Revitalising Nuclear: The UK Can Be the Home of Commercial Fusion

Energy has always been a driver of human progress. The future of global health, security and prosperity all depend on reliable access to clean, affordable energy.

This is more important now than ever. The twin transitions of artificial intelligence and energy mean that the world is becoming increasingly hungry for clean energy to power future development and prosperity. But even discounting the AI revolution, global energy demand is expected to grow 50 per cent by 2050.^[_]

Humanity’s future success hinges on its ability to rapidly expand access to clean, abundant power.

The promise of nuclear fusion has long been considered the holy grail of energy technologies. Mimicking the process that powers the stars, nuclear fusion has the potential to provide cheap, reliable and abundant energy. The fuel would have an energy density a million times greater than fossil fuels, no long-lived radioactive waste, and no intermittency or land-use problems – unlike wind and solar. Fusion could be transformative, ushering in a high-energy, low-carbon future and significantly accelerating progress.

This is why the promise and potential of nuclear fusion has captured the imagination of the scientific community for decades. However, despite considerable efforts and early optimism, tangible progress has been elusive. But now, propelled by reports that the National Ignition Facility (NIF) achieved the milestone of net energy gain in December 2022, the fusion industry is now entering a new phase of considerable strides forward.

Fusion is no longer just a science project. Thanks to scientific breakthroughs and the acceleration in its development enabled by the current technology revolution, fusion is an industry on a path towards commercialisation. Exciting startups are emerging, new solutions are being developed, commercial deals are being signed and more investors are entering the field. The question is no longer whether fusion will happen but when – and who will reap its economic and strategic benefits.

With the right focus, this could be the United Kingdom.

The UK has a long history as a world leader in fusion research and development. As the home of the Joint European Torus, and with strong capabilities in plasma physics and related fields such as materials and robotics, the UK has all the characteristics of a potential fusion superpower.

But the competition is fierce. The United States has a flourishing fusion startup ecosystem, while France, Germany, South Korea and Japan are developing their own impressive programmes. China, for its part, has underscored its belief that fusion is central to the future of energy, investing heavily in the technology and positioning itself for potential dominance, as it has in solar and batteries.

The UK cannot afford for fusion to become yet another case in which the country has led in early research and development only for the economic and strategic gains to accrue elsewhere. Fusion will drive growth, create jobs and boost exports. Its benefits extend far beyond the realm of energy, as the goal of achieving a commercially viable fusion reactor is spurring innovation in materials, robotics and analytical tools with applications across sectors, including infrastructure, defence and medicine. These advancements and technological spillovers could be worth trillions for the countries that lead in the field.

Realising that value will require focused efforts to build on existing strengths and recognise fusion as one of our country’s key strategic assets.

The previous government’s £346.7 million investment in the UK Atomic Energy Authority (UKAEA) has already yielded a £1.4 billion return^[_] – a figure that is only expected to rise. The UK’s STEP programme is one of the most advanced commercial fusion programmes in the world. The UK was the first country to begin creating a regulatory system for fusion^[_] and to establish impressive R&D facilities. Britain also hosts promising fusion startups such as First Light Fusion and Tokamak Energy.

Building on these assets requires the following set of actions:

1. Giving the UKAEA a longer spending horizon and freedom over salaries. This should include allocating ten years of funding – in line with the government’s proposed approach to R&D more widely – and exempting UKAEA from civil-service pay controls to help attract and retain talent.

2. Integrating fusion into the planning system and creating an integrated regulatory package for startups. This should include amending the 2008 Planning Act to include fusion energy for heat and electricity generation in the Nationally Significant Infrastructure Projects (NSIP) scheme; introducing a new National Policy Statement for fusion that accurately reflects the technology’s risk and value; reforming the NSIP planning regime to ensure that decisions on STEP and future fusion reactors are made rapidly; and a new fusion team in GB Energy.

3. Creating new demand-side levers to de-risk investment and create demand certainty. This includes exploring two options: an Advance Market Commitment, similar to the one Microsoft has signed with US company Helion, or a Contracts for Difference scheme based on the same principles that successfully drove investment in and lowered the cost of offshore wind.

4. Setting up an “Energy Access” fund for fusion. Given the potential geopolitical significance of fusion, the UK should establish a fund – capitalised by the National Wealth Fund – to attract and de-risk investment from the private sector, while inviting other allied countries to contribute.

Fusion seeks to replicate the nuclear reactions at the core of stars. In simple terms, it works by fusing two light atomic nuclei together to become a heavier one, releasing a tremendous amount of energy. This is the opposite process of fission reactions, which release energy by splitting heavy atoms apart.

Fusion offers considerable benefits, including the potential for energy abundance. The most common fuel combination, deuterium tritium, can easily be produced at scale: deuterium is cheaply sourced from seawater, while tritium is generated during the fusion process using lithium.

Per kilogram of fuel, fusion could generate nearly four times the energy of fission and nearly four million times that of burning oil or coal. In theory it is possible to produce a terajoule of energy with just a few grams of nuclear fuel, about the amount of power one person living in a developed country uses in 60 years.^[_] Like fission, fusion can produce round-the-clock power that doesn’t emit greenhouse gasses. But unlike fission, fusion does not create any long-lived radioactive nuclear waste. Because fusion is not based on a chain reaction, the reactors are considered intrinsically safe.^[_]

However, achieving fusion is a complex task.

To initiate it, atomic nuclei must overcome the strong forces that keep them apart and come close enough for the strong nuclear force to take effect. This typically requires the input of sufficient energy, which can be achieved through extreme conditions such as high temperatures or pressures. Under these conditions, the fuel atoms become fully ionised, forming a plasma of nuclei and electrons. The plasma must then be confined at appropriate densities and for sufficient durations to allow fusion reactions to occur and produce net energy.

Keeping the fuel at high temperatures and packed together for a sufficient amount of time involves a number of complex challenges, including controlling plasma behaviour, ensuring effective confinement, and developing materials and control systems that can withstand the harsh conditions in a fusion reactor. Overcoming these hurdles to create a sustainable fusion reaction that produces more energy than it consumes remains the goal of fusion research.

Despite decades of research and the numerous design concepts that have been developed, the journey towards practical nuclear fusion has been anything but straightforward.

While the potential of fusion has been widely celebrated, the field has faced consistent delays and setbacks. Concepts for fusion reactors emerged as early as 1939, and the first patent for a fusion reactor was granted in 1946. Throughout the 1950s, 60s and 70s, there was growing optimism, particularly with the development of magnetic-confinement devices such as the tokamak, which showed promise in containing the high-temperature plasma needed for fusion.

But progress stalled as technical challenges, such as sustaining stable plasma conditions, proved more difficult than initially thought. As a result, many of the breakthrough moments that seemed imminent ultimately fell short of delivering a practical energy source.^[_]

The quip that fusion technology is “always 30 years away” has become a common joke –perpetually within reach but elusive in practical terms.

