Fossil fuels hold ground despite clean growth, McKinsey says

It found oil demand also climbed faster in the past two years.

Global energy demand grew in parallel across fossil fuels and renewables in 2025, with clean capacity additions failing to displace conventional generation, according to a McKinsey & Company report published on 1 September.

Despite solar capacity growing by about 30% in 2025, oil demand rose by roughly 1.3 million barrels per day, up from the growth seen in 2023 to 2024. Coal consumption also reached record levels over the same period.

Overall energy demand increased 1.3%, broadly in line with annual growth rates since 2013, according to the report.

McKinsey said the trend points to an energy system where different sources are expanding in parallel rather than one replacing another, adding that this varies significantly by geography.

It said the finding challenges the assumption that renewables are already displacing fossil fuels across the board.

The parallel growth also has implications for how the transition is measured and financed.

McKinsey noted that different technologies contribute differently to output, flexibility, affordability, resilience, and emissions performance. This means investment volume alone does not reflect a system's readiness for the transition.

As demand and generation both expand, the firm said the infrastructure needed to connect, balance, and secure supply must expand with them.

This includes grids, transmission, storage, dispatchable backup, flexibility, and fuel security, McKinsey said.

The firm said leaders making energy-system investment decisions should weigh several factors, including whether current investment patterns are strengthening resilience and which assets and technologies contribute the most system value.

Leaders should also consider whether systems are being built in the most economically efficient way, according to the report.

The level of investment in clean-energy deployment needed to bend the global emissions curve down as quickly as possible is another factor, McKinsey said.

For policymakers, investors, utilities, and industrial players, the firm recommended developing portfolios that combine low-carbon power with flexibility, dispatchability, and diversified supply chains.

It also called for reducing permitting bottlenecks and accelerating transmission build-out.