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A world that has security at its core: Shell’s new Energy Security Scenarios explore 2 future possibilities

Shell has published its latest Energy Security Scenarios, which explore how the world could evolve following Russia’s invasion of Ukraine. Specifically, the two scenarios look into the possible energy and climate outcomes that could result from a world that has security as its dominant concern.

The first scenario, called Archipelagos, follows how today’s pressures could play out to the end of the century. National interest remains key and renewables are mainly seen as a way to improve energy security. By 2100, net-zero emissions is within sight, but the world has failed to meet the goal of the Paris Agreement. This scenario is “exploratory”: it seeks to plot a course from where the world stood in 2022.

The second scenario, called Sky 2050, shows just how fast the world must move to meet the goal of the Paris Agreement. Global climate security becomes the primary concern. Nations race to switch to cleaner energy and a competitive landscape emerges for technology, minerals and manufacturing capacity. Competition drives rapid change and the world reaches net-zero emissions in 2050. This scenario is “normative” and extremely challenging.

Both scenarios start with an immediate trade-off between solving short-term needs, by using fossil fuels and meeting longer-term goals. In Sky 2050, that compromise adds greenhouse gas emissions and results in a greater overshoot of 1.5°C than might otherwise have been the case. In time, this larger overshoot is balanced out with greater action to remove emissions from the atmosphere. In Archipelagos, even stronger use of fossil fuels to meet immediate energy needs results in higher short-term energy prices worldwide, with price rationing having a major effect in balancing global supply.

Sky 2050 brings society rapidly to net-zero emissions, but doing so requires major interventions from policymakers in the energy system. This includes actions such as the forced retirement of fossil-fuel assets, punitive carbon prices, the rapid introduction and scaling up of early-stage technologies and significant energy conservation through efficiency and even economic austerity.

Archipelagos sees higher fossil-fuel demand compared to Sky 2050 and meeting this demand requires investment. Yet activists and an increasing number of investors, have little appetite for further oil and gas production. With such an impasse, governments are forced to step in to ensure money flows under threat of significant financial penalties.

Indeed numerous policy efforts are required. In particular, Shell divides governments’ actions into three archetypes: the Green Dream, which can be observed in the European Union, countries that seek security by driving hard to reduce energy use, increase energy efficiency and massively boost renewable generation; secondly, there is the Innovation Wins archetype, which can be seen in countries like the USA and major resource-holders such as the United Arab Emirates. These countries are often self-sufficient in energy so are not vulnerable to supply failures, but their political systems are particularly exposed to swings in the energy price.

Both these groups of countries must start to embrace large-scale development of negative emission technologies and practices, in order to shift from the Archipelagos scenario to the Sky 2050 one.

The third archetype includes China, which is taking a cautious approach, aware of the need to move away from coal and carefully monitoring global energy market developments. It looks to use its manufacturing strength to build its position as a global low-carbon energy powerhouse. However, it needs to target a reduction of up to 40 per cent in emissions, from a mid-2020s peak, by 2035.

According to Shell’s Energy Security Scenarios, the energy system is at a renewable energy turning point. For solar photovoltaic alone, the world is already adding around 200-250 gigawatts (GW) of capacity each year, delivering some 250-300 terawatt-hours (TWh) of electricity. Electrification is also critical to achieving net-zero emissions. The major energy system shift in both scenarios is the rise of electricity in the final energy mix. Both scenarios carry unprecedented change, with electricity growing at more than five percentage points of the final energy market share each decade in Archipelagos. In Sky 2050, the increase is 10 percentage points every 10 years.

Finally, hydrogen becomes an important part of the energy system during the 2030s. It makes up 12 per cent of final energy use in 2070 in Sky 2050 and more than 4 per cent in Archipelagos.

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