In the aftermath of COP26 and with sustainable development an evermore important criteria for big investors, nuclear fusion offers a different way to invest in renewable energy. With a rich history and dynamic technology development, nuclear fusion is vastly different from nuclear fission, offering a safer and more efficient energy source.
There are various types of nuclear fusion technology, each presenting unique investment opportunities. The market is populated with key players, whose stocks provide a new frontier for energy investing.
However, it is critical to understand how to analyse a nuclear fusion stock, considering factors like government policies, regulations, and the environmental impact of nuclear fusion. Despite the complexities, the potential rewards can be significant, provided risks are effectively managed. As we move into the future, trends suggest that nuclear fusion investments will play a crucial role in the renewable energy landscape.
Contents: New Opportunities in Nuclear Fusion
- What is nuclear fusion?
- History of nuclear fusion development
- Difference between nuclear fission and nuclear fusion
- Types of nuclear fusion technology
- Nuclear fusion stocks
- Key players in the nuclear fusion market
- How to analyse a nuclear fusion stock
- Outlook for nuclear fusion
- Government policies and regulations impacting nuclear fusion
- Environmental impact of nuclear fusion
- Managing risk in nuclear fusion investing
- Investing in nuclear now
- Future trends in nuclear fusion investments
First, we should be clear - nuclear fusion is a high risk/reward investment. That’s because nuclear fusion is not a new idea - scientists have been trying and failing to make it work for decades. However, if it were to become a reality, it could change the world.
The promise of a cost-effective and functioning nuclear fusion technology is a big reduction in fossil fuel usage and carbon emissions without a lot of the sacrifices and without the toxic byproducts of existing nuclear power plants.
Nuclear fusion offers the chance at:
- Green energy without unproductive wind and solar projects and
- Reducing carbon emissions without the cutbacks to our standards of living currently being proposed by leaders at environmental events like COP26.
- Less waste that future generations will be forced to deal with and a much lower risk of a disaster like Fukushima.
Naturally, investors in the companies that help such a feat, should be handsomely rewarded, but the risk of failure remains high.
What is nuclear fusion?
REMINDER: Nuclear power is generated by a nuclear reaction in a nuclear reactor from a nuclear fuel like uranium or plutonium. This process is nuclear fission.
Fission occurs when a neutron slams into a larger atom, forcing it to excite and spilt into two smaller atoms - also known as fission products. When each atom splits, a tremendous amount of energy is released. - Source: Energy.gov
Nuclear fusion is the opposite to nuclear fission, and uses different more widely available fuels - deuterium and tritium.
Where fission splits a larger atom into two smaller atoms, releasing energy, fusion happens when two lighter nuclei slam together to form a heavier atom. Source: Energy.gov
Fusion is the way the sun makes energy.
History of nuclear fusion development
Nuclear fusion has its roots in the early 20th century when it was first theorized in the 1920s. The concept gained traction in the 1930s when it was discovered that fusion reactions were the main source of energy in the sun and stars. Experimental efforts to achieve controlled nuclear fusion on Earth began in earnest in the mid-20th century, with significant advancements made during the Cold War era.
Difference between nuclear fission and nuclear fusion
Nuclear fission and fusion are both nuclear reactions that produce energy, but they are fundamentally different processes. Fission involves splitting an atom into two smaller ones, whereas fusion involves combining two light atoms into a larger one. In fission, a heavy, unstable nucleus such as uranium or plutonium is split, releasing a large amount of energy. In fusion, light nuclei such as hydrogen are fused together under extreme temperatures and pressures, also releasing energy.
Types of nuclear fusion technology
There are several types of fusion technology currently being developed:
- Magnetic Confinement Fusion (MCF): This is the method used by most research institutions and involves confining the plasma within magnetic fields.
- Inertial Confinement Fusion (ICF): This method uses lasers or ion beams to heat and compress a small pellet of fusion fuel.
- Magnetized Target Fusion (MTF): This is a hybrid of the above two methods and involves compressing plasma within magnetic fields.
Nuclear fusion stocks
The list of nuclear fusion stocks is very short, so short that it's empty!
Nuclear fusion research has historically been the remit of governments and intergovernmental agencies.
The focal point for European research into nuclear fusion is the ITER Tokamak, a magnetic fusion device being built in Southern France. The forerunner to ITER is JET - the Joint European Torus, operated at the Culham Centre for Fusion Energy in Oxfordshire, UK. JET began operating in 1983 and in the late 90’s became a facility to test features of ITER. The UK is now designing its next-generation reactor known as STEP (Spherical Tokamak for Energy Production).
