WHITE PAPER

Fusion Energy Can Unlock

Our Low-Carbon Future —
and It May Be Closer
Than You Think
September 2023
By Ilshat Haris, Benjamin Vannier, Emmanuel Ricolfi, Vasilii Triandafilidi, Michael Caspersen, Vladimir Novakovic.
 H
ere’s the problem: demand for electricity is projected to increase by ~70% by 2040 —
according to the International Energy Agency's (IEA) World Energy Outlook 2023 report
— and to reach global net zero goals this energy needs to come from clean sources.

Solar farms, and wind turbines are examples of commonly used methods for generating
clean electricity. While their use is growing rapidly, they are inherently intermittent,
producing power only when the sun shines, and the wind blows. That’s a challenge for two
reasons. First, as demand grows, intermittent power sources may affect the stability and
reliability of the electrical grid. Second, many of the technologies we hope to use to reach our
net zero goals — including hydrogen, e-fuels, and direct air capture (DAC) — require
“dispatchable” power. That is to say, consistent power, available on demand, regardless of
external factors.

There are two technologies capable of delivering dispatchable power with no emissions:
nuclear fission and nuclear fusion. As promising as new fission technologies — including
small modular reactors and micro modular reactors, known as SMRs and MMRs — are,
they suffer from some of the downsides of all fission reactors, including hazardous waste and
fears of nuclear proliferation. Fusion power plants, on the other hand, while still in the very
early stages of development, offer the potential to provide a virtually unlimited amount of
zero-carbon energy, safely and affordably; and their commercialization could be closer than
you think. Here’s why.

Why Fusion?
Traditional nuclear fission reactors continue to make major contributions to reducing global
greenhouse gas (GHG) emissions, preventing 2 gigatons of GHG emissions in 2022 alone
— half of the total GHG emissions of the US. These reactors, however, have long been
plagued with concerns about their safety, environmental impact (in particular used fuel and
other nuclear waste), and potential for contributing to the proliferation of nuclear weapons
due to the type of fuel they use. SMRs and MMRs are considered much safer, offering
features like passive safety mechanisms and improved waste management — yet resistance
to their development remains. Germany closed its last three nuclear plants in 2023, and in
the US, just four commercial reactors have been built in the last 25 years.

Fusion power plants are different. By combining light atomic nuclei at extremely high
temperatures and pressures to release immense amounts of energy with zero emissions,
they have the potential to generate virtually unlimited amounts of clean electricity (see
sidebar, “Three Types of Fusion”). Additionally, once a process known as tritium breeding is
demonstrated, fusion power plants will be effectively self-fueling; all of the fuel they need to
produce terawatt hours of electricity will fit in just a couple of gas storage canisters, similar
to the type that welders use. Furthermore, fusion power plants will generate dispatchable
electricity, a necessity given that current sources of renewable energy like wind and solar
— which are expected to supply half of total electricity demand by 2050 — are non-
dispatchable (see Exhibit 1).

As such, fusion power plants offer several distinct advantages over both traditional and
advanced fission reactors, as well as current renewable energy sources — dispatchable
power and heat, potentially lower costs, increased safety, and greater locational flexibility.

1 FUSION ENERGY CAN UNLOCK OUR LOW-CARBON FUTURE — AND IT MAY BE CLOSER THAN YOU THINK
Three Types of Fusion
Companies and governments working on the development of controlled fusion power plants are exploring three different
methods of achieving fusion, each of which takes a different approach to creating the key conditions for fusion to occur:
extreme heat and the confinement of atomic nuclei at high pressures. The three most popular methods are:

• Magnetic confinement fusion: Powerful magnetic fields confine and control plasma, a superheated state of matter,
to achieve fusion. These magnets are so powerful that they could lift the Empire State Building. Private players include
CommonWealth Fusion Systems and Tokamak Energy; government efforts include ITER, an international consortium
of countries.

• Inertial confinement fusion: Intense lasers or particle beams rapidly compress and heat a small target containing
fusion fuel, creating the conditions for fusion. This approach mimics the extreme conditions found in the center of stars.
Examples include Marvel Fusion and the NIF facility at the US’s Lawrence Livermore National Laboratory.

• Hybrid approaches: Aspects of both magnetic and inertial confinement fusion are combined. These approaches
aim to benefit from the strengths of each method to achieve more efficient and controlled fusion reactions. Notable
companies include Helion Energy, General Fusion, and TAE.

