Energy scenarios in the age of AI

November 2025

Over the coming decades, the integration of artificial intelligence (AI) into the global economy is set to transform energy systems. What implications might this have for future territorial development and cohesion?

Shell has built a reputation for scenario development, which forms part of its internal strategy work but is also widely publicised. Earlier this year, Shell published a report entitled 'Energy Security Scenarios: Energy and Artificial Intelligence (Si apre in una nuova finestra)'. These scenarios are envisaged as a structured exploration to stimulate thinking about how AI, geopolitics, and climate policy might reshape energy systems in the coming decades. The focus is on AI’s potential to transform production processes, shift energy demand patterns, and accelerate (or stall) technological diffusion.

Nevertheless, scenarios from a company of Shell's size have an agenda-setting effect and inevitably reflect the company's own preferences regarding what is deemed plausible, scalable and investable. It is important to read them critically, especially in Europe, where the territorial distribution of energy assets and digital infrastructure will increasingly determine cohesion and competitiveness.

Across three scenarios – Surge, Archipelagos, and Horizon – Shell explores how geopolitical competition, AI development, and carbon management might interact. Together, the scenarios paint a diverse picture of how energy transitions could unfold in an AI-enabled, geopolitically fragmented world. Although they differ in their assumptions about governance, cooperation and growth, all three scenarios share an underlying recognition that the energy transition is underway and that net zero is feasible, though not guaranteed.

The variation in outcomes – from 1.3 °C warming in Horizon to 2.2 °C in Archipelagos – highlights the importance of carbon management, energy efficiency, and AI-enabled infrastructure. Timing is crucial: earlier action reduces the need for large-scale removals and avoids painful trade-offs. However, the scale of the required transformation in production, consumption, and land use is profound across all pathways.

The key message is one of preparedness. Whether through modular electrification, new energy geographies, or rapid carbon removal, the transition will take many different forms. The choices made over the next two decades will define the energy system for the rest of the century.

Surge scenario

Rapid AI-enabled growth leads to increased energy demand. Economic expansion is driven by the adoption of technology, the deployment of modular infrastructure, and market-led transitions. Modular energy systems, including solar PV, grid batteries, direct air capture and, eventually, small modular nuclear reactors, are scaled up through mass production.

This scenario is like a high-pressure test of how much productivity the world is willing to purchase with electricity. Governments tolerate hardware and data security trade-offs because the growth prize is immediate, and energy demand climbs accordingly. AI is welcomed as an economic accelerant. It becomes the backbone of global IT until the 2030s, while the energy system shifts decisively towards modular components – PV, batteries, heat pumps and electrolysers – assembled 'Lego style' and orchestrated by software rather than bespoke megaprojects. Small modular reactors emerge as niche workhorses in the 2040s, powering data centres, industrial furnaces, and even ships. This serves as a reminder that the 'electrify everything' movement will still sometimes necessitate nuclear power. The story assumes upward pressure on final demand, helped by AI services themselves, even as efficiency holds the line. By the middle of the century, energy use will be materially higher than it is today. Carbon management arrives rather late, driven by the market: direct air capture clusters scale up as module costs fall and solar energy becomes abundant. Direct air carbon capture and storage will play a significant role in the eventual clean-up.

Net-zero emissions are delayed until 2080, with temperature rise stabilising at around 2.0 °C by 2100 – a satisfactory outcome rather than a triumph.

In terms of spatial distribution, Surge disperses manufacturing and assembly capacity while concentrating value around digital energy nodes – grids that can host data centre clusters, ports that can transport critical hardware and regions with significant solar and storage potential.

For Europe, this means e.g. Nordic and Atlantic data centre corridors, Iberian and Mediterranean solar-to-industry projects and North Sea CO₂ storage logistics, provided that transmission capacity improves. In summary, this scenario is comfortable with extended roles for gas, delayed hard exits, and a heavy reliance on direct air capture rather than earlier structural demand cuts. The policy challenge will be to ensure that cohesion and consent keep pace with the build-out so that peripheral regions do not miss out on the benefits on the way to platform economies in the core.

Archipelagos scenario

A strong security mindset leads nations to prioritise domestic resource security, resulting in a fragmented geopolitical landscape. National interests dominate, and while decarbonisation is advancing, it is doing so unevenly and often expensively. Trade frictions, border controls and local energy strategies are rife. Although efforts to transition to cleaner energy sources continue, they are uneven and slowed by technological protectionism and limited coordination. Carbon management technologies are lagging behind, and demand for fossil fuels remains high.