Big leaps and bounds have been made but importantly every nuclear fusion machine still eats more energy than it produces.
Now in the age of Silicon-valley billionaires, US and Canadian nuclear fusion startups funded by said billionaires are cropping up. These are all private companies so the only way to invest in them is through an investment in a venture capital firm or to wait for an IPO.
- Commonwealth Fusion Systems (CFS)
- TAE Technologies (formerly Tri Alpha Energy)
- General Fusion
The UK has its own set of startups spun-off from the UK Atomic Energy Agency and Oxford University.
- Tokamak Energy
- First Light fusion
Key players in the nuclear fusion market
There are several significant players in the nuclear fusion market, each contributing valuable research and advancements to this developing field. Companies like Tri Alpha Energy, Tokamak Energy, and General Fusion are pioneers in this realm.
- Tri Alpha Energy: This American energy company is working on aneutronic fusion, which produces less radioactive waste than traditional fusion methods.
- Tokamak Energy: A UK-based company focused on developing compact, efficient fusion reactors. They aim to produce commercially viable fusion power by 2030.
- General Fusion: Canadian company General Fusion uses magnetized target fusion technology in their pursuit of clean, limitless energy.
How to analyse a nuclear fusion stock
Analyzing a nuclear fusion stock involves assessing the company’s financials, understanding the risks inherent to the industry, and staying informed about regulatory changes and scientific advancements.
- Financial analysis: Review the company's profit margins, revenue growth, and debt levels. Check for consistent profitability and a strong balance sheet.
- Industry risks: Understand the scientific and technical challenges the company faces. The nuclear fusion industry is still in its experimental phase, and many projects may not reach commercial viability.
- Regulatory environment: Be aware of the government policies that could impact the industry, both positively and negatively.
Outlook for nuclear fusion
Don’t expect any fusion IPOs in 2022 or even 2023. The technology needs to be proven viable to sustain investment in public markets, where the investing time horizon tends to be shorter than in private markets dominated by deep-pocketed venture capital funds and wealthy private equity investors.
But the trend seems to suggest rising fund flows into nuclear fusion. A study from the Fusion Industry Association estimated there are 35 fusion companies around the world, which have received $1.87 billion in private funding. With the addition of a new $500 million into Helion, that adds up to $2.37 billion.
What’s happened to attract this extra money?
Well one simple idea is that there is just a lot more money out there - and it is increasingly focused on the top 0.01% who invest in these types of projects. Should stock markets go through a rough patch, we can expect less private capital flowing into fusion.
But more specifically to fusion - new technology and fresh approaches are coming to the fore. Helion does not use the ‘tokamak’ first devised by the USSR in a technique called ‘aneutronic fusion’. And private investment could add new life into government projects where progress has been slow.
Risks to Nuclear Fusion Investing
There really is one risk to think about -- that so-called ‘positive energy’, where the machines produce more energy than they consume, never happens.
Government policies and regulations impacting nuclear fusion
Governments worldwide influence the nuclear fusion industry through their policies and regulations. Countries like the U.S., UK, and China have invested in nuclear fusion research, indicating a potential shift towards renewable energy sources. However, strict safety and environmental regulations can also pose challenges.
Environmental impact of nuclear fusion
Nuclear fusion has the potential to provide clean, limitless energy. Unlike nuclear fission, fusion does not produce long-lived radioactive waste, making it a more environmentally friendly option. However, the process currently requires more energy than it produces, a challenge scientists are working to overcome.
Managing risk in nuclear fusion investing
Investing in nuclear fusion involves significant risk due to the industry's experimental nature. Diversification, understanding the science behind fusion, and staying up-to-date with industry news can help manage these risks.
Investing in nuclear now
Because nuclear fusion is still unproven, governments including in the US are putting more emphasis on solar, wind and traditional nuclear power.
If you can’t wait for fusion and want to invest in currently available nuclear and uranium-related companies, these are popular ETFs:
- ETFX WNA Global Nuclear Energy ETF (LON:NUKE)
- db Uranium ETC (LON: XURA)
- Global X Uranium ETF (NYSE: URA)
- Market Vectors Uranium+Nuclear Energy ETF (NYSE: NLR)
- iShares S&P Global Nuclear Energy Index ETF (NASDAQ: NUCL)
- PowerShares Global Nuclear Energy ETF (NYSE: PKN)
Future trends in nuclear fusion investments
The potential of nuclear fusion to provide clean, limitless energy has drawn significant investor interest. But the industry is in the research and development phase, with commercial viability still a distant goal. However, advancements like compact reactors and new fusion methods can present promising investment opportunities.