The world’s nuclear fusion pioneers may be chasing the prize of limitless clean energy on tap but they will need to find new sources of capital to bridge a funding “valley of death”, said the head of its industry body after reporting that investment growth shrank by half last year.

The Fusion Industry Association (FIA), which claims to represent the vast majority of businesses active in the cutting-edge sector, said 44 fusion companies covered in its annual survey have now attracted a total $6.2bn in investment, an uptick of $1.4bn on 2022’s figure.

That was a fall of 50% on the $2.8bn funding growth tallied last year, however, with the FIA’s latest 2023 report noting an absence of the ‘blockbuster’ deals that pushed up last year’s total and instead a broader spread of smaller investments.

Companies involved in Fusion — which aims to harness the reactions that power the sun to produce unlimited, on-demand, zero-carbon energy (see panel) — need increasing levels of funding as their cutting-edge technologies attempt to move from the laboratory to pre-commercial-scale demonstrators and then actual grid power, competing with other clean energy sources such as wind and solar.

FIA CEO Andrew Holland said: “In the last two years, traditional venture capital investors have grown comfortable investing in fusion, but the amount of investment they can make might be limited to the 'Seed' or 'Series A' investments that characterised many of the rounds announced in this report.

“To support the continued growth of the industry, companies will have to find a way to bridge a possible ‘valley of death’ by bringing new investors with different pools of capital.”

The fusion sector has been notable for attracting the backing of billionaires such as Bill Gates, as well as a handful of fossil energy giants such as Shell, Eni and Equinor.

The company to attract the most capital last year according to the FIA was California-based TAE, which posted a $250m increase, and which Recharge reported earlier this year was involved in a pilot of an innovative fusion technology that uses no radioactive materials and is claimed capable of “powering the planet for more than 100,000 years”.

Grid power by 2030

Despite the “challenging” investment environment characterised by inflation and interest rate rises, the FIA reported an industry more confident of its ability to play an early role in the energy transition.

Four companies believe they will be in a position to deliver power to the grid by 2030, and 19 by 2035, said the FIA, while 13 new firms joined the race since last year’s report.

US-based Helion Energy caused a stir earlier this year when it said it hopes to get its first fusion plant online by 2028 with a rated capacity of “50MW or greater” – and announced an offtake deal with Microsoft for the power.

Holland said: “Beyond private investment, it is also notable that we are seeing an increase in public-private partnerships, and an emerging regulatory framework for fusion, which will de-risk future investments. This shows that governments are beginning to plan for fusion energy and a sure sign of a maturing industry. This all comes as companies report they are increasingly confident of hitting their ambitious milestones.”

Nuclear fusion - star power on earth

Nuclear fusion energy aims to harness the same reactions that power the sun to produce unlimited, on-demand, clean energy.

The process involves changing a gas to a plasma at temperatures of tens of millions of degrees, often aided by superconducting magnets, to create collisions between hydrogen atoms, tapping the energy that’s produced.

Unlike its close cousin nuclear fission – basis of the current global nuclear industry, which relies on splitting rather than combining atoms – fusion is said by scientists to present no risk of the sort of runaway reaction that led to the Chernobyl disaster.

And while it is not waste-free, the by-products are said to be low and short-lived compared to fission, and much more easily manageable.