Shell frames this as a 'security first' equilibrium, shaped by the ongoing effects of the 2022 shocks, migration pressures, and friction in global commerce – conditions that hinder the pace and scale of clean energy adoption. Fossil fuels will remain prominent for the longest time here; investment will be maintained in order to meet mid-century demand, even though activism and climate impacts are pushing in the opposite direction. The result is a slower, bumpier transition: assets are built, then closed early, and social divisions widen as costs and closures occur out of sequence.

This scenario predicts net-zero emissions in the 22nd century, with an estimated warming of approximately 2.2 °C by 2100. This is a worrying sign that the combination of incremental change and resilience will not achieve the goals set out in the Paris Agreement.

The territorial pattern is a patchwork of more domestic production, redundancy and regionalised systems that duplicate costs while failing to achieve economies of scale.

For the EU, this could mean higher price dispersion within the Union, stalled cross-border interconnectors, prolonged relevance of LNG on the coasts and greater reliance on national budgets rather than EU-level instruments – fertile ground for core–periphery divergence, unless cohesion policy is explicitly tuned to manage the risks of stranded assets and affordability. The quiet editorial in this scenario is familiar from incumbents: security is used to justify extended fossil fuel investment and slower structural change. The constructive challenge for policymakers is to transform security into integration by financing cross-border assets that actually reduce system risk instead of retreating to national fortresses that increase costs and hinder diffusion.

Horizon scenario

The goal of achieving net-zero emissions by 2050 and limiting warming to below 1.5 °C by the end of the century can be realised. This is achieved through deep societal and political support for climate policy, allowing for rapid decarbonisation, extensive electrification and the widespread deployment of carbon removal systems, including direct air capture and bioenergy with carbon capture and storage.

In this scenario, the political landscape changes as citizens and younger voters push for change, prompting governments to implement a comprehensive policy mix that evolves from incentives to mandates. Solar power reaches one terawatt per year before 2030, carbon removal becomes a managed industry, and direct air carbon capture and storage becomes viable after 2040 as a complement to land-based sinks. The policy list is straightforward and demanding: wide-scale carbon pricing, rapid grid and generation permitting, hard phase-outs of incumbents (internal combustion engine vehicles and gas boilers), methane abatement and carbon management infrastructures on a continental scale, plus rules for carbon asset trading.

The near-term energy narrative is counterintuitive: Horizon restrains demand growth through efficiency and energy austerity, keeping consumption in 2050 close to current levels despite electrification. The social bargain is equally straightforward: lines and turbines are installed wherever physics dictates, not just where aesthetics would prefer, and some fossil fuel assets are retired early.

In terms of space, this means an unprecedented expansion of the grid, storage location and CO₂ networks, alongside rural landscapes that are responsible for delivering both renewables and nature-based removals.

The EU perspective raises significant governance questions: can accelerated permitting be made place-sensitive? Who owns and is paid for storage rights? Which ports and basins will become CO₂ hubs? How will benefits be shared with communities that host infrastructure? Horizon's strength is also its weakness: the pathway relies heavily on carbon capture and storage and engineered removals to manage overshoot and sectoral stubbornness. This raises questions about social licence, permanence, and who will underwrite liabilities. Yet, as an organising device, it converts climate ambition into a spatial investment plan that could anchor European cohesion, provided that the politics of consent are designed as carefully as the pipes and wires.

Territorial conclusions

Viewing the three scenarios as stress tests reveals one clear message: Europe’s transition will be determined by spatial factors, such as where we install grids, data centres and CO₂ pipes, and where renewables are hosted.

Firstly, the pace and modularity of electrification are now path-defining. This means interconnections, storage and flexible demand are the binding constraints. All of these factors have a spatial component and the potential to either deepen divides or contribute to cohesion, depending on how they are managed. The question is how quickly value will be created and where it will be created (and whether AI will help or hinder the grid in the near term).

Secondly, carbon management will determine the outcome – either by design (Horizon) or by necessity (Surge) – with spatial consequences for ports, pipelines, storage basins, and rural landscapes.

To promote cohesion, policies in the EU must recognise the territorial implications of these choices. Otherwise, divides will deepen. Generation Beta will not wait for perfect governance. Therefore, regional, national and EU players need to experiment now, learn quickly and communicate across borders.

by Kai Böhme

(Si apre in una nuova finestra)