Despite progressing more slowly than its early promise suggested, fusion research and development has continued to make significant strides. In December 2022, NIF at the Lawrence Livermore National Laboratory in California achieved a major milestone: the first net-energy-gain reaction, in which a 2.05-megajoule laser pulse produced 3.15 megajoules of fusion-energy output.^[_] This has been replicated four times, increasing the energy generated each time.^[_]

In the realm of magnetic-confinement fusion, the Joint European Torus (JET) in 2021 set a record by sustaining a reaction for 5.2 seconds at 150 million degrees Celsius,^[_] generating 69 megajoules of energy from just 0.2 milligrams of fuel,^[_] a feat that was only a factor of five short of the ignition criterion.^[_] The limiting factor was the experimental hardware, not plasma stability – an encouraging sign for future reactor designs.

Meanwhile, China’s Experimental Advanced Superconducting Tokamak, dubbed the “artificial sun”, made history in 2022 by maintaining steady-state high-confinement plasma for 17 minutes at a staggering 70 million degrees – five times hotter than the sun.^[_]

These breakthroughs only mark the beginning of the fusion age, with development expected to accelerate in the next few years. While sustained progress in plasma physics plays a role, it is significant technological advances that make fusion more achievable than ever.

Recent advances include:

• Superconducting magnets: Advances in high-temperature superconducting magnets make it possible to build smaller, more effective and cheaper magnets for magnetic confinement. These magnets, in the form of tape, can achieve the same performance as conventional low-temperature superconducting magnets in devices 40 times larger.^[_] They will enable tokamak and stellarator designs to achieve stronger magnetic fields, confining hotter, denser plasmas within a smaller reactor footprint, potentially reducing costs and accelerating scalability. This is the basis for Commonwealth Fusion Systems’ new SPARC reactor (“smallest possible ARC”, with ARC standing for “affordable, robust, compact”),^[_] which many believe could be the first private-sector reactor to come online. By making its magnets with a special barium-copper-oxide tape, Commonwealth has found that it can achieve magnetic fields more powerful than the ones anticipated at the International Thermonuclear Experimental Reactor (ITER), but one-fortieth of the scale.^[_],^[_]

• Laser development: Advancements in laser fusion have often been considered several years behind magnetic fusion. However, recent progress in laser technology could improve the energy efficiency of inertial-confinement fusion. Innovations in high-powered lasers and precision targeting have advanced internal-confinement fusion. Effective diode lasers, originally developed by the telecommunications industry, have made possible the rapid compression needed to initiate fusion reactions with greater energy gain, bringing laser-based approaches closer to viability.^[_],^[_] This will be crucial, as achieving energy net gain at NIF required 322 megajoules just to run the laser.^[_]

• Advanced computing and AI: Breakthroughs in advanced computing and AI are enhancing the modelling and control of plasma behaviour. These technologies enable real-time adjustments during operation, optimising reactor performance. For instance, NIF has highlighted the transformative role of high-performance supercomputers and new “deep learning” techniques. These tools process, analyse and simulate the huge amounts of data produced by diagnostics. High-resolution 3D modelling has significantly improved their ability to match, and even predict, experimental results to enable the feat of net-gain fusion.^[_] Similarly, advanced computing is making more complex designs such as stellarators more feasible. For instance, the German company Proxima Fusion is using simulation-engineering to accelerate the development of its quasi-isodynamic stellarator design.^[_]

• Power electronics: Advancements in power electronics, specifically advanced microprocessors, enable enhanced speed and precision. These innovations are making previously discarded designs feasible, such as Helion’s approach, which directly generates electricity rather than producing heat that must be converted into electricity.^[_]

The impact of these developments is significant.

First, they are making the path to low-cost fusion viable on a shorter timescale.

There are still significant challenges on the path to fusion – for instance, optimising energy-conversion systems or developing materials that can endure extreme temperatures and withstand neutron bombardment. But the pace and scale of the current technological revolution make it likely that the world can overcome these barriers and are helping to accelerate development of working, commercial reactors.

Second, as technological progress is making a wider range of fusion design feasible, designs have become available that may be lower cost or easier to scale than those previously developed.

This means that fusion research is not limited to a single path towards success. Each approach comes with its own set of challenges and trade-offs – from plasma stability and energy efficiency to the availability of materials and the complexity of reactor designs – but the diversity in approaches drives innovation within the field and increases the chances that a viable, low-cost solution will eventually emerge.

Such a breadth of solutions can enable a wider range of applications for fusion. For instance, smaller power plants could support decentralised power grids, directly power industry or AI data centres, or even drive new use cases such as fusion rocket engines. The US Defense Innovation Unit, for example, is testing such engines with the US-based company Avalanche Energy.^[_]

The result is that the fusion sector has now entered a new phase as an emerging, diverse industry on the road towards commercialisation.

This progress is completely transforming the fusion sector. Fusion development is now no longer simply about basic science and governments creating devices for research: it is about nurturing and building a whole industry.

Such development has already started, as can be seen in the surge of private-sector startups over recent years and the early formation of a supply chain. Moreover, the fusion industry is creating spillover technology innovations that benefit other sectors, driving income and technological progress.

The question now is how to enable and accelerate this development to support advancement and commercialisation in fusion plants, scaling supply chains, and deploying the spillovers fusion development has to a wide range of applications across society.

The Birth of a Thriving Private Fusion Sector

For decades, fusion research and development has been exclusive to a handful of national and international labs. These have included large international projects such as JET in Oxfordshire and its successor ITER in France, as well as research conducted in physics departments around the world and in national fusion-research labs in countries like the US and the former Soviet Union.

Now, this picture is transforming rapidly. In addition to continued, and often increasing support for government-led projects, a number of private-sector actors are entering the race to become the future power companies in an industry that is likely to be worth trillions of dollars.^[_]

There are now more than 45 private fusion companies, many of which were founded only in the last few years. These companies aim to fast-track fusion’s commercialisation by developing smaller, more cost-effective reactor designs. Rather than focusing on research only, most of these startups are looking to deliver fully working reactors based on a range of different designs and approaches. Many of them are now aiming for fusion plants that will deliver electricity to the grid before 2035 – or even as early as 2030^[_] – a stark contrast to the decades-long “30 years away” narrative.

These companies have attracted more than $7 billion in investment globally, up $1 billion between 2023 and 2024,^[_] and from an increasingly wide range of investors.^[_] Most funding comes from investment firms, but substantial capital is also provided by high-net-worth individuals such as Bill Gates, Jeff Bezos, Sam Altman and Peter Thiel. There is also increasing interest from other types of investors, including energy companies like Eni and Equinor, as well as sovereign-wealth funds, with contributions from both Singapore and Malaysia to fusion ventures.^[_] Microsoft has also signed an Advance Market Commitment with Helion and agreed to deploy a future fusion plant next to their steel operations.^[_] While the amount of funding has increased rapidly over the last few years, the private fusion industry is still underfunded compared to the progress of the research.^[_]

It is impossible to predict at this stage which companies or technologies will become the power companies of the future. The reality is that the vast majority of the solutions being developed will not come to fruition, many of the ambitious timelines are likely to slip, and a number of companies will probably specialise in specific parts of the supply chain rather than develop a full-scale reactor as they struggle to bridge the funding gaps in the sector. However, regardless of who succeeds or how many companies emerge as leaders, a thriving startup environment will accelerate fusion’s path towards commercialisation.

