January 17, 2023 - Decarbonizing our electricity system requires unprecedented efforts at the technological, economic, and system integration levels. Renewable energies such as wind and solar power are a natural solution, since they are zero-carbon, technologically mature, and cost-efficient. Yet, due to their intermittent generation - the sun doesn't always shine and the wind doesn't always blow - the need for complementary technologies such as energy storage or transmission grid expansion, to stabilize the system, leads to a significant increase in system costs.
In a resource rich region, for example Australia or California, the marginal energy generation cost for low penetration levels of renewables (between 10 and 40 percent) is at around $40 per megawatt-hour (MWh). However, as the penetration rate increases to 80 percent, our analyses indicate that the associated system costs rise to approximately $100 per MWh and continue to increase exponentially above that threshold.
Consequently, the integration of dispatchable, zero-carbon energy technologies in the energy grid could help to avoid such system cost spikes and provide flexibility during periods of low wind and solar output. Our analysis suggests that fusion energy could become one of these technologies.
The basic principle of fusion energy is inspired by the sun—the fusion of two light atoms such as hydrogen isotopes releases large amounts of energy. To implement, scale, and make this concept competitive on Earth, several technical challenges still need to be solved. But crucially, if fusion energy can reach technological maturity, it could help to solve the problem of intermittent generation from wind and solar by providing abundant, emission-free baseload supply regardless of geography and without long-lived nuclear waste.
Our analysis on the potential of fusion in a recently published article suggests that if fusion energy became available at a sufficiently competitive cost, between $50-100 MWh, it could cover more than 20% of the generation capacity in Europe by 2050.
Growing momentum in the fusion industry
Momentum is building in the fusion industry and with several privately funded companies pursuing near-term milestones on the path to commercialization, technological advances and breakthroughs could become more frequent. Two recent events point to growing momentum:
- First, news of a breakthrough on December 5th 2022, at the Lawrence Livermore National Laboratory (LLNFL) in the US, confirmed the achievement of a fusion milestone: the energy gained from the fusion reactions (3.15 MJ) exceeded the energy inserted by the lasers (2.05 MJ). This is a major advancement on the path to a commercial power plant for the entire fusion industry and should help increase public awareness and attract more investments into fusion technology.
- Second, having attended the Fusion22 conference in London in October 2022, we believe the industry is stronger and more dynamic than it’s ever been. The event was organized by the UK Atomic Energy Authority and the Fusion Cluster, bringing together renowned participants from science to industry, from OEMs to suppliers. In interesting talks and panel discussions we saw fusion leaders from all around the globe such as First Light Fusion, General Fusion, Helion, Marvel Fusion, TAE, and Tokamak Energy addressing key questions and challenges faced by the emerging industry.
Timeline to commercial fusion is shortening
At Fusion22, the prevailing sentiment among leaders in the fusion industry has been that the path to commercial fusion is no longer 30 to 50 years away. Recent technological breakthroughs have increased confidence in the viability of the technology. Disruptions in component technologies such as superconducting magnets or laser diodes as well as advanced computer simulations contributed to a clearer roadmap toward commercialization. This has laid the groundwork for an increasing number of start-ups around the world to develop commercial fusion concepts, attracting growing attention and investments from investors as well as regulators, and delivering reputable scientific results.
Looking ahead, we see three key unlocks for fusion power:
- Regulation and standardization can—and should—drive growth. Regulation could provide legal certainty and help guide the development of commercialization roadmaps. Clear fusion-specific policy frameworks will help both manage expectations as well as build trust for the fusion industry and its investors. Targeted regulation—independent of fission and industry leaders—should collectively be aimed at building fusion’s individual, differentiated reputation and branding. This was followed by Fusion22’s host country—the United Kingdom—where, in June 2022, the government decided to explicitly exclude fusion reactors from the Nuclear Installations Act (NIA65) applicable for fission and instead continue to regulate fusion by the Environment Agency (EA) and Health & Safety Executive (HSE) like other industrial facilities.
- Governments can offer support through the development of public-private partnership programs. A famous model is the US space industry, which benefitted significantly from NASA serving as an anchor customer for private industry leaders. An important aspect to consider when building such growth partnerships is to focus on standardization and modularization from the very beginning. This will contribute significantly to improving supply chain scalability.
- A global ecosystem will be key. To overcome the multiple challenges from a technical and commercial perspective, a parallelization of both technological advances and supply chain development is required. Only with combined forces of academia, industry, and supply chain, supported by governments, will fusion reach the point of marketability, significantly before the middle of this century and thus avoid being crowded out by lock-in effects of other clean technology investments. At the national level, the United Kingdom offers another example of what successful fusion clusters might look like: The Culham Centre for Fusion Energy—the United Kingdom’s national laboratory for fusion research—has been the home of several major research facilities such as the Joint European Torus (JET), the Mega Ampere Spherical Tokamak (MAST) and the Small Tight Aspect Ratio Tokamak (START). The UK government has just recently announced a commitment of nearly half a billion pounds. This environment provides fertile ground for private-sector innovation, as reflected in the high and growing density of start-ups in the area.
Given its huge potential and the impact fusion energy could have on decarbonizing our energy system, we believe it is more important than in other industries to establish a strong collaboration within a global ecosystem. It is our ambition to be a catalyzer, building up this ecosystem, by convening the key players in supply chains and crucially the relevant industry sectors that will be instrumental to fusion’s continued development. We look forward to sharing more ideas on this soon.
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This article was edited by Thomas Farrar, a manager of communications, based in McKinsey’s London office.