A Contrarian Case for Fusion
What is the rationale behind the hundreds of millions of dollars suddenly pouring into nuclear fusion development? How does nuclear fusion become the multi-billion dollar unicorn that investors, oil companies, and society need it to be?
When I was involved in the nuclear fusion research community in 2012, it was almost entirely funded by government science programs (as it had been for decades). Progress was being made but it was slow, costly, and often lacked commercial intent. Since 2012, the nuclear fusion community has made a strategic pivot towards attracting significant venture capital investment. Today, there are over a dozen active nuclear fusion startups that have attracted over $1.25 billion in venture capital. The leading startups include TAE, Commonwealth Fusion, General Fusion, Helion, Tokamak Energy, and First Light. The first two of which have each raised $700 M and $263 M, respectively. These capital raises have included significant participation from oil & gas super majors likes Equinor and Eni.
If one takes a slightly cynical or even practical lens, you might consider these investments more philanthropic than financial, corporate green-washing, or perhaps just ill-informed of the technical risk involved. After all, nuclear fusion (for commercial power) has consumed billions of government research dollars over its 70 year development history. Why could now be its break-out moment? And, why should high-risk investors expect venture-like returns if it does work?
So let’s try to take a contrarian lens, as the most successful venture investors do, and justify why nuclear fusion is a worthwhile bet. Let’s start with nuclear fusion’s unique attributes and compare them against what the power market expects today:
Abundant and Low-Cost Fuel (inherent attribute)
Most fusion reactors run on deuterium, an isotope of hydrogen found in seawater, and there is enough potential energy in fusing deuterium to power civilization for millennia (note: tritium is also needed but only for initial startup and can be procured as a waste product from existing nuclear plants). Extracting deuterium costs ~$1/gram and each gram of deuterium produces ~805 mmBTU. Thus, fueling a fusion power plant costs about $0.001/mmBTU
Market:
Wind and Solar: $0/mmBTU
Natural Gas: $2.25/mmBTU
Nuclear Fission: ~$0.50/mmBTU
Coal: ~$1.90/mmBTU
Clean (inherent attribute)
Nuclear fusion does not produce any CO2 or other green house gases (GHGs). Arguably, this is a necessary quality in all future generation technologies for Earth.
Market:
Wind and Solar: no CO2 or GHGs
Natural Gas: ~117 lbs CO2 per mmBTU
Nuclear Fission: no CO2 or GHGs
Coal: ~228 lbs CO2 per mmBTU
Dispatchable (inherent attribute)
Dispatchability refers to a generator’s ability to produce power on demand. Since we can predictably control a fusion reactor’s fuel and operation, it is dispatchable. Dispatchability is a very important quality in generators because storing electricity is so expensive. Even if you do invest in storage, you are always left with the uncertainty of whether you have enough storage for the most extreme weather events. The longer duration storage you are considering, the more economic a dispatchable generator looks.
Market:
Wind and Solar: not dispatchable
Natural Gas: dispatchable
Nuclear Fission: dispatchable
Coal: dispatchable
Gaseous Fuel (inherent attribute)
This may not seem like an important feature at first glance but the state of a fuel has major implications on its operating costs and short-run marginal costs, which factor into when a generator is dispatched. Gaseous and liquid fuels are easier to transport because they can be pumped. Solid fuels (like coal and nuclear fission) require more handling equipment, which translates to maintenance and cost. It also leads to stockpiling of fuel at the generator site, which translates to sunk cost that incentivizes steady-state continuous operation rather than responsive load following. We will likely never see pipelines of deuterium gas feeding fusion reactors the way natural gas pipelines feed combustion turbines today, but a gaseous supply chain makes for a more nimble cost structure. Additionally, gaseous fuels are far easier to engineer into mobile applications than solid fuels.
