How to invest your money in fusion energy?
You don’t have Jeff Bezos billions but want to put you money into the future of energy? Here is how you can do that.
Fusion energy is the future of energy. The promise of a clean and an almost inexhaustible energy source that the Sun exploits all day long is brilliant. Yet, fusion energy production has a terrible long history and still no working power plant exists. There is even a joke within the fusion community that no matter when you ask about the readiness of fusion power plants the answer will be “in 30 years”.
However, just before the 2000s a shift was noticeable in fusion research. More and more privately funded companies popped up and lately Jeff Bezos (General Fusion) and Bill Gates (Commonwealth Fusion Systems) put hundreds of millions of dollars into these companies via their funds. However, these are private companies and although more than 20 companies exist nowadays, none is traded publicly. So how could you invest in this dream?
Albert Wenger from Union Square Ventures writes in an article that “the upside of successful fusion is nearly unlimited.”. Given that he is himself invested in three fusion companies we would of course expect nothing less but his appeal to other VCs to invest in the industry might still have some weight. Prof. Martin Kupp professor of entrepreneurship at ESCP Business School, gave his appraisal on the bullish view and added that one should diversify the investment over several different design concepts.
From an investor perspective, it makes a lot of sense to spread the risk by investing in several ventures […] covering a range of different technical approaches
- Prof Martin Kupp
As a private individual with currently no exchange tradable funds focussed on fusion energy out there, this task becomes even more difficult. But let’s look at the options that are available.
Fusion Reactor Companies
The Fusion Industry Association lists 22 companies that try to build a fusion reactor. There are a few more but none to my knowledge have gone public nor announced any plans of an upcoming IPO. The most funded of those companies, TAE Technologies, received close to $1 billion in investments. Yet without revenue from selling electricity it would be hard to justify more investments in a public offering (only about 15% zero-revenue offerings take place and those companies have a much higher chance of delisting).
It is difficult as an individual to offer enough money to join upcoming funding rounds even for the less-well funded companies. Even for CTFusion or Hyperjet Fusion, which as of Aug 2020 have received less than $3M, I expect the minimum ticket size to be a few hundred thousand USD. We know that Commonwealth Fusion Systems (CFS) received investment from several ventures: Future Ventures, Khosla Ventures, Lowercase Capital, Moore Strategic Ventures, Safar Partners, Schooner Capital, Starlight Ventures, Eni Next, and Gates-funded Breakthrough Energy Ventures. Many of them have a very broad portfolio. Even with energy innovation funds such as Eni Next (strangely enough a CVC of the supermajor oil company Eni) the exposure to fusion is limited. Becoming an LP (a limited partner whose money is managed by the fund) for funds such as human-problem fund Starlight Ventures should require at least similar ticket sizes.
It is therefore difficult for non-accredited investors to directly allocate funds in fusion startups until they go public. For accredited investors (in general: $200k+ single income or $1M net worth not including the primary residence), marketplaces like EquityZen and Forge offer exposure to these companies. However, on EquityZen one does not buy directly shares of the fusion company but rather of EquityZen’s LLC that in turn owns shares from previous employees’ stock options. On the other hand bids can be placed for as little as $10k.
An interesting anecdote that over seven years ago LPP Fusion raised money via crowdfunding but no shares, only merchandise was given to the funders.
Fuel
Most fusion systems will start with hydrogen isotopes, deuterium (D) and tritium (T). A few have announced that they are looking into — in theory — better fuels. Examples is startups TAE Technologies and HB11, which consider hydrogen-boron as fuel even though they will first start with D-T as fuel.
Tritium is not easily available. And while D-D is in principle better and deuterium is abundant, the first reactors will all need tritium due to the energy mechanics at play.
A study by Pearson et. al suggests there is enough tritium available by the CANDU-type nuclear reactors for the demonstration plant of the ITER project (DEMO). The current annual US electricity consumption is 4 PWh. If fusion reactors were to provide only 25% with DEMO-type reactors (15.6g/GWh) a supply of 374 tons of tritium would be used up every single day. This is orders of magnitude beyond the global inventory. The only feasible option is therefore breeding the tritium in the fusion reactors itself. For this, enriched lithium is needed. Lithium carbonate (not enriched) is at the time of writing traded at USD 20,000 per tonne. To reach efficient breeding condition the lithium needs to be enriched with the isotope lithium-6 (see our previous article). Presumably the enrichment will increase the price significantly.
A similar tonnage of deuterium gas is required. Given a previous deal by the DOE that prices deuterium at USD 270,000 per tonne, we can expect that larger amounts of deuterium will still come at a high cost. However, large scale suppliers of deuterium are less clear due to a possible defence use.
The top lithium producers are therefore a bet one could place to be exposed to fusion energy. This bet would be placed among all the EV car and battery enthusiasts that are also long on lithium. Top contenders are:
- NYSE:LTHM Livent is the top 5 US lithium provider. Whereas it’s piers have non-lithium businesses, Livent is solely focussed on lithium.
- SHE:002460 Ganfeng from China.
and others.
Fuel costs pale in comparison to the cost of the power plant and it’s maintenance. Constructing nuclear fission reactors costs several billion USD. Indeed Entler et.al find that fuel costs of a DEMO-type plant contribute as little as 1% to the fusion electricity costs. The main cost is driven by the hardware.
Suppliers
It was found that the replacement cost of reactor parts is 31 times the cost of the fuel. Moreover, when building the reactor in the first place the magnets cost make up 37% or $2.2b of the $6b investment cost (direct cost). Other significant contributions arise from nuclear technology (13%), which refers to the first wall, blanket, heat exchanger and so on, and from the heating system, which for tokamaks consists of gyrotrons that use microwave radiation to heat up the plasma to very high temperatures.
ITER’s solenoid magnet is produced by General Atomics, which is privately held and, thus, investing in it faces similar issues as already discussed for the fusion companies. On top there are ethical concerns as it produces, e.g., the predator drones for the US military.
Of the 5 engineering companies mentioned in the UKAEA fusion program at least SNC-Leven (parent of Atkins) is publicly traded under TSE:SNC, Babcock International (parent of Frazer-Nash) under LON:BAB. For ITER several procurements were awarded to, e.g., Amec Foster Wheeler now acquired by LON:WG. Yet, we have to keep in mind that currently fusion energy projects make up only a small part of revenue for these kinds of companies. Investing in them bears limited exposure to fusion energy.
Conclusion
As a non-accredited investor it’s currently very difficult to expose one’s portfolio to fusion energy. A few options exist for the future fuel supply and engineering supply chain. Monitoring upcoming IPOs of the fusion startups is recommended.
As an accredited investor, the best bet is to look for pre-IPO shares on secondary marketplaces such as EquityZen and Forge.
Full disclosure: The author is personally invested in ASX:VUL Vulcan Energy Resources which is poised for carbon-negative production at Europe’s largest lithium field. He is also part of the team at Kyoto Fusioneering, a supplier of fusion parts.
Disclaimer: Be aware that this article is not advice which product to buy but explains about the options that are available. Do not invest your money unless you are prepared to sustain a total loss of what you have invested plus any commission or other transaction charges. This applies especially to fusion energy as it is still uncertain if the technology will be able to be used for energy production and if it can outperform alternative energy sources.
