly 1.3 million barrels per day, up from the growth seen in 2023-24, and coal consumption reached record levels. Overall energy demand increased by 1.3 percent, broadly in line with annual growth rates since 2013.

Taken together, these trends point to an energy system in which different sources are still expanding in parallel rather than being replaced consistently across the globe. McKinsey’s analysis finds that this picture varies significantly by geography and challenges assumptions that renewables are already displacing fossil fuels across the board.

This simultaneous growth has implications for how the transition is measured and financed. Roughly $3.3 trillion was invested across the global energy system in 2025. Of that total, approximately $1.8 trillion was directed to fossil fuels, power generation, and low-carbon technologies. Upstream oil was the largest fossil-fuel capital-expenditure category, at roughly $540 billion, while solar was the largest clean-energy category, at roughly $440 billion.

The article argues that investment volume is not the same as system value. Different technologies contribute differently to output, flexibility, affordability, resilience, and emissions performance. As demand and generation expand, the infrastructure needed to connect, balance, and secure supply—including grids, transmission, storage, dispatchable backup, flexibility, and fuel security—must expand with it.

To ensure leaders are making energy-system investment decisions that take into account meeting energy demand as well as investment costs, leaders must consider factors such as current investment patterns strengthening resilience, assets and technologies that contribute the most system value, systems being built in the most economically efficient way and the level of investment in clean-energy deployment to bend the global emissions curve down as quickly as possible.

For policymakers, investors, utilities, and industrial players, the article suggests developing portfolios that combine low-carbon power with flexibility, dispatchability, and diversified supply chains, while reducing permitting bottlenecks and accelerating transmission build-out.

The full article is available here.