Investing in Fusion - Fools Gold or Gold Mine?

More than 50 teams worldwide are racing to develop fusion power - international and national programs, huge engineering companies, and over $6 billion invested in startups. Fools gold or gold mine?

Prepare for ignition: the Wendestein 7-X Stellarator. Image Max Planck Institute for Plasma Physics.

I was recently asked by a friend what I thought of the idea of starting a venture fund focusing on nuclear fusion. I sent him fairly long answer by email - and then I thought others might find it interesting too. Or might find it wrong. Or whatever. So here goes, developed from that response, my basic take on fusion as an investable sector.

Are we nearly there yet?

First of all, as a piece of science, I am as excited as anyone about the net gain breakthrough achieved by the Lawrence Livermore National Lab (LLNL) in 2022.

However, if we are looking for something that actually helps meet demand for clean energy, forgive me for being vastly underwhelmed. They took 300 MJ of electricity, produced a 2MJ laser pulse, which in turn delivered 3MJ of heat. In my world that is called a heat pump with a COP of 0.01.

To turn that into to a useful power plant, they have to get not just more than 300MJ of heat out when they put 300MJ in, but enough to run a generator and get 300MJ of electricity out. It’s exergy that matters, not energy. Assuming 40% thermal efficiency, they would need 750MJ of heat - a whopping 250 times more than they managed.

But that is just for breakeven. While we all know that #EROIisBollox - or should do by now - if they want to get, say, 4x more out than they put in, the magnificent LLNL breakthrough is still short by three orders of magnitude.

Even if (or when, for the believers) the fusion community announces it has acheived three orders of magnitude improvement in energy yield, there are still four further fundamental classes of problems to solve:

• Lifetime challenges: stuff that gets bombarded with high energy particles falls apart and becomes radioactive over time

• Systems design challenges: how do you extract the power, ensure its voltage, frequency, phase, etc, and in general do all the things you need before you can inject power into a grid;

• Operations challenges: how do you run a plant safely, day in and day out, and how do you manage the supply chain;

• Integration challenges: how do you integrate fusion power into the grid and the rest of the energy system.

Oh wait, there’s a final challenge - the cost challenge! You have to deliver power to customers more cheaply than any of the alternatives, many of which are already doubling in uptake every few years and seeing their costs continue to plummet.

Runners and riders

So, how are the various teams working on fusion power plants doing? To be honest, I’m not following them in any detail, largely because none of them are anywhere close to doing anything commercial, and have other things to do with my time than read breathless press releases.

• ITER, the multinational, multi-decadal fusion project in Cadarache France, is nothing more than a vast and unwieldy science platform. That doesn’t mean it should be shut down - it will do some good science and guarantee a steady stream of educated physicists and engineers - but let’s be clear: it has zero chance of producing a workable, series-buildable fusion power plant.

• The 43 private fusion companies that have raised over $6 billion in recent years are mainly ways of separating rich men with messiah complexes from their money, in order to fund the lifestyles of other less rich men also with messiah complexes - with no chance of creating a working power plant;

• There may be some exceptions. I have a soft spot for Helion Energy, which has an interesting technological approach that removes the need for a thermal generator and the associated efficiency loss, and actually appears to want to produce a power plant, rather than just enjoying the process of being a fusion startup.

Will fusion help us achieve Net Zero by 2050?

If things go right for one of the more promising players, could fusion help keep the planet under 1.5C of temperature increase over pre-industrial days? Spoiler alert: no.

For me, there are three scales at which a new generating technology becomes interesting: 1%, 5% and 15%. Below 1% and it might power some niche applications but won’t make any appreciable contribution to climate change. Get to 5%, and that’s when you might see what I call “the sneeze”: the point where the S-curve takes off and things can start happening very fast. Then, 15% is when you’re really hurting the big incumbents, and they either kill you or keel over. Today, taken together, solar and wind are delivering 15% of global electricity.

So how long might it be until fusion gets to 1% of global power, the first of these three benchmarks?