Growing the Supply Chain

The increased push to develop commercial reactors at speed, scale and low cost is also turbocharging the need to create a supply chain for fusion components.

As a result, the number of private companies looking to operate within the fusion supply chain has grown in recent years, as they seek to capture value in the future fusion economy. The fusion supply chain was worth more than $600 million in 2023 – a figure that is widely recognised to be an undercount – and projected spending is expected to soar to over $7 billion for their first-of-a-kind power plants.^[_] This growth is reflected in the reported 21 per cent planned increase in supply-chain spending for 2024 compared to 2023.^[_] Key investments include vacuum pumps and chambers, specialised materials, power electronics, and control systems.

The supply chain represents a challenge for industry. Fusion reactors will rely on advanced components that are often highly complex parts produced in small batches by specialist suppliers. Scaling these to high-volume production, particularly ahead of demand, will a be challenge.^[_]

But the fusion supply chains of the future will not just rely on established technologies; they will require a series of new solutions to address numerous practical engineering hurdles. While some enabling technologies are already under development, solving the complex challenges needed to make low-cost fusion a reality involves further innovation in a range of areas, from new materials to advanced management systems and energy-storage solutions.

Harnessing Spillovers to Other Industries

This innovation process won’t just shape the future fusion supply chain – it will also drive technological progress with spillover effects far beyond the fusion industry.

In many ways, the current period of fusion development is similar to the space race of the 1950s and 60s. The goal of landing a man on the moon catalysed a wave of technological breakthroughs, many of which transcended their original purpose. For instance, NASA’s quest for space exploration led to the creation of memory foam, cordless tools and even modern firefighting equipment. Similarly, advanced computing, satellite communications and GPS, which now underpin global industries, all stem from this era of rapid progress.^[_]

Just as the space race reshaped the technological landscape, the fusion race has the potential to drive breakthroughs that could impact daily life in unimaginable ways.

Some developments are already emerging:

• AI developments: The computational models and systems used in fusion research are pushing the boundaries of AI and machine learning, enabling new modalities in fields such as drug discovery, robotics and materials design. The ability of fusion research to accurately simulate complex systems could be repurposed for a range of scientific and industrial challenges. The Oxford spinout company Mach42^[_] has developed AI solutions to speed up plasma simulation that it is now applying to semiconductors to halve the time from design to market. Another spinout, Luffy AI,^[_] utilised an adaptive Al framework to develop software control systems for industrial processes and robotics systems. University of Exeter spinout digiLab has been working with the high-performance computing team at Culham to hone its software. That collaboration has recently enabled the UK Atomic Energy Authority (UKAEA) engineers to reduce the number of experiments they need to run by a factor of 30, and the team is now expanding their use cases into other areas of complex engineering.

• Superconductors: High-temperature superconducting (HTS) magnets were originally created to enable magnetic confinement in fusion reactors. These magnets are cheaper to produce, more robust and more efficient than their low-temperature superconducting counterparts, making them attractive for a variety of industries. HTS magnets could be used in medical imaging, particle accelerators and other scientific applications, but they could also open new markets in areas where such magnets were previously too expensive or impractical. Tokamak Energy, a UK-based fusion company, has already secured a deal with the US Defense Advanced Research Projects Agency (DARPA) to use their HTS magnets in magnetohydrodynamic propulsion systems for submarines.^[_] HTS magnets can also be used in nuclear-magnetic-resonance machines, making them cheaper, more efficient and potentially more powerful, which would represent a significant advancement in scientific and medical-research technology.

• Energy storage: Fusion research has also led to progress in energy-storage technology. Technology developed by TAE Power Solutions was originally invented to collect and store megajoules of energy and deliver precise sinusoidal waves to TAE’s fusion-research reactors. Now, however, it has been adapted to enable electric vehicles to charge twice as fast, achieve 10 to 15 per cent longer range and have greater durability compared to conventional battery-electric powertrains.^[_] Because a number of fusion solutions rely on effectively using and storing energy, this area will likely develop further as the industry moves towards electricity generation.

• Manufacturing: Fusion development is also set to revolutionise manufacturing. For instance, the National Ignition Facility at Lawrence Livermore National Laboratory relied on unweldable alloys for its fusion chamber, inspiring the creation of Seurat Technologies, which develops the world’s largest and cleverest 3D printers.^[_]

• Life sciences: Fusion companies are also increasingly commercialising life-science applications. Companies like SHINE Technologies^[_] are using fusion technology to produce molybdenum-99, a parent isotope to technetium-99m – a radioactive isotope widely used in medical imaging, particularly for SPECT scans. This means key medical isotopes can be produced without research reactors or highly enriched uranium. SHINE has also begun using fusion technology for the commercial production of lutetium-177, which is pivotal for the development of radiopharmaceuticals that can treat various cancers effectively. Similarly, in Britain, Astral Systems is developing a compact-fusion neutron source and is already talking with NHS trusts about supplying critical radioisotopes (including iodine-131 and actinium-225) to cancer units.^[_] TAE Life Sciences^[_] has developed compact particle accelerators capable of generating focused neutron beams. These beams can be reconfigured for medical applications and could improve cancer treatment by targeting tumours more precisely.

Spillover effects will only grow.

The materials needed to withstand the extreme conditions inside a fusion reactor could have applications in aerospace, defence and any field that requires components to endure high temperatures, radiation or corrosive environments. Similarly, robotics systems designed for handling delicate operations in reactor cores could be adapted for use in hazardous environments such as nuclear decommissioning, space exploration or deep-sea operations. Fusion will also require vast amounts of data to be moved and processed far faster than currently possible and is likely to drag areas such as photonic and quantum sensing as well as computing forward.

Investment, therefore, is not simply based on when a commercial reactor will come to market. Even if the fusion industry fails to reach net power within set timelines, the technology developed in pursuit of fusion can be worth billions in the process.

The fusion sector is at a crucial point in development. Investment now will pay off by driving progress and economic value to the countries that can harness it.

The significant strides in fusion in recent years have reignited global interest, drawing the attention of countries eager to lead in the field.

Energy has shaped geopolitical patterns for centuries. In recent decades, global power has been shaped by the distribution of fossil-fuel resources, with energy-rich countries like Saudi Arabia, Russia and the US exerting significant influence. Now, patterns are being reshaped by renewables, with China’s dominance in key supply chains becoming a growing focus of government policy across the West.

Fusion could represent a new frontier for energy geopolitics and shape future global economic patterns.

Low-cost fusion could finalise the shift away from the oil and gas age, deliver energy independence, and lift billions of people out of energy poverty. It could revolutionise access to plentiful electricity across the world and accelerate development of energy-intensive, but much needed, processes such as fertiliser production or water desalination. If successfully commercialised, fusion energy could mitigate conflicts over finite resources and promote a more stable and sustainable global energy order.