Market:
Wind and Solar: N/A
Natural Gas: gaseous fuel
Nuclear Fission: solid fuel
Coal: solid fuel
High Conversion Efficiency (achievable and probable attribute)
To the extent that one thinks of a fusion reactor like any other heat engine bound by the limits of Carnot efficiency (i.e. max efficiency = 1 — ([Temperature of the environment]/[Operating temperature of the reactor])), then the 100,000,000 degree temperature of fusion reactions should enable fusion to wildly exceed the efficiency performance of any thermal generator today. In all fairness, practical engineering considerations lower this theoretical limit dramatically, but there exists a long runway for improvement. Even further, the fact that all fusion cores are plasmas also introduces the prospects of direct energy conversion through electromagnetic means (avoiding Carnot limits all together).
Market:
Wind:
Practical efficiency today: 30–50% (potential energy of wind converted to electricity)
Max theoretical efficiency: 59.3% (Betz’s law)
Solar:
Practical efficiency today: 20% (incident photons converted to electricity)
Max theoretical efficiency: 68.7% (Shockley-Queisser limit)
Natural Gas:
Practical efficiency today: 63% (thermal energy converted to electricity)
Max theoretical efficiency: 86.5% (Carnot limit)
Nuclear Fission:
Practical efficiency today: 30% (thermal energy converted to electricity)
Max theoretical efficiency: ~100%
Coal:
Practical efficiency today: 44–47% for modern ultra supercritical coal (thermal energy converted to electricity)
Max theoretical efficiency: 89.2% (Carnot limit)
Minimal Safety Requirements (probable attribute)
Fusion reactors do not have any of the long lived radioisotopes generated by nuclear fission, and the total quantity of radioisotopes they do have is on par with the level typically scene by medical equipment. Additionally, fusion reactors do not stockpile a large quantity of potential energy the way fission reactors do (another benefit of a gaseous fuel). Therefore, there is neither the potential for a meltdown nor the risk of an unmanageable severe radiological release into the environment. The elimination of these two risks allows for substantial simplification and cost reduction in the power plant design (e.g. no containment vessel, no triple redundant active safety systems, no specialty certified materials or civil work, etc.). Additionally, it opens the door to a new pathway for licensing and regulation (fusion reactors may not need a construction or operating license from a nuclear regulatory body at all). All of this adds up to reduced capital costs, reduced operations & maintenance costs, and potentially broad public acceptance as compared to fission.
Market:
Wind: blade failure, otherwise minimal
Solar: no major concerns
Natural Gas: high pressure equipment; fairly minimal
Nuclear Fission: extensive regulations and engineering to prevent meltdown and radioactive release
Coal: high pressure equipment; fairly minimal
Minimal Security Requirements (probable attribute)
There are two primary reasons nuclear fission plants require heavy and expensive security. 1) the uranium and plutonium inside a fission plants could be used to develop a nuclear weapon and 2) the quantity and type of radionuclides inside a fission plant could be used in a dirty bomb either by stealing the materials or damaging the plant itself. Nuclear fusion does not have either of these risks because such radionuclides and meltdown risk are not present. There are no bomb making materials to steal, and if someone drove a truck bomb into a fusion reactor, it would be very inconvenient, but it would not lead to wider-spread harm to the public (other than maybe a power outage). Therefore, fusion reactors can have an extremely minimal security force, on par with non-fission power plants.
Market:
Wind and Solar: minimal security
Natural Gas: minimal security
Nuclear Fission: extensive security capable of defending paramilitary attack
Coal: minimal security
Minimal Staffing (aspirational attribute)
All generation technologies are incentivized to trend towards autonomy so as to reduce fixed O&M costs. However, the realities of reliably, safely, and securely managing large spinning equipment and other forms of large potential energy leads to a certain headcount. Superior safety and security attributes and reduced moving parts could enable fusion to shrink its head count as low and utility-scale wind and solar today.
