Borne from war, controversy has long dogged nuclear power. Climate change and now an energy crisis is changing minds. New technologies focused on light-element fusion, the same process that powers the Sun, rather than heavy-element fission promise cleaner, carbon-free baseload power.

Not surprisingly private investors looking to meet environmental, social and governance (ESG) mandates are taking notice. In the last six months, fusion investment has surged even as activity in the broader nuclear space has grown steadily since 2018. Last fall, Commonwealth Fusion Systems secured USD 1.8bn just a month after Helion Energy brought in USD 500m, with USD 1.7bn more possible, and General Fusion announced a USD 130m round.

The Biden Administration gave fusion power a boost when it held a summit on the niche at the White House in March. Such high-profile attention means investors require less convincing about the viability of fusion power, and more about which technology represents the best approach, says Jim McNiel, chief marketing officer of fusion player TAE Technologies.

Diversity is key

Fourteen private fusion power companies are active in North America, according to the Fusion Industry Association (FIA). Each strives for a differentiated approach. Investors like the diversity because it hedges their bets, says Amy Roma, a partner at Hogan Lovells.

Those novel technologies can be applied beyond power too.

Commonwealth Fusion is focusing on high temperature superconducting (HTS) magnets to achieve commercial fusion. The US defense sector is interested in HTS magnets for their potential to improve motors and generators, which could lead to more involvement, says Dr. Matthew Moynihan, a technical consultant to investors. Defense contractors Lockheed Martin [NYSE: LMT] and General Atomics have publicly disclosed direct involvement in fusion power, but others could come knocking.

Stellar outlook

To date, deal activity in the fusion sector has focused on spinouts with some M&A. In April 2021, Wisconsin-based Phoenix merged back with SHINE Medical Technologies, a company Phoenix had previously spun out to produce medical radioisotopes. The recombined company could pursue an IPO or recapitalization, this news service reported.

California-based TAE Technologies spun out its particle accelerator technology for cancer treatment in 2018. TAE also has spoken to investment banks about a potential public offering for its power management technology. The company, which has raised USD 880m to date, is in the process of raising a USD 500m-plus round, this news service reported in March.

Virginia-based NearStar Fusion is developing a power plant concept that uses plasma railgun technology, which also can be used for space propulsion, this news service reported last December. It is not alone. Multiple companies, including Zap Energy, Princeton Fusion Systems, MIFTI, LLPFusion, Helicity Space, and CTFusion, are pursuing fusion-augmented space propulsion, according to the FIA.

Not even the sky is the limit for fusion. The next five to ten years will be critical for companies to make sustained progress and show fusion can deliver on its stellar promise.