But fusion could also become a new frontier for countries seeking technological supremacy. Those that pioneer fusion technology could become energy-exporting leaders and redefine global influence, mirroring China’s current hold on solar and electric-vehicle supply chains.

There is considerable reason to believe that China will seek technological supremacy in fusion. For example, in a recent meeting China’s State Council declared that “controlled nuclear fusion is the only direction for future energy”.^[_]

The state appears to be backing up this belief with action. Having previously been a relatively underdeveloped actor within fusion, the country is now accelerating its efforts and positioning itself as the key player in the race to commercialise fusion.

China has developed an ambitious fusion programme over the past few years. Its new state-of-the-art research facilities were built in record time and are widely considered to be more advanced than anywhere else on the planet. Reactors are reported to operate 24 hours per day.^[_] In January of 2024, China launched a new national industrial consortium to advance fusion technology and created a new enterprise, Fusion Energy Inc, to centralise the country’s resources.^[_] China is now outspending the US on fusion, committing $1.5 billion annually to research – more than double Washington’s fusion budget.^[_]

As with solar and electric-vehicle technology,^[_] China has adopted a “fast follower” strategy. The country is currently focusing on designing a tokamak, having already built three research reactors. In addition to government projects, new fusion startups are emerging, though many Chinese designs are widely considered to be copies of existing US or UK designs. For example, China’s tokamak design closely resembles those of Commonwealth Fusion Systems in the US and Tokamak Energy in the UK. Last year, Helion accused two Chinese startups of copying the designs for their reactors.^[_]

The emergence of China as a fusion leader creates an important strategic imperative for other countries. Unless countries outside of China invest now, it could be too late. China could gain dominance in fusion, much as it has in the solar supply chain, leveraging its geopolitical edge to export Chinese-designed reactors and supply-chain components to countries worldwide.

The US is the other potential fusion superpower, but it takes a significantly different approach.

China pursues state-sponsored projects and pours in significant money to accelerate development, but the US has a far more vibrant private sector. Of all the fusion companies established since 1992, more than 50 per cent are American compared with 4 per cent being Chinese.^[_] The US also houses some of the world’s most well-funded fusion startups, including Commonwealth Fusion Systems, which has attracted $2 billion of the $7.1 billion in private funding for fusion.^[_] The country’s deep capital markets will give it an immediate advantage in developing the fusion companies of the future.

To date, public-sector support in the US has been less significant than in China. However, the US is taking steps to emulate the successful Commercial Orbital Transportation Services milestone programme, which resulted in SpaceX. Through the Milestone-Based Fusion Development Program, the Department of Energy (DOE) has selected eight companies to develop fusion pilot-plant designs and address related scientific and technological challenges within five to ten years. DOE initially awarded $46 million for the first 18 months of work,^[_] a figure widely considered to be far lower than what is needed to support the development of the fusion industry, let alone to foster the necessary manufacturing capabilities and supply chains.

China’s rise as a major fusion investor is reflected in its annual equity investments in fusion companies. Equity funding to fusion companies in China exceeded that in all other countries combined in 2023. In 2024 this trend turned again, suggesting that the fusion race is on.^[_]

While the two major technology superpowers of our time are likely to also be leaders in nuclear fusion, this need not be a race between China and the US alone.

Other countries are also accelerating their efforts, seeking to take a stake in the future fusion economy.

Germany has a long-established fusion programme, but in recent years efforts have accelerated at the Max Planck Institute for Plasma Physics (IPP), the Karlsruhe Institute of Technology (KIT) and the Jülich Research Centre (FZJ), leading to the emergence of promising companies like Proxima Fusion. In March 2024, Germany announced its Fusion 2040 programme,^[_] pledging more than €1 billion for fusion research by 2028 to support a range of technologies and build a supply chain. The country’s aim is to build its first fusion plant by 2040.^[_]

South Korea began fusion development in the early 2000s, and its Korean Superconducting Tokamak Advanced Research (KSTAR) has set multiple records. Now, the government is investing in wider fusion supply chain and industrialisation, with the aim to produce a pilot reactor for operation in the 2040s.^[_]

Japan has recently accelerated its plans for fusion commercialisation. The government now aims to generate electricity from fusion by the end of the 2030s,^[_] which is an acceleration of its original 2050 timeline.^[_] The public-sector fusion Moonshot Research and Development programme was launched to fund development and began accepting applications in 2024. It also established J-Fusion, a consortium of Japanese companies, to accelerate fusion progress in the country.^[_] Their strategy is explicitly focused on fusion industrialisation and aims to improve the partnerships with startups across different methods, such as domestic Kyoto Fusioneering and Helical Fusion.^[_]

Overall, 2024 saw a significant increase in the amount of government direct grants or cost sharing. Shares in public-private partnerships that went into fusion companies worldwide – rising from $271 million in 2023 to $426 million in 2024.^[_]

The growing number of countries in the fusion race will accelerate the development of international supply chains and deepen global collective knowledge on fusion. But it will also create an increasingly competitive environment, where countries will seek to reap the benefits of the future fusion economy and become the home to future fusion companies.

This means that the next few years will be crucial in determining which countries will play a role in the fusion industry of the future.

Creating a UK Strategy for Commercialising Fusion

The UK has a long and proud history of leadership in fusion research and development and is widely considered one of the few countries that can compete with China and the US and capture large value from the future fusion industry.

The country had a pioneering role in early atomic-energy research, in particular plasma physics and magnetic confinement. From the 1940s, British scientists, particularly at the Atomic Energy Research Establishment in Harwell, played a significant part in early nuclear research, including fusion. The first fusion reactor designs were conceived by British scientists in the 1940s.^[_]

The country has had dedicated fusion research facilities since the 1950s, and in 1960 the UKAEA established the Culham Centre for Fusion Energy. Culham became the hub for the UK’s fusion experiments, in particular specialising in tokamaks. In 1977, the European Community selected the UK’s Culham site to host the Joint European Torus (JET), a pan-European fusion experiment. JET began operating in 1983 and quickly became the largest and most successful fusion experiment in the world. The decision to locate JET in the UK firmly established the country as a leader in international fusion research.

Britain’s long history in nuclear fusion R&D has placed the UK as a leader in the technology. Considered to have a world-leading skills base in plasma physics and strong R&D in key supply-chain components like robotics, magnets, materials, the tritium fuel cycle and sensors and diagnostics for fusion, the UK has a number of basic strengths.

Now the country must harness this strength in R&D and translate it into a fully fledged commercial strategy.

The UK has already started this journey. In 2020, the country launched the Spherical Tokamak for Energy Production (STEP) programme to be built in Nottinghamshire. This project aims to deliver energy from fusion to the national grid by 2040.

This is the world’s first government-led programme to create a commercial reactor that produces power for the grid. STEP is widely considered an important and globally significant project that can further drive the skills and supply chains needed for fusion, and help unblock the regulatory barriers to rapid fusion deployment to ensure the UK continues to lead on this new technology and emerging industry.

