The Other Fusion

Mention ‘fusion’ and most people will first think you are talking about a new restaurant.  Only a few techy types who read scientific journals will pick up on a cutting-edge technology for power generation.  Fusion is a type of nuclear reaction, but unlike the nuclear power already in use wherein atoms are broken apart, through fusion reaction energy is created by smashing together two atoms at high speed.  Triggering such atom collisions requires tremendous heat.  Thus far, scientists have had difficulty finding a heat process that generates more energy from the fusion reaction than it takes to spark it.  The challenge is called ‘energy gain.’

It is not like mankind does not already have a perfect fusion example to use as a model.  Fusion reactions can be found naturally in the core of stars.  Indeed, at the core of our own Sun hydrogen atoms combine to make heavier elements like helium with the resulting power bathes Earth and its neighboring planets in light and heat.  Duplicating that in a controlled process is proving a tough nut to crack.

There is renewed confidence that a nutcracker could be at hand.  In early December 2022, the National Ignition Facility (NIF) in California announced a breakthrough in achieving energy gain – i.e. more energy produced that used in a fusion process.  In the NIF laboratory 2.05 megajoules of laser light was focused on a capsule of fusion fuel, sparking an explosion that produced 3.15 megajoules of energy.  Scientists the world over celebrated!

Why is everyone so excited?  Fission-driven nuclear reaction represents a potentially ample source of energy that is carbon-free and nearly waste free.  If an energy-gaining process can be scaled up to mass energy production, human kind may be able to avoid the worst of the environmental crises triggered by combustion of fossil fuels.  Fusion is also quite efficient, requiring one-millionth of the fuel mass needed to produce the same amount of energy as a coal-fired power plant.  Favored fuels for fusion are also quite abundant and inexpensive.  Thus fusion is potentially a low-cost source for energy for heating and lighting our homes and powering transportation  -  if the right technology can be developed.  So far, nuclear fusion reactors come with a fairly high price tag.

There is also reason for investors to be excited.  Surprisingly, a number of commercial companies have been involved in fusion research and development.  Our due diligence has found at least 40 companies with active fusion development projects.  Participation by private companies in fusion development may be related to the availability of financing.  Institutional investment in fusion power development was off a bit in the year 2022, but venture capital and private equity funds still laid out $1 billion in the year to keep fusion projects moving forward.  This compares to $2.6 billion funneled into fusion project by savvy investors in the year 2021.

 

With commercial companies in the thick of fusion work there is potentially an investment gain available to investors right along with energy gain.  In the next few posts we will explore the companies already involved in fusion research and development.  We will take closer look at the science behind fusion and explore which companies could be good investment targets.          

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.