Today’s Energy Transition Imperative: Investment, Innovation, and Validation

The energy landscape is evolving at an accelerating pace, driven by surging demand from data centers, industrial manufacturing, and electrification. In fact, global energy demand is projected to grow by 11-18% by 2050, according to McKinsey.  

CERAWeek 2025 explored the need to balance today’s demand-driven focus on reliability with long-term decarbonization goals. Dispatchable power sources like gas ensure baseload reliability and coupling those solutions with renewables, hydrogen, carbon capture, and battery storage can strike the right balance, while we continue to progress clean energy solutions such as geothermal and nuclear.  

With clean energy solutions accelerating over the past two decades, investors have been expanding their strategies, committing capital earlier in the development process. They have also been seeking innovative solutions for risk allocation that allow them to fulfill their investment mandates while providing capital to energy transition projects. Validation technologies have become critical in mitigating development risk and providing investors with confidence to take on early-stage opportunities.  

To expand the grid and address the current supply-demand imbalance, stakeholders across the global energy ecosystem, from companies to investors to governments, must work together and ensure that infrastructure keeps pace with evolving needs.  

Assessing the Current Investment Landscape 

The past three years have seen record investment in the energy transition. In 2024, global funding hit $2.1 trillion, propelled by declining clean energy costs and government policies supporting decarbonization. In the U.S., the Inflation Reduction Act (IRA)’s Greenhouse Gas Reduction Fund alone has funneled $27 billion into emissions reduction and advanced clean energy projects. According to BloombergNEF, sectors receiving the most investment include electrified transport, renewable energy, and power grids.  

Investment fuels innovation, validates emerging technologies, and attracts additional capital, creating a virtuous cycle.  

While investment grew by 11% to $2.1 trillion in 2024, this marks a slowdown compared to the previous three years, where annual growth ranged from 24% to 29%. Furthermore, we are falling short of the investment levels required to meet net-zero targets by 2050. According to BloombergNEF, Australia, Germany, the UK, and France must double their spending, while the U.S. must triple its current rate to stay on track. 

Closing this investment gap is critical to achieving decarbonization goals. All stakeholders must collaborate to create market mechanisms and contract structures that incentivize further investment. Across the globe, government incentives are essential for lowering the costs of new technologies and supporting private sector development. Funding drives progress: investment fuels innovation, validates emerging technologies, and attracts additional capital, creating a virtuous cycle.  

Accelerated Energy Demand Brings Additional Challenges 

After more than a decade of relatively flat U.S. energy demand, forecasts show an acceleration driven by data center buildout and electrification. As discussed during CERAWeek, even S&P Global’s conservative scenario projects U.S. electricity demand to grow 1.9% per year on average through 2035.  

Growing energy needs are driving development and reliability in the short term, but we still must be mindful of the need for affordable power for all.  

The race to add power generation capacity – particularly for energy-intensive data centers (both in front of and behind the meter) – is attracting new capital into the sector. While the investment in renewables and battery storage continues, there is renewed interest in flexible, reliable power solutions such as natural gas, including its blending with hydrogen and coupling with carbon capture as an innovative solution to meet market demand.  

Growing energy needs are driving development and reliability in the short term, but we still must be mindful of the need for affordable power for all. Reliability, affordability, and sustainability remain core pillars of the energy transition. While today’s rapid growth necessitates a stronger focus on reliability, we cannot lose sight of the broader need for balance across all three. 

The Changing Profile of Energy Investors 

A decade ago, infrastructure investors prioritized fully operational assets generating cash flow and had less tolerance for development and construction risk. Today, they are committing capital earlier in project and technology development, creating opportunities for collaboration across the energy value chain.  

When evaluating potential investments, institutional investors and corporations consider risks associated with technology, development, construction, operation, and scalability. By investing in early-stage companies or entering projects at an earlier phase, they position themselves for potentially higher returns and greater flexibility to deploy additional capital later. However, this strategy also carries greater risks, particularly regarding development, scalability, and commercialization challenges.  

To mitigate early-stage risk, investors are conducting deeper due diligence, engaging earlier with developers and companies, and demanding greater transparency in tech advancements. The shift has led to greater collaboration among investors and companies with varying risk and return appetites. By forming strategic partnerships and pooling resources, they share risk and unlock new funding models.  

Reducing Risk Through Technology Validation 

Validation is the linchpin of energy transition investments, ensuring that emerging solutions can withstand real-world conditions while delivering performance, quality, safety, and seamless integration with digital control systems. It gives investors confidence while reducing risk attracts further investment. 

Mitsubishi Power’s T-Point 2 facility at its Takasago Machinery Works in Japan exemplifies this approach. As the world’s only commercially operating validation power plant, T-Point 2 connects to the grid and validates gas turbine technologies with hydrogen fuel co-firing capabilities that achieve higher efficiency and reduce nitrogen oxides – supporting short-term reliability needs and long-term decarbonization goals. 

Validating extends beyond testing facilities to real-world projects, where landmark clean energy projects prove scalability, attract investment, and inspire similar efforts. Key technologies demonstrating scalable pathways to decarbonization include: 

• Hydrogen: Large-scale electrolyzers validated at Takasago Hydrogen Park have been integrated into the Advanced Clean Energy Storage (ACES Delta) project in Delta, Utah, a joint venture between Chevron and Mitsubishi Power. The project, expected to go commercial later this year, will use renewable energy to electrolyze water, storing up to 11,000 metric tons of green hydrogen in underground salt caverns so that it can be used to power communities in the Western United States. ACES Delta is expected to be one of the world’s largest green hydrogen production and storage facilities and serve as an early utility-scale model for others.  

• CCS: In the U.S., Mitsubishi Heavy Industries (MHI) developed the carbon capture process technology used for the Petra Nova Project in Texas, the largest post-combustion CO2 capture project in the world. Currently, the MHI carbon capture team and Mitsubishi Power are working on a project in Decatur, Illinois, that could become one of North America’s largest CCS installations. Validating CCS applications is important, as it can help decarbonize the existing infrastructure, particularly in the hard-to-abate industries. 

• Geothermal: Fervo Energy, an MHI investment, is building the world’s largest enhanced geothermal power project. Set to launch in 2026, Fervo’s Cape Geothermal Power Project is permitted for up to 2 gigawatts of baseload power that could support over 2 million homes. Further, MHI subsidiary Turboden, a global leader in Organic Rankine Cycle, is collaborating on the project. Validating geothermal energy ensures a carbon-free, always-available complement to wind and solar, unlocking a largely untapped clean energy source. 

While validation can extend development timelines, the benefits – enhanced reliability, reduced operational costs, and greater investor confidence – far outweigh the trade-offs.  

Unlocking the Future: A Shared Responsibility 

I left CERAWeek 2025 optimistic about the sector’s long-term commitment to decarbonization through clean energy solutions. The path forward is clear: Advancing the energy transition requires a coordinated effort from technology companies, investors, and policymakers to deliver reliable energy today while laying the foundation for a low-carbon tomorrow.  

• Technology providers must continue advancing innovative clean energy solutions – such as CCUS, hydrogen, and geothermal – while scaling renewables and energy storage. 

• • Investors must strategically deploy capital to bridge funding gaps. 

• • Policymakers must create clear regulations that enable large-scale deployment and offer incentives that can support the progress of clean energy alternatives. 

To navigate this evolving landscape, industry leaders must prioritize innovative and pragmatic solutions that drive progress across industries, communities, and economies. By fostering global collaboration, deploying capital strategically, and rigorously validating emerging solutions, we can architect a sustainable energy future.