Summary

Fusion power is a proposed form of power generation that generates electricity by using heat from nuclear fusion reactions. In a fusion process, two lighter atomic nuclei combine to form a heavier nucleus, while releasing energy. Fusion processes require fuel and a confined environment with sufficient temperature, pressure, and confinement time to create a plasma in which fusion can occur. Research into fusion reactors began in the 1940s, but to date, no design has produced more fusion power output than the electrical power input. At present, there are two main approaches: magnetic confinement fusion (MCF), using magnetic fields to contain hot plasma and inertial confinement fusion (ICF), compressing a fuel to extremely high densities using strong lasers or particle beams. Magnetised target fusion (MTF) and magneto-inertial fusion (MIF) are combinations of both approaches.

Viability (3)

Despite perennially always being 30 years away, 2022 was a breakthrough year for fusion. The Joint European Torus (JET) project sustained a reaction for five seconds generating 50m joules and the Lawrence Livermore National Laboratory (LLNL) reached the threshold for ignition (a self-sustaining reaction). This followed a breakthrough the previous year in which the MIT and Commonwealth Fusion Systems project (MIT-CFS) broke the magnetic field strength record with a new high-temperature superconductor. It is still unclear which design: tokamak, mini-tokamak, linear reactors, magnetised target reactor, or stellarator will be viable first. Machine learning is starting to have an impact in terms of design new kinds of tokamaks and controllers. But the takeaway is that fusion is a hard engineering challenges not a science question, as with other moonshots like Quantum Hardware or Brain-Computer Interfaces.

Drivers (5)

Big picture, the scientific driver in that fusion is the only energy source in the universe we haven’t yet mastered. Short-term, The Paris Agreement requires massive decarbonisation of the global economy and is driving more R&D into game-changing technologies like Fusion. As more engineering milestones are hit, the size of the market is attracting startups, investment and talent. Supply-side, computing power and machine learning are making simulations cheaper and more accurate for things like plasma control (See DeepMind’s work).

Novelty (5)

Energy can be produced by harvested from the sun, wind, tide, heat from the earth, and from the splitting or combining of atoms. Nuclear power doesn’t do anything unique that other energy sources cannot. But it has a combination of characteristics that make it a compelling option, namely the fact nuclear fuel is 2 million times more energy dense than any chemical like fossil fuels, biofuels or batteries. Combined with the zero carbon emissions of a renewable source without the safety and radioactive waste concerns of nuclear fission. Additionally, raw materials are relatively abundant as the raw fuels are deuterium and tritium, both heavy isotopes of hydrogen. Deuterium is easily found in seawater, tritium comes from lithium and so may become challenging to source but the volumes are small enough for this not to be a major concern.

Diffusion (4)

Once fusion is achieved connecting it to the electricity grid will be the big challenge, although this is a question of time and money not science. Likely to be some political challenges depending on exactly which company/consortia achieve fusion depending on geopolitical landscape in the 2030s. However, diffusion will likely be exceptionally fast considering the potential GHG emission reductions. Impossible to predict at this point but an important consideration on adoption will be around LCOE compared to alternative dispatch technologies especially with Solar Photovoltaics, Wind Power, and Stationary Energy Storage having 10-15 years headstart.

Impact (5+) High certainty

Unlikely to reach market until 2030s, but when it does come online, it will be totally transformational for both carbon emissions and economic growth. Estimates suggest a $10tr+ market by late 2030s. Total market capitalisation of O&G majors is c. $6tr. It will come too late to bend the curve on climate change but the close relationship between energy consumption and economic growth suggests cheap clean abundant power is one of the most important technologies for the long-term growth.

Timing (2030+) High certainty

Best case scenarios from private companies are “within a decade”. But these timelines are at odds with publicly-funded projects from the EU, China and the UK coming in between 2035 and 2050. The reality is there will be a long lag between “net gain” and commercial electricity supply despite the huge demand. Even if net gain was achieved tomorrow, it will still take the best part of a decade to make a material impact on grid supply. For our purposes we do not need to distinguish between 2030 or 2040. We can put nuclear fusion on the 2030+ timeframe making it hard to see a pathway for VC funding.