The fusion research community around Culham has also resulted in some promising fusion spinouts, such as fusion companies like Tokamak Energy and First Light Fusion.

These are strong foundations, but without continued government support and a radical agenda that reflects fusion’s move towards commercialisation, the UK will be left behind. Having led the way on the science, this is the moment for the UK to lead the way on commercialisation and reap the economic and strategic benefits of the technology.

To promote progress, the UK government needs to be a stronger, nimbler partner for the scientific community and the private sector. The country needs a strategy that fully engages with the requirements, risks and opportunities in fusion’s commercialisation phase as well as the UK’s relative strengths and opportunities in the fusion supply chain.

There are three core considerations a UK strategy should take into account.

First, the direction in which fusion will develop is impossible to predict. There are a number of designs being pursued by a number of entities and it is currently impossible to know which design will prove most cost-effective and valuable in future energy systems around the world. There could be several concepts that get to the end goal of providing energy through a fusion reaction, just as helicopters and airplanes both operate based on the principle of lift.

For this reason, it is in the UK’s interest to develop a thriving and diverse fusion industry and build skills, capabilities and regulatory frameworks that put the country in a position of strength regardless of which technology wins out.

Second, even though it is uncertain which solutions will ultimately win out, there is significant value in a state-sponsored programme like STEP, which is intended to demonstrate electricity production to the grid. More importantly it is designed to help build upon the UK’s R&D expertise to move the country’s industry towards commercialisation and develop the supply chain and skills needed for the future fusion technology.

A government-backed programme is uniquely well-placed to do this, by de-risking the financing hurdles involved in developing a large first-of-its-kind project, working as an integration point across a number of streams of associated R&D and giving the government a stake in creating a permissive regulatory environment for a new technology. As fusion designs will have a number of similar components regardless of the technology, investment in any fusion technology will help drive investment in the future supply chain and skills ecosystem.

Finally, while the UK can aim to become the first country to commercialise fusion, fusion development is not purely a competitive process. Continued collaboration on R&D as well as the supply chains, skills and regulation needed for commercialisation will be essential to accelerating fusion development, and the UK should take an active role in encouraging and facilitating this. While the UK has strengths in the fusion supply chain, there are a number of areas where other countries will be best placed to lead and innovate, necessitating collaboration and a future trade strategy.

Therefore, to navigate the uncertainty of this current phase and hedge our bets for future success, the UK strategy should have three dimensions:

1. Accelerate STEP: The UK should continue the work to prove fusion can be commercial and build the UK fusion skills and supply chain through STEP. Fusion technology will require significant capital and backing to deliver a working commercial reactor. This is essential as private power-generation companies will not adopt a new technology until there are reliable demonstrations that it can operate on a commercial scale, giving them the confidence in the positive economics of investing in the technology. STEP could also be a driver of a viable skills pipeline and supply chain within the UK, as well as functioning as a government-backed trailblazer for the creation of an effective route to market for fusion reactors.

2. Attract startups: The UK already has some promising fusion startups, but the country should continue to nurture and grow this community, including by attracting companies from other countries or becoming the hub for European and Middle East operations of future fusion companies. While the country cannot compete with the likes of the US on financial incentives, an attractive package of siting, regulation and clear route to market combined with deep skills, strong R&D facilities and a robust domestic supply chain should make the UK an attractive market for the fusion industry.

3. Drive international collaboration: The UK should continue to maintain an international leadership role, fostering international relationships among partners for R&D and international supply chains. An international approach can also help create demand and a pipeline of projects across the world, to help create the certainty for the supply chain.

A strategy with these three strands could place the UK at the centre of the future fusion industry. But for this strategy to be successful, it needs to be backed up by a strong policy agenda.

Driving the industry towards commercialisation presents different challenges than when fusion was mainly in the realm of science. While there continue to be scientific challenges that should be explored, creating a fusion industry will also involve addressing questions around accelerating manufacturing and building a supply chain ahead of demand, creating a permissive regulatory environment for fusion, and attracting capital to finance the development of a technology with high uncertainty and long return profiles.

These challenges require the government to act as a strategic partner for the private sector.

The fusion-policy environment initiated under the former government began to put in place some of the foundations to help accelerate this process and address the barriers to the commercialisation phase. By commissioning STEP and beginning to introduce a regulatory environment for fusion, the UK has put itself further ahead than many other countries on building a fusion supply chain and market. The Fusion Futures programme, which represents up to £650 million of additional investment for the industry until 2027, also sets the ambition for new funding for infrastructure and the skills pipeline.^[_] The government’s decision to stay out of Euratom and thereby not contribute to ITER but rather use the funds for a domestic project towards commercialisation also shows foresight in a rapidly developing landscape.

The current government has continued this work, with further funding of £410 million for 2025–26 to support STEP and UKAEA R&D work. The announcement in the AI Opportunities Action Plan that Culham will be the country’s first AI Growth Zone is an important step forward. As home to a 400-kilovolt transmission-grid connection that has been unused since JET was decommissioned, Culham is a strong choice of location. This could be an opportunity for both inward investment into Culham and to create the compute power to make the UK a world leader in AI for fusion.

But the UK must go further, faster to stake its claim in the fusion economy of the future.

This will require an ambitious strategy and smart policy interventions. The reality is that the UK cannot compete with the deep capital markets of the US or the sheer scale and speed of Chinese state-sponsored programmes. Instead, the UK can utilise its unique strengths to compete. This means building upon strengths in science and research, being faster and nimbler, and effectively utilising international relationships for success.

Building a UK fusion industry is a real test for whether the UK can do industrial strategy. It is an area where we have a significant comparative advantage, but where harnessing it will require an integrated and coordinated strategy backed by strong policy and smart delivery.

An ambitious fusion industrial strategy for the UK will include:

1. Giving the UKAEA a longer spending horizon and freedom over pay. This should include funding for the UKAEA over ten years – in line with the government’s proposed approach to R&D more widely – as well as helping UKAEA to better maintain and attract talent by exempting it from civil service pay controls.

2. Integrating fusion into the planning system and creating an integrated regulatory package for startups. This should include amending the 2008 Planning Act to include fusion energy for heat and electricity generation in the Nationally Significant Infrastructure Projects (NSIP) scheme; introducing a new National Policy Statement for fusion that accurately reflects the technology’s risk and value; reforming the NSIP planning regime to ensure that decisions on STEP and future fusion reactors are made rapidly; and a new fusion team in GB Energy.

3. Creating new demand-side levers to de-risk investment and create demand certainty. This includes exploring two options: an Advance Market Commitment, similar to the one Microsoft has signed with the US company Helion, or a Contracts for Difference scheme, similar to the same principles that were used to drive investment into and drive down the cost of offshore.

4. Setting up an “Energy Access” fund for fusion. Given the potential geopolitical significance of fusion, the UK should set up a fund to attract and de-risk investment from the private sector, capitalised by the National Wealth Fund, inviting other allied nations to contribute.

