Chapter 1
Nuclear fusion promises not only an abundant new source of energy but also the possibility of technology breakthroughs for other sectors, outside of power generation, worth trillions of dollars. But despite the recent surge in private funding for fusion, the best way to harness these technology spillovers remains unclear.
Countries with a growing cohort of fusion startups, like the US and UK, can address the spillover challenge through pivot-support programmes (PSPs). PSPs are a policy proposal designed to help capitalise on the increasing investment in fusion technology. To fully reap the benefits, governments must prepare to take three steps:
Assess the need. Commission an evaluation study, led by a relevant institution such as the UK Atomic Energy Authority in partnership with the Fusion Industry Association, to identify critical challenges for fusion companies concerning technology commercialisation beyond power production. The result will validate the need for government intervention, and help to identify the priority areas and the required extent of support.
Pilot a programme. Set up a team to execute a pilot PSP, working closely with business-promotion agencies, technology-transfer offices and advanced energy-research agencies. A pilot must be well-timed to fit with the milestones set by fusion companies for core technology development.
Review and update. Use the experience gained from the PSP pilot to refine the programme framework, and consider expanding its scope to serve other trailblazing areas of climate innovation with potential spillover opportunities.
PSPs are not a panacea for all the challenges of fusion technology. But they are a way to increase the impact of fusion’s growing inflow of private capital. For countries like the UK and US, adopting PSPs would ensure a seamless flow of innovation between sectors while opening new frontiers for a green economy.
Chapter 2
The nuclear-fusion industry holds significant promise as a breeding ground for innovations relevant to other sectors. In 2021, when researchers at the Massachusetts Institute of Technology, in partnership with American company Commonwealth Fusion Systems completed an experiment, their result claimed a world record for the most powerful high-temperature superconductor (HTS) magnet. Although the experiment was part of a long-held scientific ambition to produce electric power from fusion, it opened new possibilities in other sectors where HTS technology is in demand, like energy storage and magnetic resonance imaging (MRI).
Investment in fusion companies (in USD billions)
Note: 2021 or latest available
Investors are now taking part in a gold rush for fusion startups, with tech billionaires and institutional investors throwing their weight behind promising companies. By the end of 2021, private investments in fusion startups had grown to nearly $5 billion (Figure 1), with most of the funding secured in the past two years. Partners from tech companies to oil and gas giants are all involved. Although multilateral programmes like ITER (the world’s largest fusion experiment, involving 35 countries) have long dominated fusion research, emerging companies are changing the landscape.
Chapter 3
Fusion is a potentially industry-disrupting source of clean energy. But there are uncertainties about whether the companies leading the development of this technology will achieve commercial electricity production within the promised timelines (Figure 2).
Technology-development milestones for selected fusion startups
Source: Arthur D. Little
First, from a technical standpoint, there are still myriad challenges to address – from achieving the effective containment of plasma heat to making the fusion reaction yield enough energy to offset the input by a commercial margin (known as reaching “net power”). Despite over 50 years of fusion research, with almost 100 tokamaks, stellarators and other fusion machines built and tested, achieving net power remains a challenge.
Second, for fusion to succeed in the marketplace, it must compete with other energy technologies on price. It may be impossible, especially as alternatives like solar become cheaper and more popular. From the baseload point of view, fusion could face stiff competition from newer technologies, including small modular fission reactors. In addition, nuclear projects, as with most large-scale projects, have a reputation for budget over-runs which drive up their energy prices. Small modular fusion reactors may help bridge the gap. But without policy interventions to subsidise fusion energy, it remains uncertain whether the economics of the technology would independently stack up well.
Third, building a fusion power plant will likely require overcoming the same financing and regulatory hurdles that current fission plants face. Fusion plants will have their safety and environmental issues, all of which regulators must address. Dealing with all this will be expensive, especially since it is unprecedented.
Finally, the politics of government support for fusion can be complex. One of fusion’s most prominent sponsors, the US, for example has a history of vacillating commitment towards the technology. From withdrawing from the ITER programme shortly after joining to omitting fusion from its Green New Deal, the US government has wavered in promoting fusion as part of a long-term clean energy transition plan.
There is no doubt that fusion has progressed significantly and there are clear reasons to be optimistic about its potential as an electricity source. Since the 1970s, fusion experiments have achieved higher temperatures with stronger magnets in more compact reactors, resulting in higher plasma density and output energy.
Advancements in intelligent data systems are contributing to the improvement of fusion models. American fusion power company TAE Technologies and Google are developing better fusion models using machine learning, data science and advanced computation – methods that would have been impossible a few decades ago. Fusion is moving from the pure science research stage towards the engineering phase with the building of demo plants like SPARC, which MIT is developing in partnership with Commonwealth Fusion Systems.
However, like the boom and bust of the cleantech industry in the 2000s, the path between the current wave of fusion investment and the end goal of commercial electricity production may be extended and winding. The obstacles to achieving fusion net power – from the technical to the economic – remain substantial.
Chapter 4
Fusion research remains a promising source of innovation, irrespective of the uncertainties of power production. Even if the fusion industry fails to reach net power within set timelines, the technology developed in this space offers opportunities worth trillions of dollars for multiple neighbouring sectors.
