The Future of Energy: Shell's Three Scenarios

What will the future of energy be in a world marked by crises, geopolitical tensions and technological accelerations? To orient itself, Shell has imagined three scenarios collected in the new report Energy Security Scenarios 2025 and called them Surge, Archipelagos and Horizon. Not forecasts, but analytical tools to explore how the global energy system could evolve and what decisions could determine its course. Peter Wood , chief energy advisor of Shell and vice president, scenario strategist, explains the implications and meanings.

"The Surge scenario envisions the possibility of a new phase of economic growth, driven by increased productivity thanks to artificial intelligence (AI) . Archipelagos shows a fragmented world, where technological development is held back by energy sovereignty, border security and trade tensions. Horizon takes a normative approach to outline the actions needed on a global scale to achieve net zero CO2 emissions by 2050 and limit the temperature increase to 1.5 °C above pre-industrial levels, by the end of the century". It is the Archipelagos scenario that most closely resembles the present: "Here international collaboration weakens, national interests prevail, new barriers emerge", observes Wood. In this fragmented context, the diffusion of technologies also slows , undermining the effectiveness of the transition. “A prime example is photovoltaics: born in Europe thanks to strong public investments in research, but became competitive only thanks to China's ability to produce it on a large scale, reducing costs. In a less cooperative world, it is less obvious that global supply chains of this type can be repeated."

According to Wood, energy prospects are not linear. Even in the most virtuous scenario, Horizon, a temporary climate overshoot is likely. And while oil demand does not fall, the energy transformation risks colliding with a paradox: “You cannot transform capitalism without capital. Decarbonization requires trust, security, economic growth.” The future revolves around AI . “It will have a profound impact on society and energy: by automating entire processes at lower costs, it will increase productivity and can accelerate energy solutions. But it will also have consequences: many jobs will disappear, others will be created. It is a systemic transformation. And without economic growth, the social costs of the transition cannot be sustained.”

In the Surge world, AI becomes a powerful driver of development. Net zero is postponed to 2080 and global temperatures will only stabilize around 2°C by the end of the century. “It’s the price of an approach that prioritizes growth at the expense of climate,” says Wood. On the contrary, “Horizon requires strong policies, international cooperation and a collective leap in decarbonization.” Reality, however, once again recalls the Archipelagos scenario, where energy security and sovereignty prevail over cooperation. “ If the international system closes, the transition also slows down. Energy supplies cross borders, as does knowledge. Without collaboration, instability is created.” And then there is China , dominating supply chains for key technologies such as batteries, magnets and electric motors. “Not all countries will want to depend on Beijing,” observes Wood. “For example, Italy has strong manufacturing, and will want to defend its production capacity. This is as true for us as it is for Germany.” Much will also depend on what emerging countries do: “Two-thirds of the world’s population lives in Africa, India and Latin America . If they adopt the transition as they did with cell phones – skipping entire phases and going directly to solar and mini-grids – then the world can really change.”

Wood insists: “Emerging economies are often given little consideration in debates. Wrongly, because it is in these countries that the future is at stake. We need a global alliance that makes knowledge, capital and technologies available even to those who cannot afford them today". And he adds: “The education system also has a central role. We need new skills today. From systems engineering to energy economics, we must train people capable of leading the transition”. It is not enough to focus on technologies: “Innovation is also institutional, social and political. We need a new generation of policymakers and entrepreneurs capable of navigating uncertainty and building trust. Because without trust there is no investment. And without investment, the transition runs aground”.

Wood concludes with an appeal: “We can no longer wait for the system to fix itself. Even in the most positive scenario, overshooting is likely, that is, a temporary exceeding of the climate limits, before temperatures are brought back under control. This is why we must invest both in mitigation by reducing emissions and in adaptation by strengthening the resilience of territories and communities. Every transformation begins with a decision”. And Italy? “It has human capital, industry, creativity. If these elements are accompanied by a coherent strategy and targeted investments, it can be a protagonist. Without concrete action, everything remains theory”.