Empowering the UKAEA to Deliver and Strengthen the Culham Campus

The UKAEA is the domestic champion for the UK fusion industry. It is responsible for leading the UK’s fusion-energy research and development, managing key facilities like the Culham Centre for Fusion Energy, fostering technological innovation and skill development, and promoting collaboration with industry to advance the commercialisation of fusion energy. This is in addition to oversight of STEP delivery, which is the remit of the UKAEA’s new subsidiary UK Industrial Fusion Solutions Ltd.

The UKAEA has received significant government support for fusion development. The previous government invested more than £700 million from 2021–22 to 2024–25 to support the UKAEA’s cutting-edge research programmes and facilities, and £126 million in 2022 to boost UK fusion programmes.^[_] This shows a strong commitment to fusion and has yielded results – for every £1 invested in UKAEA, there is a return of approximately £4, and the government’s investment in fusion energy generated an average of 4,000 jobs per year in the decade to 2020.^[_]

But as fusion development is accelerating, more could be done to support the UKAEA to stay at the forefront of fusion development in a rapidly evolving field.

To date, government processes and onerous oversight processes have slowed progress down unnecessarily. As set out in the TBI report A New National Purpose: Innovation Can Power the Future of Britain, the UK must change how R&D investment is made, moving away from the “accountant” mindset in the government.

There have already been examples of where government micromanagement has slowed progress. For instance, when the UKAEA sought to establish the new company to deliver STEP, it took two years to get approval from the Cabinet Office.

If the UK is to stay at the forefront of fusion development this needs to change. Establishing an effective and agile domestic leader and ensuring the UKAEA has the freedom and certainty to drive effective delivery will be essential to foster a successful fusion industry. The government must shift to empowering the UKAEA to deliver, rather than marking their homework. The reality is that, as the domestic champion for the fusion sector, the UKAEA is better placed than central government to make decisions on a deeply technical area.

Currently, the UKAEA is subject to regular government spending reviews, typically conducted every one to three years. While these reviews ensure fiscal accountability, they introduce uncertainty into projects that demand decades of continuous research and development. The reality is that fusion research is a long-term endeavour. These projects cannot be effectively managed under the constraints of short-term budget reviews. The inherent volatility in government spending cycles can cause delays, hinder technological progress and lead to inefficiencies in project management.

By guaranteeing stable funding for the UKAEA over a longer horizon – for instance ten years, as outlined in the government’s proposed approach to R&D more widely – the UK government would provide the stability required for continuous advancements in fusion research. This would allow the UKAEA to plan with confidence, focus on technical milestones and avoid the disruptive uncertainty that can arise from shifting political priorities or budgetary constraints. This could also provide some of the additional long-term certainty that can help attract private-sector funding and ensure more effective planning.

This model has been applied to other long-term national priorities, such as space exploration and climate research, where stable, multi-year funding has proven critical to success. By granting the UKAEA similar treatment, the UK government would signal its commitment to a low-carbon future and ensure the nation’s role as a global leader in nuclear-fusion technology.

However, any move to exempt UKAEA from normal spending reviews would need to be accompanied by robust oversight mechanisms to ensure accountability and transparency in the use of public funds.

The government could use the Office for Value for Money to audit the decision-making systems of the UKAEA, shifting towards mechanisms based in confidence and earned trust rather than in retrospective bureaucratic audit. The UKAEA would need to demonstrate that they have robust data, evaluation and decision-making processes to qualify for simplified business-case processes and long-term funding envelopes.

Recommendation: Accelerate fusion research by putting the UKAEA on a ten-year spending review with simplified business-case processes for their investment decisions.

A core issue for the UKAEA is its access to skilled employment. While the UK benefits from having world-class researchers at a relatively low cost compared to the US market, some workers are attracted by better pay packages in other countries.

The UKAEA is currently under pay controls in line with civil-service pay, limiting its ability to attract top talent in an increasingly competitive global environment. A number of talented individuals currently accept lower pay than what they might get elsewhere to work at a world-leading fusion-development agency, but there is no guarantee that this will continue.

To address this, the government could exempt the UKAEA from pay controls, as proposed in A New National Purpose for the country’s top R&D facilities. This would give the UKAEA the discretion to pay higher rates than the civil service, where appropriate, within their budget envelope. This model has already been effectively applied to other organisations such as the AI Safety Institute.

Recommendation: Enable the UKAEA to better maintain and attract talent by exempting the agency from civil-service pay controls.

The UK’s strength in fusion stems from a world-class R&D environment, primarily centred around the village of Culham in Oxfordshire, where there is a national fusion-research lab owned and managed by the UKAEA. The community both spawns and attracts the best plasma physicists and fusion engineers in the world. The Culham campus provides world-class research and testing facilities, such as the Materials Research Facility,^[_] Remote Applications in Challenging Environments^[_] and Mega Ampere Spherical Tokamak Upgrade,^[_] in addition to the new Hydrogen-3 Advanced Technology Centre^[_] to research tritium fuel handling. Culham is also the home of JET, so there are also opportunities to conduct invaluable research on JET decommissioning.

This strong community around Culham is core to making the UK one of the best places in the world for fusion development – fostering new spinouts and attracting the interest of fusion companies from around the world to the UK market. For instance, the Canadian company General Fusion chose Culham as the location to construct its demonstration plant.^[_]

The Culham campus also has benefits beyond fusion. It has diversified to become a hub for various cutting-edge technologies and industries. The site hosts autonomous-vehicle testing facilities, leveraging its private road network for real-world trials for companies like Oxa. The site has attracted a diverse range of innovative companies, including those working in aerospace, battery technology and biotechnology. This diversification not only enhances the UK’s capabilities in various high-tech sectors but also creates a unique ecosystem where different technologies can cross-pollinate and drive innovation.

The announcement that Culham will become the UK’s first AI growth zone is an important step forward in strengthening this ecosystem. Over the longer term, the government and UKAEA should consider what future investments may be needed to continue to make sure the UK is at the forefront of R&D. Future expansion could consider how to align investments in advanced manufacturing, to enable more effective manufacturing of fusion supply-chain components.

There are also opportunities to build magnet-testing facilities, building upon the country’s lead in magnet technology, that would support STEP but could also attract inward investment by related manufacturers that are interested in improved magnet innovations.

Creating an Enabling and Proactive Regulatory Environment for Fusion

The UK has been a pioneer in creating a regulatory environment for fusion. The Energy Act 2023 made the UK the first country to legislate specifically for fusion regulation. This confirmed that fusion-energy facilities will not be subject to nuclear-site licensing requirements, recognising the significantly lower hazard associated with nuclear fusion compared to traditional nuclear fission. Rather than being regulated by the Office for Nuclear Regulation, fusion facilities will be regulated by the Environment Agency and the Health and Safety Executive, or their devolved equivalents.

This approach is designed to be risk-informed and specific to fusion, providing the clarity the industry needs and reducing any regulatory risks associated with the technology.

The UK should continue to lead the world in fusion regulation to become a country where the route to market is clear and predictable for fusion companies. The development of STEP is an opportunity to work through the regulatory hurdles of fusion development in real-time. It will be essential for the government to remain agile and responsive to help accelerate STEP development and approvals in the regulatory landscape.

