Private Wealth SEPTEMBER 9, 2015 • MICHAEL S. FISCHER
The development of a fusion reactor to generate clean energy has long been the holy grail of scientists worldwide. Researchers are now boasting of advances that could make the technology achievable in the near future, and private investors are taking notice.
“Fusion has been talked about for many years, and it disappointed a lot of people,” says Jaeyoung Park, president and chief scientist at EMC2, a California company that is hoping to tap private investment capital to support its fusion research. “Now we’re on the other side of it. With all the technologies available now, it has become a great time to do fusion research.”
Nuclear reactors produce electricity by splitting atoms, the process known as fission. Fusion is the process by which two atoms combine and—illustrative of Albert Einstein’s famous equation, E=mc²—release energy by converting mass into energy. Fusion powers the sun, all the other stars and just about everything else in the universe. “Fusion is a nearly ideal energy source—essentially inexhaustible, clean, safe and likely available to all nations,” wrote Steward Prager, the Princeton Plasma Physics Laboratory’s director, in a New York Times post.
At a time when energy demand is increasing and concern about climate change is growing, power stations that use fusion would have several advantages, according to the Culham Centre for Fusion Energy, the U.K.’s national fusion research laboratory.
There would be no carbon emissions. Energy production would be efficient: One kilogram of fusion fuel could provide the same amount of energy as 10 million kilograms of fossil fuel. These power stations would also be safe because the small amount of fuel used would mean a large-scale nuclear accident could not happen. And fusion power plants should supply large amounts of electricity, costing broadly the same as other energy sources, according to estimates.
EMC2 has been conducting U.S. Navy-supported research for two decades on a reactor called the polywell, which combines two fusion technologies: electron beams to heat plasma to 100 million degrees and a magnetic bottle to confine the hot plasma. According to a Navy review, the company’s scientists have validated these ideas, and next they must demonstrate that the technologies can support a fusion reaction—the last step before possible commercialization in the form of an electricity-producing reactor.
In October, Lockheed Martin announced a breakthrough of its own, stating it has figured out how to harness fusion energy.
Several other approaches to controlled fusion are also being tested.
The International Thermonuclear Experimental Reactor (ITER) project in France, which is expected to cost more than $20 billion and be completed around 2030, is intended to serve as a bridge, establishing the scientific basis for the first commercial fusion power plant that could be built in the 2040s for the large-scale production of electricity. The project is reportedly receiving funding from the U.S., the European Union, South Korea, Japan, China, India and Russia.
Private investors are in the game as well, helping fund smaller-scale projects. Microsoft co-founder Paul Allen is an investor in Tri Alpha Energy, a California developer of plasma fusion technologies that reported a major breakthrough in its research in May, according to Science magazine. Jeff Bezos, Amazon’s founder and chief executive, has invested in General Fusion, a Burnaby, British Columbia, fusion technology company that recently received $21 million for its research in a new funding round.
In addition, a nuclear fusion start-up, Helion Energy in Redmond, Wash., received $10.6 million in a funding round earlier this year, The Seattle Times reported. Helion’s investors reportedly include Mithril Capital, the venture-capital firm of Peter Thiel, PayPal’s cofounder, and Joe Montana, the San Francisco 49ers’ former quarterback and National Football League Hall of Famer, who is now an angel investor.
“I believe the reason for the interest is that governments the world over have committed to ITER, and the ambition and consequent cost of that project has caused the neglect of small, high-risk innovative approaches,” says François Waelbroeck, director of the Institute for Fusion Studies at the University of Texas.
The Investment
EMC2 is seeking private investment for a three-year, $30 million commercial research program to prove the polywell can work as a nuclear fusion power generator. “We have had a 20-year involvement by the Navy, and it has been a very productive relationship,” says Park. “We were able to address a lot of basic scientific questions.” He understands that at this point, the company has to give up its government subsidy and seek private funding. “The Navy’s view is that they will provide transitional funds, but it’s time for us to go out on our own,” he says. “In their view, we’re becoming an adult.”
Park hopes to appeal to deep-pocket individual investors, as well as family offices and foundations that are committed to solving the energy problem—“people who look at this as their responsibility and their destiny,” he says. “It’s our generation’s job to solve the energy problem. Whenever we created energy in the past, we created pollution and created problems about sustainability, and we’ve done that for more than 200 years.”
An investment in the program is not for the fainthearted, Park freely admits. “People ask whether there are any applications in the middle [before building a reactor], and there aren’t many,” he says. “So it’s a very high-risk and high-return proposition.”
Investors will have full access to the energy production potential of fusion technology, where the biggest impact of the fusion is expected to be. EMC2 owns 100% of the intellectual property from its research. The Navy has licensing rights for specific applications it orders. EMC2 will keep confidential a small segment of the technology that is unique and critical to the Navy.
The $30 million phase will complete the last remaining technical milestone before EMC2 embarks on the development of a reactor. Park’s ambition is to see the company’s first reactor on the grid in about 10 years, and almost immediately start to replace coal-based power plants. “That will be the first target because among power sources, that’s the worst one,” he says. “We’ll probably replace nuclear fission, because although its contribution has been great, it’s time to replace it with a better technology.” He also expects the reactor to complement other energy sources, such as solar and wind, and begin to phase out natural gas and the fossil fuels.
Many power plants exist around the world. “How fast we’re going to replace them is going to be market driven, how much each country will invest to replace those old technology power plants and put in this one,” Park says. He estimates that an achievable goal is to replace 20% to 40% of the global electricity market in 20 to 30 years.
Park acknowledges this will be a huge undertaking. “A reactor doesn’t get built very quickly,” he says. That will require a significant infusion of capital, on the order of $200 million to $300 million, he says. He envisions teaming up with an existing energy player. In that event, EMC2 might issue the company 20% to 30% of its shares, and an investor could make an early exit.
As a government-funded entity, a company such as EMC2 carries extra credibility when approaching private funders, according to Michael Delage, vice president of technology and corporate strategy at General Fusion, which is 80% privately funded by venture capital funds and family offices. It also receives government funding from Sustainable Development Technology Canada and from several research and development programs.
“Being able to leverage government is helpful; it’s good for helping investors to see that you’re able to leverage their dollars,” says Delage. “SDTC actually requires that, so for every dollar they are willing to put in, you must match that with at least two dollars of private capital. The two catalyze each other.”
Park is optimistic about the success of EMC2’s long endeavor. “With investments in fusion power now that will pay off in dividends later, we could potentially see in our own future the implementation of one of the cheapest, most sustainable and powerful energies,” he says. That would not only provide electricity and broaden access to clean water through seawater desalination, but also help emerging and established countries overcome energy consumption issues and build on other energy-based endeavors.
“This is something we can do,” Park says. “We can make a real difference—and [investors] may be able to make a large sum of money. But more than anything else, they can tell their children that this was something they did and are proud of it.”