The Gorillas of Fusion – The Race to Dominate Fusion Energy

There is an old saying in product development – “There is no problem that cannot be solved without adequate time and money”. Examples often cited of this include putting man on the moon, reaching the bottom of the oceans in the Marianas Trench, and other similar milestone achievements. However, it has its weaknesses when it comes to predicting what companies will achieve market dominance from a commercial perspective. There are numerous examples in emerging markets where the expenditures of hundreds of millions of dollars (or in some cases, billions of dollars) could not provide a new contender in a market with market leadership; examples include:

• Google Docs: The estimated market share for Google Docs is only 10.8% in the office productivity market. For a product which was released in 2006, is free, and reflects an investment by Google of probably over $1B across several acquisitions, a 10.6% market share against Microsoft Office/Office 365 (which is NOT free) is underwhelming.
• Cisco “Spin-Ins”: Another example is Cisco’s creation of “spin-ins” under John Chambers. During Chambers time as CEO of Cisco, the company created several startups (spin-outs) which later were purchased by Cisco for numbers approaching $1B. While these “spin-ins” created a lot of wealth for the team members of those spin-ins, the increase in market share realized by these spin-ins is questionable.
• Various Recent EV Companies: During the past decade, a number of US electric vehicle (EV) startups have popped up. While these companies raised billions of dollars in funding, many have “gone bust” over the last few years, with only Tesla and Rivian (two of the earliest companies in the EV market) having a clear path to success.

There seem to be three factors that are indicative of success in emerging markets: i) how much capital a company has; ii) are those companies ahead of the market or behind the market; and iii) is there an economic or technology inflection point that enables what those companies are trying to achieve? The nexus of these three factors tend to determine who will likely be the lead contenders, or “gorillas” in a given market. Let’s spend some time exploring those factors:

• Capital: Most high-tech undertakings, especially those involving complex hardware, take hundreds of millions of dollars, if not billions of dollars to get to market. Companies that have large “treasure chests” of existing investments are not only set up to weather difficulties better than those who are not; they can also proactively “buy” the best talent, improving the competitive gap between themselves and their competitors. Simply put, companies that are not well capitalized will almost always fall behind their well-capitalized competitors, eventually becoming niche players or acquisition targets.
• Time to Market: To be successful does not require a company in an emerging market to be first to market; in fact there is some evidence that being first to market may be “hazardous” for startup companies. However, it is also clear that even a big pile of cash cannot help you catch up if you are late to market. In the software industry, this used to be called the “millions of lines of code” advantage that some gorillas have – it just takes time to build up this advantage. The other advantage is on the customer acquisition side; one of the reasons that Meta has no effective competition is that being early in the market allowed it to corral the bulk of users in that market.
• Effectively Utilizing Inflection Points: In the early 2000s, there were a few companies that dominated the anti-virus (AV) market; most of them are now niche players in the (larger) endpoint security market that evolved from the AV market. The big factor here was the use of artificial intelligence (AI) and machine learning (ML). Companies that utilized these technologies early in the 2010s (CrowdStrike being the most obvious one) were able to replace the old market leaders by offering significantly better products that weren’t reliant on updates which typically lagged threats.

Fusion energy certainly ranks as one of these emerging markets, with a large number of both funded companies and different technology approaches, from magnetic confinement fusion (MCF) to inertial confinement fusion (ICF) to a number of hybrid approaches. Given the inherent difficulties in replicating controlled fusion on Earth (fusion has been variously called ‘one of the greatest technological endeavors of mankind’, and ‘harder than rocket science’), companies which want to succeed in commercializing fusion require a significant amount of capital investment to do so. They also have to be “timely”, both in developing their approach and in utilizing new “enabling” technologies such as high-temperature superconductor (HTS) tapes for high-power magnets. Like other emerging markets, these same three factors (capital, timing, and use of enabling technologies) will be key in understanding the market as it evolves.

Capital Investments to Date In Fusion Energy

Funding, especially private capital investments for fusion energy innovation has been “lumpy”, to say the least. While inflation-adjusted government funding starting in 1954 exceeds this amount (it is over $34B), the yearly funding since 2001 has only averaged slightly below $450M per year. Moreover, much of that funding has gone to government labs and international efforts such as the International Thermonuclear Experimental Reactor (ITER).

That means that private funding, which according to the Fusion Energy Association has been $7.1 billion since 2020, is increasingly becoming the major funding source for fusion energy. This funding hit a maximum in Q4 2021 of nearly $2.5B, as shown in the chart to the right. By company, the amount of funding for fusion companies with over $20M is shown below. There are in fact four (4) companies (Commonwealth Fusion Systems, TAE, Helion, and Pacific Fusion) that received the lion’s share of this private funding (roughly $5.15 billion, or nearly ¾ of all of the private funding since 2020).

A Matter of Being At The Right Place At the Right Time

Interestingly, the founding dates of the above companies also fall into three distinct ranges:

• Pre-2000 (1 company, $1.2B): The only company above founded in the last century was TAE, which was founded in 1998 and has a total funding of $1.2B.
• 2009-2019 (8 companies, $4.0B): This is where most of the companies in fusion energy were founded, including Commonwealth Fusion, Helion, Tokamak Energy, Zap Energy, First Light, Marvel Fusion, Type 1 Energy, and Avalanche. This time band also represents the bulk of investor funding at $4.0B, with the top 2 companies (Commonwealth and Helion) having ¾ of those funds.
• 2020 and Beyond (3 companies; $1.0B): There are three relative newcomers to fusion Energy: Pacific Fusion (2023), Focused Energy (2021), and Proxima Fusion (2023). Of these only Pacific Fusion ($900M in funds) has received over $500M in funding to date; the other two have total funding of slightly over $110M between them.

From a standpoint of enabling technologies, the most important technology for companies utilizing magnetic confinement fusion (or related hybrid approaches) has been the advent of HTS tapes, which allow the use of liquid nitrogen instead of liquid helium (more expensive and harder to handle) to build high-flux superconducting magnets. HTS tapes (especially 2nd generation HTS tapes) came to market in the late 2000s, and enabled companies designing tokamaks around that time to build better (and cheaper) magnets for their systems.

The final timing point of interest is which companies are making commercial arrangements with power utilities to provide them with electricity generated from fusion energy. To date, commercial arrangements have been inked for the following:

• Helion Energy: A Power Purchase Agreement (PPA) with Microsoft to provide 50 MW (or greater) of electricity by 2028; the PPA was signed in May 2023.
• Commonwealth Fusion Systems: CFS signed a deal with Dominion Energy Virginia to site a fusion energy system near Richmond, Virginia in the early 2030s.
• Type One Energy: Type One has reached a cooperative agreement to place a stellarator prototype plant in TVA’s Bull Run site.

What’s Next In Fusion Energy?

Of course, no private fusion company has reached Q>1 yet (an accomplishment only achieved by the Lawrence Livermore National Laboratory’s National Ignition Facility), meaning we are still a long way from the finish line. As such, this (and related technology areas) will continue to be an area that The Fusion Report will actively monitor, and which we will share with our readers. There is still a lot of room (and time) for things to potentially change!