The next step to create a permissive regulatory framework for fusion will be to create a framework for fusion reactors to get planning consent. In March 2024, the Department for Energy Security and Net Zero consulted^[_] on a new National Policy Statement for nuclear energy including fusion called EN-7, to provide clear guidance to the Planning Inspectorate, developers and regulators.

The government should now prioritise rapidly implementing EN-7 based on the consultation, to ensure that the regulatory and siting arrangements for fusion are clear. It is essential that EN-7 is proportionate to fusion energy’s unique risk and value.

To achieve low-cost fusion, it will be essential that the UK does not make regulatory mistakes similar to those made in the past with respect to fission reactors, where multiple environmental requirements slowed down development and led to bespoke design arrangements that have increased the cost of the projects. The aim should be for fusion reactors in the future to achieve fleet approvals, like how approvals are given for aircraft in the aerospace industry, with very limited local adjustments.

Recommendation: Amend the 2008 Planning Act to include fusion energy for heat and electricity generation in the NSIP scheme and introduce a new National Policy Statement for fusion that accurately reflects the technology’s risk and value.

STEP will need to go through the planning process over the next few years. Currently, this process is likely to take in excess of four years. To help accelerate STEP – and any future fusion projects – a new National Policy Statement should minimise the number of lengthy environmental assessments and consultations, to create a clear and streamlined framework for approvals that allows for future fusion reactors. TBI has previously set out what those reforms could look like in Building the Future of Britain.

Recommendation: Pass reforms to the NSIP regime to ensure that decisions on STEP and future fusion reactors are made rapidly.

A strong approach to fusion regulation can also be a key competitive advantage for the UK. Decisions on siting for fusion prototypes will happen over the next few years for a number of new startups in the fusion space. Hosting these could be valuable as it will attract investment and build the local skills and supply chain.

While the UK cannot compete on financial incentives to attract fusion startup investments, it could establish an advantage by creating a proactive regulatory environment that makes it easy for fusion companies to get through regulatory and planning hurdles. To achieve this, the government could set up a dedicated fusion team that proactively helps guide companies through the regulatory process. The UK could establish a fusion regulatory and siting umbrella for startups, with a streamlined process for getting through licencing, consenting and permitting hurdles.

This could also include proactive siting. Several areas around the country were interested in hosting the STEP reactor, and the community in Nottinghamshire is highly supportive of the project. A similar process could be run to identify potential sites for future reactors as a part of a longer-term spatial-energy plan for the country.

This could be administered by Great British Nuclear or GB Energy. Similar to how Great British Nuclear has helped small modular reactor (SMR) companies through the SMR competition, a dedicated fusion team could be set up to lead a similar process for fusion companies working closely with HSE, the Environment Agency and local authorities to identify sites around the country and streamline the planning process.

Recommendation: Create a central fusion team in Great British Nuclear or GB Energy that can proactively guide fusion companies through regulatory and siting processes.

The government should also take the lead on driving international regulatory harmonisation to enable a global pipeline of fusion projects. Fusion will require scale to become cost-effective, but the UK is only one of a handful of countries that have begun to clarify how fusion would be regulated. The UK could use its experience of regulating fusion to push for regulatory harmonisation around the world, creating a permissive environment for fusion in a number of jurisdictions.

Mainstreaming the principle that fusion and fission should be treated differently could also have important knock-on impacts. For instance, it could help ensure that insurance products more accurately reflect the risk of fusion and limit high premiums.

Financing Fusion

The most significant challenge for the fusion industry is access to finance.

Fusion represents a uniquely risky prospect for investors. Capital-intensive and lengthy projects have traditionally struggled to attract sufficient continuous financial support. Fusion is even more challenging in this respect as it requires substantially higher upfront capital investment than most early-stage technologies, with the possibility of quite long timelines for completion. Currently, the returns profiles for fusion investment are likely to be firmly outside the horizon of most investors,^[_] at least for the final reactor and full value of the supply chain.

This is particularly challenging for third countries like the UK. The US and Chinese capital markets have a far greater capacity to fund long-term, risky opportunities with high potential upside compared to the UK. The technology also has high technical risk as investors often do not have the capability to accurately assess it due to its complexity. This is making some investors wary of investing and can draw investment into the wrong solutions.^[_]

Another core challenge is that even if fusion becomes viable as an energy source, it is fundamentally uncertain whether it will be able to compete on cost with other technologies for electricity generation, in particular in an energy market dominated by zero-marginal-cost renewables for large parts of the day. However, given the rapidly increasing energy demand as well as requirements in the economy for high-grade heat, fusion looks increasingly competitive with renewables and storage.

Providing a strong, proactive regulatory environment and investing in the R&D facilities will reduce some of these risks and make the UK a more attractive place to invest in fusion companies. The reality is, however, that further government support may be needed to help de-risk private investment into fusion, especially to achieve accelerated timelines. As the fiscal headroom is restricted, the UK state must be strategic in how to utilise public money in ways that maximise the likelihood of private-sector finance flowing in.

There are two tiers of funding required for the fusion sector:

1. Funding to develop the companies to supply fusion reactors. These will be essential to develop the fusion industry but can also provide more immediate revenue through use in other sectors or in reactor development or prototypes. These companies often emerge as spinouts from universities or fusion companies and provide a nearer-term cash flow.

2. Funding for full-scale reactor development. In the UK, this is first and foremost funding for the development of STEP. This will be a costly endeavour, and returns could take a long time to accrue as power-plant development and path to revenue could take a number of years.

The government needs a strategy for both these levels in order to build a fusion industry that can be a source of growth and prosperity for the country.

Demand-Side Levers

Fusion is similar to other first-of-a-kind energy projects. Uncertainty around future demand can deter investors who fear there won’t be demand for the output, especially for early products. A core enabler to attract private investment into fusion in the UK is therefore to create a clear and certain demand for fusion reactors.

In the US, large private generators state that they will need to see four fusion reactors reliably and economically delivering energy to the grid before they will order the first fusion reactors, which speaks to the need for government to kick-start demand. Creating a demand pull will show the UK’s commitment to the industry and create the certainty in the market that there will be a customer for future power plants.

One example of how demand-pull mechanisms could be utilised for fusion is Microsoft’s Advance Market Commitment with Helion.^[_] However, while this deal illustrates that there will be significant offtakers if fusion can be produced at low cost, there are likely a limited number of private-sector actors willing to enter into these types of agreements and the signal of additional government backing can be valuable.

There are two options for how the government could do this:

1. Create an Advance Market Commitment, proposing to buy the first megawatt of power from a fusion reactor that meets certain requirements (such as cost of energy) at a higher-than-usual price. This could encourage a race among fusion companies to be the first company to generate electricity in the UK to capture the economic benefit and could encourage private capital to flow into companies that look likely to benefit from this.

