ENERGY INFRASTRUCTURE AND AI-DRIVEN GROWTH IN THE EUROPEAN ECONOMY

Abstract

The widespread adoption of Artificial Intelligence (AI) is reshaping economic growth trajectories across the European Union. However, AI is not only a digital phenomenon, but it is also an energy-intensive one, which relies on physical infrastructure that is subject to policy, investment, and capacity constraints. This paper examines whether energy infrastructure is becoming a strategic bottleneck for AI-driven growth in the EU. It extends the endogenous growth model to incorporate energy as a separable input to AI production, developing three analytical scenarios of increasing specificity. The third and most realistic scenario demonstrates that when energy capital is insufficiently expanded relative to AI adoption, growth slows and a crowding-out effect emerges, compressing energy availability for households, industry, and other sectors. The theoretical findings are supported by an illustrative calibration, which confirms that the bottleneck and crowding-out dynamics identified in the model are consistent with observable trends in EU energy investment and data centre demand. The paper contributes a conceptual framework linking AI expansion, energy supply, and energy constraints. It also suggests directions for future empirical research on infrastructure constraints and AI-led growth in Europe.