Recently I’ve been having a lot of interesting conversations with investors about fusion energy.
That’s because I’m organising a fusion investment event in London on the 18th of May. FusionXInvest will be the first large event fully dedicated to driving investment into fusion, which is critical for its commercialisation.
Fusion energy will be transformative for society, offering almost limitless clean energy whenever and wherever we need it—complementing renewables for reliable electricity grids and decarbonising industrial sectors such as steel, cement, mining or desalination. Fusion is the energy of the stars, and you can read more about how scientists are working to harness it in a previous piece.
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While the scientific developments are inspiring and the engineering challenges daunting, often dominating the conversation, it’s essential to recognise the importance of getting the finance right when it comes to complex engineering projects and the developments of new technologies.
Why investors are key
Investors are in an interesting position. They have the potential to be a huge part of the solution to our climate/energy woes by making the accelerated development of fusion possible.
Legal & General Group, one of the UK’s leading financial services groups and a major global investor, is up front about the power of investors to address climate change through investment, influence and operations.
The Group’s alternative asset platform, Legal & General Capital (LGC), plays a significant role in developing and deploying technologies that help to tackle climate change, such as electric charging infrastructure in the UK, super-efficient solar panels, offshore wind farms and also fusion energy, where they have been investing in Tokamak Energy for several years.
John Bromley, Managing Director Clean Energy Strategy & Investments at Legal & General Capital, says: “Climate is not only the most urgent issue, but also the biggest investment opportunity of our lifetime. Investors who are focused on the challenges of decarbonising our economy, and can take a long term view, have a crucial role to play in the accelerated development of fusion energy.”
He continues: “As an energy transition investor, Legal & General Capital supports the growth of a new generation of clean energy technology and infrastructure providers, and innovative companies whose work will support the transition to net zero.”
Some consider that the financing risk is the biggest risk to fusion, so investors are critical to success.
Why is fusion so attractive? As John Bromley says, “Renewables will certainly be a large and important part of a decarbonised economy, but we will also require dispatchable zero carbon energy sources to end fossil fuel reliance. Fusion energy holds the potential to achieve and sustain a significant reduction in global emissions.”
There’s no doubt that funding fusion is challenging, involving high upfront costs, long timescales and high uncertainty. Yet investment in fusion has been increasing.
Just last month, Breakthrough Energy Ventures (Bill Gates’ investment firm seeking to finance, launch, and scale companies that will eliminate greenhouse gas emissions throughout the global economy—an investor in Commonwealth Fusion Systems and Zap Energy) invested in another fusion company, Type One Energy.
Behind the scenes, more conventional investors, like pension funds, insurance companies and sovereign wealth funds, have quietly been investing in fusion. The mainstreaming of fusion among capital-providers has begun.
What investors need
Yet getting into fusion investment requires a steep learning curve. Fusion is a big and complex subject.
Increasingly investors, investment banks or other financial players are enquiring wanting to learn about fusion, taking that first step into getting familiar with a new industry.
Financing fusion is so critical to the mission that advocates of fusion should be asking how we can accelerate this mainstreaming of fusion and draw new capital to the table.
Investors need access to opportunity, they need insight from industry insiders and existing investors, they need community and relationships. This is why events that bring all these things together can be so important.
But investors also need government support and certainty. That’s one reason why the U.K. is currently in a strong position for fusion energy development, because they have outlined their plans for a regulatory framework for fusion while other countries are still in discussion.
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It goes further than technology regulation, however. Policy and incentives will be required in the financial services industry to drive the effective reallocation of capital.
Michelle Scrimgeour, Chief Executive of Legal & General Investment Management, gave evidence to a 2022 U.K. parliamentary inquiry entitled ‘The financial sector and the U.K.’s net zero transition’.
Scrimgeour said: “A successful transition to a decarbonised economy, consistent with less than 1.5 degrees warming, will require a substantial change in capital allocation. Several trillion dollars a year of incremental capital will need to be invested into low carbon energy, energy infrastructure and energy efficiency. For this capital allocation to occur, a financial services industry that is aligned with net zero outcomes will be crucial. Equally, this requires global policy action at international governmental level, particularly on an effective regulatory structure to price carbon and other greenhouse gases.”
So while investors hold the key to the success of fusion and our clean energy future, it’s not just down to investors—government policy will be crucial in enabling investors to drive the change.