Market:
Wind: 120 annual man-hours / MW
Solar: 63 annual man-hours / MW
Natural Gas: 197 annual man-hours / MW
Nuclear Fission: 1,130 annual man-hours / MW
Coal: 925 annual man-hours / MW
Public Acceptance (aspirational but achievable attribute)
One of the most challenging forces facing any power plant project is NIMBYism. Even wind turbines find opponents in neighboring residents who do not want the obstruction to their views or associated noise. While people might generally be more accepting of wind and solar compared to fossil generators, their increased land requirements still make it difficult to site enough generation in the locations it is needed most. Nuclear fission suffers some of the most pushback, particularly as sites approach major urban centers because of the perceived health and safety risk. Nuclear fusion is a blank slate in the eyes of the public. It has the opportunity to establish a public brand that reduces development friction and allows for siting closer to cities, increasing energy revenue and reducing transmission costs. Fusion is clean, safe, dense, and potentially minimalist. There are sure to be antagonists (as there are for constructing anything), but a new standard can be set for integrating infrastructure into the existing environment.
Market:
Wind: noise, visual burden, bird impacts, and large land requirements
Solar: large land requirements, ecological impacts from shading and reflection
Natural Gas: noise, air quality, ugly
Nuclear Fission: major perceived health and safety risks, ugly
Coal: ugly, noise, very bad air quality, very bad water quality
A Path Towards Exponential Improvement and Cost Reduction (potentially killer feature)
What really separates a technology of the future, a technology worth taking a big risk on, from a technology of the past? Many of the attributes listed above are certainly desirable, but are they enough to garner venture capital looking for venture-style returns? What really separates fusion from the incumbent generation technologies is that it offers a pathway for exponential improvement, for 10X superiority in multiple dimensions. Wind, solar, and lithium ion batteries were able to exhibit this same characteristic; investors could project a declining cost curve and rally behind the companies bringing these technologies to market. As the cost curve was empirically demonstrated, cheap capital could pull the future forward. In the case of wind, solar, and lithium ion this cost curve asymptotes towards a relatively predictable raw material cost. If fusion can establish its own cost curve, its raw material cost could be orders of magnitude lower per unit energy and per unit power. Fission failed to ever establish such a cost curve. Instead, it got more expensive with every reactor built because of the layers of complexity injected into it in order to risk manage the public’s lack of trust. Physics was on fission’s side, but our public institutions were not.
Fusion has massive potential for improvement, possibly even rapid and unexpected improvement, when compared to any other generation technology. The cost of a fusion reactor is inversely proportional to its magnetic field strength cubed. If a new material allows the magnetic field to double, the size and cost can shrink by a factor of 8 (87% reduction). Turbines can only suck so much more energy out of a volume of wind, photovoltaics only have so much more sunshine they can convert into electricity, and batteries can only pack so much potential energy in the chemical bonds between atoms in a given volume, but fusion has 100,000,000 more energy density to tap into. The first fusion reactor may not look much different than our power plants today, but the 5th or 6th generation of a fusion reactor could fundamentally change humanity’s relationship with energy.
When deciding to found SpaceX, Elon Musk used the metric of raw materials cost as a percentage of final product price. In the case of rockets, he determined that the raw materials cost for putting something into orbit was about 1% of the price charged by United Launch Alliance, the Lockheed-Boeing JV for launching payloads into space. Therefore, SpaceX had a market with a 99% margin that it could improve upon. The untapped potential of an energy generation technology could be measured by a similar metric: What % of the final price per MWh generated is comprised of everything other than the raw materials cost (fuel, steel, concrete, silicon, etc.)? (Note: this is different than the amortized capital cost of construction). One might consider this metric “the amount of potential innovation still left in the technology.”
Market:
Onshore Wind: 52%
Utility-Scale PV: 73%
Combined-Cycle Natural Gas: 81%
Ultra-Supercritical Coal: 86%
Nuclear Fission: 99%
Jake Jurewicz offers professional consulting at 1st Principles Consulting, LLC.