• It will take the rest of this decade to get a working machine in the lab, reliably delivering more electricity than it consumes, by a decent margin. Not just getting more energy out than the laser put exergy in, but achieving that 3x growth in yield and putting a lot more power into the grid than the plant drew out of it. So that’s 2030;

• Then you have to solve your four challenges: create a design that can be built in series at an acceptable price point. Make sure it is reliable and safe, and can actually be maintained. Develop a supply chain for fuel and components: sourcing deuterium and tritium or whatever your fuel is, fabricating the funky materials you need to contain your plasma or survive your pulses of high-energy particles, disposing of used and radioactive reactor walls, and so on. Get through a regulatory process, and be certified by Underwriters Laboratories, TÜV or whatever. Train a work-force. Do your ruthless cost engineering. And put together finance and build your first-of-a-kind plants. There’s a huge amount to do, and it will take a decade. So that’s 2040;

• Now you have to start cranking out plants, at scale. Say global electricity demand doubles to 50,000 TWh, the average fusion plant is 500MW (like the plant Helion is developing), and fusion plants match the average capacity factor of fission plants (70% globally in 2022) - it will take a further decade to build the 163 plants required to deliver 1% of global electricity*. So that’s 2050.

So fusion could get to the1% mark by mid-century, but that’s pretty much it. Building stuff at the scale of the energy system, to the reliability and safety standard required for mission-critical civilian service, is just not a fast thing.The first ever megawatt-scale wind turbine was connected to the grid at the improbably-named Grandpa’s Knob, Vermont, in 1941. The first 1MW solar farm at Hesperia, California, was built in 1982.

I know there are lots of people who will tell me I’m wrong, but I’ll happily put up my track record as an energy system analyst and forecaster against theirs. It’s fascinating to see some of the same VCs who thought they knew how to remake the fuel sector now making the same mistakes about the power sector. And yes, I realise that this post might age like milk, and that’s a risk I’ll have to take. In fact, I actually hope I’m wrong, for the sake of all of us and of the planet.

Would I invest in fusion?

So if fusion is almost certain to be a bust as a contributor to Net Zero by 2050, does that mean we should give up, shut down all research and projects, and invest no more? No, not at all!

Even if it takes far beyond 2050 to get fusion working, the world will still need oodles of affordable cheap power – to complete decarbonisation (since we are clearly going to miss Net Zero in 2050), to replace aging wind and solar farms, and maybe to power DAC if things get sufficiently ugly and we are sufficiently organised to do something about it.

At a societal level, should we invest a few percent of our energy research and development resources in fusion? Absolutely - particularly if it comes from people who would otherwise waste their money on yachts, crypto startups or hydrogen cars.

Would I invest my own money? Certainly not in fusion generation startups. The decent ones are too expensive, the chances of success are too low, the capital requirement is too humungous, and the time scales too long. There is going to be enormous destruction of value.

However, there will also be enormous creation of value in fusion. How come? The organisations working on it are at the cutting edge of physics, materials science, nuclear technology and so on. They will be creating plenty of spinoffs that will end up transforming existing sectors - and maybe creating industries we can’t yet even imagine.

• Seurat Technologies (which raised another $92m in 2023) was spun out of the US Fusion Ignition Programme - it is now developing the world’s largest and cleverest 3D printers. You can hear all about it in Episode 114 of Cleaning Up James DeMuth - Disrupting Manufacturing with Laser Printing.

• The quest for materials that can survive life in a fusion reaction chamber will result in some really clever material and process breakthroughs, as we heard in Episode 119 of Cleaning Up: Dr. Aneeqa Khan - Fusion Energy: The Materials Challenge (apologies for the bad audio quality).

• Two other areas of technology where fusion is forcing a whole sector to up its game from basic research through to manufacturing scale are supercapacitors and superconductivity. Many approaches to fusion require the application of monstrous pulses of electricity - pulses which neither the grid nor batteries can possibly deliver, and which would melt normal cables.

So there is a thesis for a fund investing in fusion, but it is not about the holy grail of the power plant, it is about the supply chain, technologies and services. I would broaden the mandate to nuclear in general, since there are also plenty of opportunities in fission - again, I would not invest in Small Modular Reactor companies themselves, but in the supply chain, services and fuel cycle. Then, I would add products and services around the use of nuclear technologies in medicine, food, metrology (the industry of measuring stuff), etc.

Et voilà - you have a full-spectrum nuclear technology fund.

Is nuclear a sector for classic VC? Not if you don’t know your engineering, materials science and hard-tech business-building. Done right, however, with a bit of luck and a tonne of discipline, you could make a lot of money. Go for it!

Selah.

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* Earlier versions of this piece contained a different figure for the number of plants needed to get to 1% of global power - in this version I corrected an earlier error as well as adjusting for capacity factor and average plant size.