Morgan Stanley
  • Research
  • Dec 20, 2022

Nuclear Fusion: Still a Long Road From Breakthrough to Viability

The recent breakthrough in nuclear fusion represents a remarkable advancement in the development of a potentially radical decarbonization technology. But nuclear fusion technologies will need to advance much further before they can be relied upon as a source of abundant, sustainable energy.

Shooting giant lasers at a hydrogen-filled diamond may sound like science fiction, but scientists at a U.S. government-funded laboratory used just this approach to replicate the process that powers the sun and prove that nuclear fusion—with a net energy payoff—is possible on Earth.

While the milestone represents a remarkable advancement toward achieving the dream of decarbonization, nuclear fusion as a source of abundant, sustainable energy remains at least a decade—and billions of dollars in investment—away.

“The recent breakthrough to achieve a net gain of energy was a marvel that meaningfully advances the technical development of nuclear fusion technology,” says Ed Stanley, Morgan Stanley’s Head of Thematic Research in Europe. “Like other radical energy-transition technologies, nuclear fusion provides hope of an alternative path to curtailing long-term global warming, but the timeline could be very long.”

Analyzing the Future of Fusion Energy

Fusion has the potential to generate large amounts of energy with no greenhouse gas emissions. But the catch is that the process requires large amounts of energy, and it is highly inefficient at present. For instance, the excitement around the recent development is that it took 2.05 megajoules to trigger an output of 3.15 megajoules. But it took roughly 300 megajoules to power the lasers. (One kilowatt hour, or the amount of energy used to keep a 1,000 watt appliance running for about 60 minutes, is equal to about 3.6 megajoules.)

“Think of it as a lightbulb that gives off 100 times less light than the energy needed to illuminate it,” says Stephen Byrd, head of Morgan Stanley's Global Sustainability Research team. The other type of fusion technology in development, which uses powerful magnets to combine hydrogen atoms and form helium, resulting in energy output, is also power-intensive and far from viable.

Both technologies require improvements to the key components (lasers and magnets) to drive down energy consumption, reduce overall costs and eventually help firms turn profits and bring investment returns. It took 60 years of research to get to the point of the latest advancement, and at a technical session hosted by the agency, a senior U.S. Department of Energy official estimated it would take a few more decades of research before this form of lab-based nuclear fusion could be commercialized.

Commercial developers are more optimistic, and some have predicted fusion will be commercialized by 2030 and prove itself a contender with other forms of power generation by 2040. One executive of a firm developing nuclear-fusion technology said that nuclear fusion accounting for even 5% of the total global energy market by 2050 would be “remarkable.” 

Fusion Infusions

With clear sustainability advantages and benefits in comparison with other types of nuclear energy, fusion technologies have earned more investor interest in recent years. In fact, in 2021 privately held firms in the space received an estimated $4 billion to $5 billion in funding, according to an executive of a firm working on fusion technology, compared with $200 million to $300 million over prior years. Laser-centered fusion technologies have received less venture funding ($1.8 billion since 2015) than the magnet-powered fusion alternative ($5.2 billion since 2015), though the recent milestone could help close the gap and draw more funding for fusion technologies overall. In the U.S., commercial firms may be able to find government funding and subsidies from recently passed legislation.

Public acceptance will also be a significant factor in viability and would likely require education around the distinction between nuclear fusion and nuclear fission, particularly the lack of risks from radioactive waste or threat of exploitation for nuclear weapons.

“The sustainability and security credentials of nuclear fusion are clear: It produces no long-lived radioactive waste to pose an environmental threat and no enriched materials that could be exploited to make nuclear weapons,” says Stanley. “Lastly, there is more flexibility in where fusion plants are located compared with nuclear reactors, since they aren’t dependent on external fuel or other infrastructure.”

For a detailed look at analysis from Morgan Stanley Research on the recent nuclear fusion breakthrough, deeper insights on decarbonization technologies and more on disruptive technology that could define the next decade ask your Morgan Stanley Representative or Financial Advisor for the full reports “Thoughts on Fusion Energy Breakthrough” (Dec. 14); Earthshots (Nov. 30); and Moonshots (Sept. 14) Morgan Stanley clients can access the reports directly here, here and here