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The Lex Newsletter: Fusion will be the next energy transition

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Dear reader,

In my previous existence as an Italy-based energy executive, I spent quite a lot of my time working on hydrogen. I spent even more of my time wishing I had a penny for everyone who told me it was the fuel of the future — and always would be. 

The same wags have been hanging out around the nuclear fusion tent, chuckling that the energy source is forever 50 years away from viability. The milestone achieved by the National Ignition Facility in the US brings that timeline forward. Scientists created a fusion reaction that released more energy than it took to get it started.

The breakthrough comes too late for commercial fusion to feature in the current energy transition. It should be viable in time for the next one. Investors need to start thinking through the implications right now.

Nuclear fusion is a thrilling concept for a world trying to wean itself off fossil fuels in double-quick time. Hydrogen isotopes potentially produce 29bn times more energy than the same amount of coal. Fusion promises abundant low-carbon energy like solar and wind, but without the problem of intermittency. Plants could generate a lot of power in a limited space, as nuclear facilities do, without the pesky side effect of radioactive waste. 

Cost estimates — which at this stage should be taken with a shovelful of salt — look potentially attractive. Nicholas Hawker, of First Light Fusion, a UK start-up, has calculated that a fusion reaction yielding 500 times the energy you put in would have costs as low as $25 per MWh. The company itself is targeting $45 per MWh for its first plant and falling thereafter. 

Wind and solar will be cheaper in future, dropping further from today’s level of say $30 to $70 per MWh. But to make those energy sources comparable to nuclear fusion, we need to add the cost of grid connections, batteries and longer-duration storage. That number rises steeply as we get closer to a fully renewable power system.

If commercial-scale nuclear fusion existed, it would take a place in the “merit order” for national energy that taps different sources according to their costs and other characteristics. The trouble is that fusion will not gain that status for many years.

The National Ignition Facility got a 3.15MJ output from a 2.05MJ input, so a gain of 1.5 times. That is a far cry from the 500 times gain Hawker uses to calculate the likely cost of power. His timeline sees grid connections in the 2030s, and the technology scaling up in the 2040s.

That seems optimistic, given the time that fusion scientists have taken to reach the energy gain milestone. Commercialising fusion is not a challenge solved by one big breakthrough. It is the sum of many fiendishly complex engineering problems that need to be solved one by one. 

The good news is that there is no shortage of labs, publicly funded projects and start-ups willing to try. Venture investors are already busy deploying capital. For example, Commonwealth Fusion Systems recently raised $1.8bn, the largest financing in the sector to date, according to the Fusion Industry Association. Investors included Bill Gates’s Breakthrough Energy Ventures and oil company Eni (full disclosure: until recently I worked at Eni’s former pipelines business Snam, and before that at Eni itself).

The UK is a particular hotspot for the fusion industry, with a sizeable ecosystem clustering near Oxford. The recent milestone by NIF is a triumph for the US but will add fuel to the reaction in the UK.

Worldwide, investors can expect a wave of new fusion start-ups. Headline-grabbing technologies have always had this impact, be it genomics, graphene or electric vehicles.

Would-be early-stage investors need to scrutinise claims to intellectual property very carefully. “Cold fusion” — a supposed breakthrough in 1989 which flopped — demonstrated how easily an unsuccessful technology can attract investment.

Hot fusion is too nascent to help the world hit climate change targets by 2050. Clean energy will need to come from renewables and other low-carbon technologies. Energy efficiency, electric vehicles and heat pumps will need a big push. 

Scientists will keep plugging away at fusion and venture capitalists should provide judicious backing. “Along with relentlessly cheaper solar and wind, [fusion] means the late 21st century will see limitless green energy,” said Lord Adair Turner, chair of the Energy Transitions Commission.

Fusion could support many applications. We might use it to suck carbon dioxide out of the air, perhaps — an energy-intensive process known as direct air capture. And, I am reliably told, nuclear fusion could be a go-to technology for space travel, where a little fuel really does need to go a long way.

Elsewhere in energy 

As European countries predictably fail to agree on a gas price cap, the Oxford Institute for Energy Studies has published a useful reminder of how hard it is to make this work. 

Looking further ahead, news that scientists at Nanjing Tech University have made advances in generating hydrogen from seawater opens interesting new possibilities for coastal production hubs. 

Enjoy the rest of the week, and if you are in the northern hemisphere, stay warm.

Camilla Palladino
Lex writer

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