Energy Transition: Challenges, Risks, and the Path Forward
Spotlight interview with
Dr. Isabel Figuerola‑Ferretti
Head of the Quantitative Finance Group and Co‑Director of the Low Carbon Hydrogen Center at Universidad Pontificia Comillas
The green transition is far from over.
Despite recent declines in enthusiasm and weaker returns on green investments, the shift toward a low‑carbon economy continues.The real issue is not a halt in progress but the need to adjust expectations.
“The energy transition is not stopping, but expectations must be adjusted to reality.”
Ambitious targets set in the wake of the Ukraine war have not been met, investments in green technologies have slowed, and returns have weakened compared to fossil fuels. For Figuerola-Ferretti, this does not signal failure, but rather a place for recalibration.
The financial challenges that stand out:
Demand Bottlenecks and Market Gaps
Green alternatives such as renewable hydrogen remain up to four times more expensive than fossil‑based options, limiting adoption in hard‑to‑abate industries. Policy has favored production over demand, creating a gap that undermines adoption. Without a functioning market and reliable price signals, uncertainty grows. Figuerola-Ferretti argues for policies that guarantee demand and provide incentives for offtakers to adapt their processes to green inputs.
Infrastructure Underinvestment and New Dependencies
Infrastructure investment has not kept pace with power generation. While renewable capacity has expanded since the Paris Agreement, spending on electricity grids has lagged far behind, creating bottlenecks and exposing Europe to new vulnerabilities. At the same time, the transition is generating fresh dependencies: rare minerals essential for green technologies are concentrated in supply chains dominated by countries such as China. Europe risks replacing one dependency with another, underscoring the urgency of investing in alternative materials to safeguard energy sovereignty.
Financial Innovation and Interim Solutions
Despite these obstacles, Figuerola‑Ferretti highlights solutions that can sustain momentum. Financial innovation has proven to be a powerful enabler. Long‑term Power Purchase Agreements (PPAs) and Contracts for Difference (CFDs) have made capital‑intensive projects bankable and reduced risk for investors, while carbon markets such as the EU Emissions Trading System provide effective frameworks, though prices must rise significantly to shift behavior.
Equally important are pragmatic interim solutions. While the long‑term goal is fully green technologies, short‑ and medium‑term options such as low‑carbon hydrogen can serve as practical bridges. These require lighter investment and regulation compared to purely green alternatives, offering a realistic pathway toward full decarbonization. Together, financial innovation and interim solutions form the twin pillars of a resilient transition.
At the upcoming Energy Technology event hosted by Cámara de Comercio Hispano‑Finlandesa, Isabel will share her insights on how financial innovation and strategic policy can unlock the next phase of the transition.