WORKWEEK

I’ve used plenty of space in this newsletter over the past year or so to cover companies commercializing nuclear fusion.

That’s a conscious choice. I could use more virtual real estate to discuss solar, wind, hydroelectricity, and nuclear fission, all of which are readily available and actionable ways to produce clean electricity today. 

Though not quite as consequential, where I allocate newsletter whitespace involves tradeoffs in the same way that investors and policymakers have to make difficult decisions about which climate solutions to allocate capital to. 

Of course, part of what I’m doing is tracking investor and policymaker activity. And, as much as fusion often still seems like a solution that’s far off from making a tangible impact on reducing power sector or industry emissions, capital allocators continue plowing capital into new fusion companies.

Nor is the private sector the only one playing its role here. The DOE granted $46M to eight nuclear fusion startups this week to accelerate their development. Grantees included established names like Commonwealth Fusion Systems as well as new names, like Realta Fusion (more on them below).

The fusion field grows

More companies have joined the fusion fray in 2023; there are already plenty more updates to make to the above graphic. And this week ushered in two more tally marks:

• Realta Fusion raised a $9M seed to provide industrial heat via fusion. 
• Proxima Fusion raised ~$7.5M in pre-seed funding to make a stellarator fusion reactor.

These two deals are good grounding for us, not only because they cement the story around money flowing into fusion, but because they also offer a helpful view into the various sectors in which fusion energy could be useful.

The most immediate is the power sector. ~60% of the power sector in the U.S. is still dependent on fossil fuels, predominantly natural gas. Getting that number to zero will take decades, whether or not fusion energy plays a role. 

Still, the availability of fusion reactors would greatly help accelerate power sector decarbonization. Fusion reactors, like the one Proxima Fusion wants to build, would offer a near-24/7 power option that, importantly, requires pretty minimal inputs. That’s one of the main draws of fusion; producing lots of power with a small amount of fuel. A 1 GW fusion power plant could require as little as ~1 tonne of fuel to provide continous power for a year. 

But that’s not where the buck stops. Many heavy industries don’t just require a lot of electricity. They need a lot of heat. This is especially true for making steel, other metals, cement, and fertilizers. Fossil fuel combustion for industrial heat contributes roughly 10% of all global greenhouse gas emissions.

That’s why it’s cool to see Realta Fusion thinking about fusion as a play for industrial heating. The company is explicitly developing its reactors design to make heat, not electricity.

Many reactor designs differ in how they aim to contain and sustain nuclear fusion reactions. They can also differ in how they would theoretically take the energy released from fusion and translate them into electricity. One of the best-funded fusion projects in the world, ITER in France, would accomplish this by taking heat transferred to the walls of its system and using that heat in a conventional steam turbine to generate electricity.

Reading the above, we can begin to appreciate why using the heat directly could also be an attractive approach. You can skip the steps needed to convert heat to electricity, during which (as much as 40-50%) of energy is inevitably lost. 

The net-net

Zooming out, folks often get hung up on whether we’re allocating capital to the right climate solutions in general. It’s a fair question; when carbon credit companies raise while hardware-focused climate tech companies struggle to, I get annoyed, too.

However, the answer is to grow the total pie rather than fret about who’s getting what slice. The scale of capital needed to get serious about mitigating climate change is orders of magnitude larger than the capital flowing today.

So if investors want to bet on fusion companies because that’s where the biggest potential returns are, let them. Even if the solution is 10-20 years out. Solar was 10-20 years ‘out’ once too; it was expensive and inefficient 10-20 years ago relative to today. Now it provides 4-5% of global electricity. 

Hopefully fusion will too by 2035 or 2040. Both public and private capital allocators are acting like it has a solid shot at that.