Fusion research can positively impact technology sectors from next-generation magnets and superconducting wire to spacecraft propulsion. Superconducting magnets used in fusion reactors can be developed for motors, transmission lines, wind turbines, electric vehicles and energy storage. Radioactive isotopes from fusion can be applied in medical research and cancer treatment and in dealing with the issue of nuclear waste from traditional reactors. These industries are worth hundreds of billions of dollars, and fusion’s innovations can increase their value.
Countries with a vested interest in fusion can leverage the technology spillover from fusion research while speeding up the progress towards commercial energy production.
For countries like the US and UK, which are home to a growing cohort of fusion startups, one way forward is to develop pivot-support programmes (PSPs).
Pivot-support programmes harness technology breakthroughs from fusion development in improving productivity and economic competitiveness in other industries. PSPs are not a substitute for developing fusion as a commercial energy source. Instead, they are a complement. Among other objectives, PSPs would:
send positive signals to investors about the government’s support for private investment in the very complex, high-risk area of fusion research and development.
minimise exit costs for fusion investors and lower the entry barrier in sectors that could benefit significantly from advances in fusion research.
provide a framework for ensuring effective use of knowledge spillover to improve national competitiveness in target sectors.
widen the opportunity for public-private collaboration on technology research and development.
Support provided through PSPs may range from business incubation to early-stage equity and low-cost loans. Granting access to science and technology parks, innovation clusters, and purpose-built industrial research facilities are other vital support modes.
PSPs are essentially a statement of guarantee from the government to the private sector: “If, in your high-risk pursuit of commercial fusion energy, you create an innovative solution that can make certain industries in our country more competitive – for example, the biomedical industry – then you can receive this support from us as you evolve and explore these new possibilities.”
Pivot-support programmes are not an entirely new concept. They are simply a specialised startup-support programme aimed at companies taking fusion technologies onto new horizons. The programme recognises the higher-risk profile of fusion investment and the potential that fusion development holds for wider economic contribution.
Fusion is no longer just a “billionaire toy project”, as some like to call it. Now there are institutional investors and banks involved. General Fusion, for instance, raised $130 million in its 2021 Series E funding round from institutional investors like the Singaporean sovereign-wealth fund GIC. While some of these investors might have a lower risk tolerance, the presence of PSPs could provide a welcome safety net.
Chapter 5
Implementing successful pivot-support programmes requires the careful management of complex risks, including ensuring that PSPs do not sabotage the primary focus of producing commercial energy. PSPs should complement policies aiming to catalyse cheap, clean energy from frontier technologies, not replace them.
When developing PSPs, governments must remain committed to complementing private-sector efforts to make fusion a viable commercial energy source. For instance, governments should invest in research on enabling technologies like the advanced materials applicable across a broad range of reactor designs employed by fusion companies. Integrating realistic commercial milestones in the programming of public R&D funds should also become a priority.
In administering PSPs, beneficiary selection must be closely managed to ensure transparency and minimise exploitation. Achieving this would involve a team hosted in a suitable government agency – for example, the US Department of Energy – who could work closely with experts from industry and academia (Figure 3) in managing awardee selection, monitoring the ever-changing technology landscape and making suitable recommendations for how the PSP runs.
Overview of the PSP
Source: TBI
Pivot-support programmes would require human and financial resources, which could generate value elsewhere. But governments can minimise the opportunity costs by focusing on the pivot elements, i.e., areas where the awardee needs support as it evolves.
Since there is a wide variety of fusion technologies, it would be essential to evaluate potential PSP applicants case-by-case. Equally important is the need to standardise, as far as possible, what counts as impact in fusion research and potential value-add in the target industry. The standards should reflect the country’s innovation priorities and be updated routinely to respond to changes in the technology landscape.
A few fusion companies already demonstrate the potential to succeed in a business pivot. TAE Technologies, for example, built a subsidiary business to develop cancer-treatment devices using its plasma-beam technology. The subsidiary raised $40 million in venture capital while announcing a partnership with a leading Chinese biomedical company. Commonwealth Fusion Systems is another example, with potential demand for its high-temperature superconducting magnets in the development of particle accelerators, energy storage and medical applications.
One could argue that there is no need for any government intervention to capture the spillover from fusion. Businesses can always pivot into new commercial territories anyway. But in most business pivots, there are often hurdles – ranging from administrative to regulatory – that are better addressed with external support. For example, a fusion company whose technology can enable radiation treatment may have limited competence and resources to navigate regulations on biomedical devices or run a testing facility. This is where PSPs come in, providing early-stage financing, networking and business-advisory services to enable a smoother transition.
PSPs can, of course, apply to other frontier areas of climate innovation like direct air capture and geoengineering technologies. They are simply a no-regret tool that could keep private capital flowing into risky but rewarding climate-technology experiments.
Chapter 6
It is essential to stay optimistic about potential energy sources like fusion. But optimism must be balanced by pragmatic policy that captures value from fusion investment, irrespective of the likelihood of a commercial breakthrough. Sitting back and leaving fusion in the hands of hype cycles and fickle public opinions is counterproductive. Countries with an active fusion ecosystem must begin providing dynamic support and encouraging the ambitious development of technology pioneers.
While PSPs are not a singular solution to the challenges of fusion technology, they are a way for countries to increase the economic impact of growing private investment in the industry. Countries like the UK and US must be proactive in assessing the need for PSPs, setting up pilots and updating the programme mandate as required. By supporting fusion companies in this way, governments can create a fertile environment for innovation and gain more bang for the buck.