2. Introduce a Contract for Difference for fusion, which is the same mechanism used to attract investment into offshore wind and drive down the cost of that industry. This would involve setting a strike price (likely relatively high in the first instance) for new fusion power that fusion generators would be guaranteed if they can produce power for the grid. This would create certainty that energy generators would be insulated from periods of very low or negative prices, in particular for first-of-a-kind reactors that likely will be more expensive. This would help de-risk private-sector investment in fusion and make the UK an attractive place in which to operate with a clear route to market.

Both of these options would come at no immediate cost to the Exchequer, with the significant benefit of showing the UK’s commitment to fusion and creating certainty of demand. Moreover, many fusion companies are aiming to produce electricity that is cheaper than any other source of energy over the long run. If these plans work, driven by significantly lower labour costs, longer lifetimes and eventually scale of manufacturing, these may prove to be temporary requirements for the industry.

It is perfectly feasible that once fusion comes online there will be offtakers who are willing to directly pay, at a higher price point, for a fusion power plant. For instance, there are currently a growing number of AI companies looking at how to power AI data centres of the future or industrial players who require significant electricity or high-grade heat. While fusion likely presents too much of a long-term prospect for an industry that is looking for power in the short term, it is feasible that once future breakthroughs happen and fusion comes closer to fruition, the government could sell on the contracts to AI companies or other offtakers.

Recommendation: Explore introducing an Advance Market Commitment or Contract for Difference for fusion to de-risk investment and create demand certainty.

The other avenue to help drive demand for fusion technology is through STEP development. STEP is specifically designed to work in partnership with the private sector and foster a domestic fusion industry. This is already helping to expand the industry. Prior to STEP, in 2016, the UKAEA had contracts with around 200 companies and organisations. In 2023, this had grown to more than 4,000, representing significant investment into the UK economy.^[_]

Currently, STEP is undergoing a procurement process for its engineering and construction delivery partners. This process, while thorough, is lengthy and complex, potentially hindering the agility needed in a rapidly evolving field like fusion energy. To create certainty of demand and ensure that innovative companies, especially startups, can attract private investment, it is essential that UKAEA streamlines and accelerates its current and future procurement processes for STEP.

This would not only help build a robust and diverse supply chain but also encourage more companies to engage with the fusion sector. By optimising its procurement processes, UKAEA can create a more dynamic and responsive ecosystem for fusion energy development, ultimately accelerating progress towards commercial fusion power and strengthening the UK’s position as a leader in this transformative technology.

Recommendation: Accelerate the procurement process to create certainty for the supply chain. The UKAEA should be given the freedom to continue rapid procurement decisions.

A New Fusion Fund

Creating demand certainty will be a key enabler to attract private capital into fusion, but it is unlikely to be sufficient.

Currently, a number of private fusion companies, primarily in the US market, are well funded through venture capital while the UKAEA’s STEP reactor relies on government funding. The previous government committed more than £240 million up to 2024 for the first tranche of STEP, with another tranche commencing in 2024 and bringing government funding to more than £300 million by 2025.^[_]

Neither of these positions will be viable over the long term. The government alone cannot foot the bill for a full fusion development, nor can the industry rely on venture-capital funding streams only in the long run to complete development of first-of-a-kind through to nth-of-a-kind reactors, or develop the scale of the supply chain that is needed ahead of demand.

The UK can help accelerate fusion development and gain a competitive advantage in the future fusion economy, by creating a strategic approach to fusion financing and how to strategically utilise public funding to attract private-sector investment.

To fund the future fusion supply chain, as well as fully integrated fusion companies, there is a growing interest in creating private fusion funds to drive investment into fusion companies. Governments can help support the success of such funds. Research by the global financial-services firm Lazard^[_] suggests that fusion megafunds – in which several projects are bundled into a holding company funded through various debt and equity tranches, with both initial funding and first-loss capital guarantees from governments and philanthropic partners in the short term – may be the solution to help bridge the funding gaps in the fusion sector. This is based on a successful model in biotech.

The model would be based on different asset classes with companies from across fusion development, from those developing full power plants to auxiliary companies, which provides opportunities for shorter-term returns alongside the long-term upside from fusion investment. This would essentially secure investment and could attract a wider range of investors, and is in particular structured to appeal to sovereign wealth funds to hedge against oil depletion and increased regulation for use of renewables.

To date, sovereign wealth funds from two countries (Malaysia and Singapore) have invested in fusion companies, but there are likely opportunities for further expansion as an increasing number of countries around the world take an interest in fusion. A number of existing energy companies are also increasingly entering the fusion space, with companies like Eni, Equinor, Chevron and Cenovus being involved in a number of fusion projects.

The UK could capitalise on increasing interest in fusion energy from more established players by setting up a fusion “Energy Access” fund. The fund could include investment in STEP, as well as other startups, with requirements that a certain proportion need to be from the UK or have plans to build a reactor in the UK. The government’s role could be to provide first-loss capital or directed capital and resources.

The UK is well-placed to attract this kind of funding. STEP is widely considered one of the leading commercial fusion programmes in the world outside of China, providing countries with a strategic imperative to collaborate and invest. Just as ITER has achieved significant capitalisation from governments, there is significant potential for alternative approaches, focused explicitly on commercialisation, to do the same.

The UK already has international partnerships around fusion, in particular with the US, but these could be operationalised and strengthened for fusion’s age of commercialisation – beyond R&D partnerships towards supply-chain and funding agreements. This could include involvement in larger multinational fusion funds to support technologies across a number of countries and to achieve scale.

Recommendation: Set up an “Energy Access” fund for fusion, utilising STEP as an anchor investment and forging partnerships with other governments to seek investment.

Developments in fusion open the possibility of energy abundance and accelerated technological progress. The question now is less whether fusion power becomes a reality but rather when it will happen – and who will reap the benefits.

The UK cannot afford for fusion to become yet another area where it leads on the early science and research but allows the economic and strategic benefits of the technology to go elsewhere. With an ambitious industrial strategy for fusion this will not be the case. Britain can capture the economic and societal benefits of fusion and make fusion energy an engine of the country’s growth and an asset to the UK’s place in the world.

Acknowledgements

The authors appreciate the helpful feedback and insights that informed this paper from the following people:

Dennis Whyte, Massachusetts Institute of Technology

Mark White, Future Planet Capital

Rory Scott Russell, East Innovate

Chris Martin, Tokamak Energy

Lucio Milanese, Proxima Fusion

Peter Read, Vitruvian Partners

JD Englehart, In-Q-Tel

Warrick Matthews, Tokamak Energy

Christian Lowis, Tokamak Energy

Julie Norton, Tokamak Energy

Jennifer Ganton, Commonwealth Fusion Systems

Tim Bestwick, UK Atomic Energy Authority

Ian Chapman, UK Atomic Energy Authority

Tim Dodwell, digiLab

Oded Gour-Lavie, nT-Tao

Francesco Volpe, Renaissance Fusion

Emily Shuckburgh, University of Cambridge

Garri Jones, Lazard

David Gann, UK Atomic Energy Authority

Peter Dolan, Hedosophia

The Fusion Industry Association