23 Dec 2021
Should there be a Nuclear Fusion Megafund?
In our previous blog concerning the latest affairs in the energy sector, we discussed the viability of nuclear fusion reactors as the future baseload power source of our national grids.
It was determined that if this conceivability is to become at all possible, then it would require serious private investment. Thus, in this blog we turn our attention upon the matter of whether it is time to place a macro bet on nuclear fusion?
With the funding for nuclear fusion in the US peaking during the energy crises of the 1970s, and sharply decreasing in the 1980s, where it has remained constant until now, it is clear that research into fusion has been traditionally underfunded. Subsequently, in recent years, companies have slowly begun to transition away from government labs, and towards the private sector.
The Fusion Industry Association is a non-profit organisation comprised of 22 private companies researching the depths of commercialising fusion power. Yet, regardless of its recent developments, fusion has not seen the proliferation of investor capital it is warranted; Investors seem to be stuck in the thrall of more standard solar and wind technologies.
Zach Halem, a researcher at MIT’s Laboratory for Financial Engineering (LFE), suggests that fusion is presented to investors as too much of a high risk, high reward opportunity. Thus, if more money is to be infused into the fusion eco-system, it is imperative that the investment model is re-assessed.
The risk at the moment is that each of the 22 companies in the FIA fall broadly into 3 categories: magnetic confinement, inertial confinement and magneto-inertia confinement. Moreover, each category hides further sub-categories. For example, within magnetic confinement, companies such as CFS and Tokamak Energy utilise a tokamak design, yet others, such as Renaissance Fusion and Type One Energy are developing a stellarator design.
Subsequently, given the uncertainty surrounding all the specific concepts within fusion technology, the risk for investors needs to be reduced. Rather than an investor placing a bet and investing in a specific concept, it would perhaps be more enticing to invest if they were able to place a bet upon the success of nuclear fusion in its totality.
To reduce the risk, there needs to exist an amalgamation of many projects into one single financial entity. By investing into this ‘megafund,’ investors are able to cover a range of different technological approaches, therefore enabling them to significantly increase their odds of benefitting from major success.