Is Fusion Energy Development Stalling?
A couple of weeks ago, a friend of mine asked me if I thought the development of commercial fusion energy was stalling. After all, most of the headlines regarding fusion energy from this year were in the first quarter of the year, ARPA-E funding seems to be under siege, and there haven’t been any new funding announcements (yet) in Q2 2025. On top of that, General Fusion sent out a public letter yesterday stating they will be reducing the size of their team, and the operation of their LM26 machine because of capital shortfalls (they have raised $455M in capital to date). And all of this is against 2024 fundraising that saw “good” amounts of funding ($900M), but not as much as in 2022, which saw a total of $2.8 billion invested (fusion energy funding’s “banner year”). In fact, Crunchbase ran an article in May of last year called “Fusion Funding Has Fizzled” (see graph from Crunchbase below).
So How Do You Fairly Judge What is Going On With Fusion Energy?
In a very real sense, “judging” the state of fusion energy is no different than judging the progress of any (largely) venture capital (VC) funded emerging market segment. Whether it is datacenter technologies, consumer electronics, electric vehicles (EVs), aerospace, or retail, it comes down to market traction (how much does someone want it?), available capital, technological risks, supply chain constraints, fulfillment chain creation, and the regulatory situation (are there barriers, or is the emerging market “fast-tracked”?). Secondly, where is the market segment in the technology maturity curve – is it still “early days”, or is success just around the corner. Additionally, are there competing technologies that may displace the demand for this technology? Finally, are there enough (usually at least two to three) of the companies whose investors have the patience (and or the companies captured the right funding conditions) to weather the inevitable issues that occur with complex products and markets. If enough of those answers are positive, then the market will likely reach maturity.
To be fair, there are certainly areas where fusion is different from the typical VC investment. Fusion energy is an extremely complex technical undertaking, labeled (quite fairly) as “the most complex technological undertaking” that humanity has undertaken. Fusion energy is also very capital-intensive, requiring higher levels of capital than most VC-funded activities. Fusion energy also has a much longer “path to maturity” than most VC-funded activities, being measured in tens of years rather than the 3-5 years that VCs are “used to” (note that the typical VC fund lifetime is seven years). That said, these factors are not unique to fusion energy; a number of market segments including automotive (EVs are a good recent example) and aerospace (building commercial aircraft), and space (satellite launch, followed by manned space vehicles) have investment profiles that are not dissimilar to that of fusion energy.
Also, nearly every emerging market (successful or not) experiences what the Gartner calls the “trough of disillusionment” in their Hype Cycle market maturity model, where “expectation disappointment” sets in, before commercialization breakthroughs are actually achieved (the “plateau of productivity”).
Finally, while disappointing, the fallout of some number of initial companies in an emerging market, whether because of a lack of capital, technical issues, or mismanagement, is always part of market maturity. Fusion will be no different in this respect, and given the capital requirements it is not unforeseeable that the fusion energy market will “neck down” to a handful of companies (again, think commercial airline manufacturers, car companies, etc.) from the (at least) 18 companies today, or even the 11 companies with funding over $100M.
So Where Is Fusion Energy At? The Billion (or Trillion) Dollar Question…
Market Traction: do we need more electricity? (yes): Market traction for fusion comes down to a simple question: do we need more electricity? Luckily, this question has a simple answer: “yes”. More to the point, the world is probably ready to pay more for that additional electricity than it is paying today – it is a resource that modern society absolutely has to have to function. The good thing for fusion is that the only three technologies that it will compete with to generate electricity (natural gas, nuclear fission, and PV solar) all have shortcomings: natural gas is polluting (though not as much as coal) and its price is going up; nuclear fission still has a largely negative impression with the public; and PV solar isn’t dispatchable.
Capital: you can’t be successful without it: Today, there are only four companies with at a level of investment that is near or above a billion dollars: Commonwealth Fusion Systems ($2B), TAE ($1.2B), Helion ($1.0B), and Pacific Fusion ($900M); none of the other companies in fusion energy have more than $500M today. From a capital standpoint, a minimum total funding of $1B seems very much to be what a company in this space will need to be successful. While this might sound like a very large amount of money, Rivian (probably the most successful of the EV companies to enter the market this decade) raised $13.5B before then went public in November 2021. Prior to that, their last funding raise was a Series E round in January 2021 of $2.65B. While The Fusion Report absolutely is not in the business of picking “winners and losers”, and the door is not closed for companies to raise more funds, it is difficult to see a company making it to the finish line if they haven’t raised $1B.
Technological Risks and Supply Chain Constraints: These two largely go hand-in-hand. While the fusion companies themselves bear the largest burden on the technology risk side (i.e., making MCF, ICF, or hybrid fusion work), there are a lot of pieces and parts that need to be acquired to build a fusion power plant. This is definitely an area that is making progress (and the Chinese, even more so), but still presents one of the largest sources of risk. The good thing is that many of the fusion companies are making significant progress maturing fusion technology, which is a net positive.
Fulfillment Chain Creation and Regulatory Environment: Simply stated, this factor revolves around who will sell power to the end consumers? In the case of fusion (or any electricity generation technology), it is utility companies. These already exist, and with some training will be able to master the use of fusion energy to generate electricity. Similarly, the regulatory regime for fusion appears pretty clean, given that the same regulations for nuclear fission do not apply to fusion energy.
Investors With Patience: This is most often the hardest thing to get for opportunities requiring large amounts of capital. By nature, investors like to minimize the amount of money that they have at risk; the easiest way to do that is to not give the money to the companies that they invest in until they need it. The companies being invested in have the opposite driver – they want as much of the money as they can get up front. Who wins that bargain depends on the investment (funding) environment and the strength of the company. Without naming names, some companies have done better than others – mostly those whose investors have very large amounts of capital and believe in a carbon-free future, and especially those who raised most of their funds between 2018 and 2023.
Summary – Fusion Isn’t Stalling, It Just Takes A While
Building a fusion energy company, and more importantly a commercialized fusion energy machine, takes time. Meaningful milestones are often not measured in months or even quarters; they are often measured in years. For a company to only have one significant milestone in a year is not unusual; it may very well represent the standard order of things in the fusion energy market. Even across all of the major fusion companies, a given quarter could easily occur with little news from any companies, let alone funding events, which are often mistaken by onlookers as concrete progress.
With that said, the companies that I have spoken with so far this year all seem to be making progress against their engineering goals while staying reasonably liquid. In many senses, that is all that a startup (and all of these companies are startups) can hope for. Will some fusion energy companies fail by running out of capital or by not hitting their milestones? Of course they will – that is the nature of any market segment with an active population of startups. It doesn’t mean that the market segment in general has failed. Patience and discipline are probably the key attribute of successful startups, and there are many out there which have it.