Exhibit 1 - Global Demand for Electricity Will Double from 2020 to 2050,
but Expected Growth in Renewables Will Cover Only Half of that Demand

1. Includes solar PV & wind with battery storage, hydro, geo-thermal, bio-mass
Source: IEA; UNEP; BCG analysis.

2 FUSION ENERGY CAN UNLOCK OUR LOW-CARBON FUTURE — AND IT MAY BE CLOSER THAN YOU THINK
 Add EyeEm Image

“
In reference to NIF achieving energy-positive controlled fusion

It's been called a Kitty Hawk

moment... We still have a
ways to go... but the prize is
incredible.
- Dr. Ernest Moniz
Former US Secretary
of Energy
 Dispatchable power and heat

Fusion power plants may one day offer constant, virtually unlimited, dispatchable energy
available in the form of heat or electricity, making them uniquely positioned to provide clean
power for several key zero-carbon processes needed to slow global warming. These include
hydrogen production, direct air capture (DAC), and e-fuel pruduction, such as zero-carbon
ammonia, methanol, sustainable aviation fuel, and others (see sidebar, “Powering the
Low-Carbon Future”).

Cost

Once put into production and scaled up, the electricity from fusion power plants could be
on a pathway to become the most affordable source of dispatchable energy. Judging by initial
simulations, fusion may provide energy at a Levelized Cost of Electricity (LCOE) of less than
$50 per megawatt hour, comparable to some renewable power sources. Fusion's expected
competitiveness is driven by three key factors. First is its high potential capacity factors of up
to 90%, compared to just 30% to 40% for solar and wind energy. Second is that fusion's capex
should be lower than that of SMRs and MMRs on a per unit of energy basis, based on our
modeling. Third is that fusion's operating costs could be kept low. Not only could fusion's fuel
costs be lower than those of fission power plants, but fusion's staffing costs may also be
lower. It is likely that fusion power plants will have a staffing model that is more similar to
natural gas-fired power plants, which are cheaper to staff than traditional fission power
plants.

Fusion also has the potential to produce cost competitive, clean hydrogen. Based on our
modeling, unsubsidized hydrogen produced with fusion energy could cost just $1 to $3 per
kilogram by 2050 — less than expected for renewable powered hydrogen production.
Furthermore, developing fusion-to-hydrogen co-generation plants may generate additional
revenue by switching between hydrogen production and electricity generation in volatile
electricity markets.

Like the rapid reduction in the cost of lithium-ion batteries — a 10% to 20% decline with
each doubling of battery production — the cost of fusion power and SOECs is likely to
decline significantly over time, as we learn more about the technologies and gain more
experience in how to build and operate them.

Safety

Many perceived risks associated with nuclear fission do not apply to nuclear fusion. Fusion
reactions require very specific conditions to sustain themselves, and if any of those conditions
are not met, the reaction simply stops. Therefore there is no risk of a runaway reaction, or
the need for complex safety mechanisms. Moreover, fusion power plants will not produce
long-lived, high-level radioactive waste. Their waste will have a far shorter half-life than waste
from fission reactors, and will likely be classified by the US’s Nuclear Regulatory Commission
(NRC) as belonging in the same category as medical isotope waste. Additionally, they will not
pose the weapon proliferation risks of uranium or plutonium-based fission reactors.

Location

Fusion power plants offer greater flexibility in site selection compared to renewable energy
technologies that rely on the availability of the wind, the sun, or flowing water. Fusion power
plants can theortically be placed virtually anywhere given their safety, fuel availability, and
limited footprint, opening up many possibilities. For example, a fusion power plant used for
hydrogen production could be built near a demand hub, reducing transportation costs. On
the other hand, a solar-powered hydrogen plant might have to be located far away from the
hub due to the availability of space and sunlight. Alternatively, fusion power plants could be
fitted into existing brownfield coal-burning power plants, thus avoiding growing NIMBY (not
in my back yard) trends, further reducing permitting requirements, and providing a “second
life” to communities that have historically depended upon fossil fuel-based industries.

4 FUSION ENERGY CAN UNLOCK OUR LOW-CARBON FUTURE — AND IT MAY BE CLOSER THAN YOU THINK
Powering the Low-Carbon Future
Fusion power plants could have a major role to play in powering a range of processes instrumental in fueling the zero-
carbon economy and reaching net-zero. These include:

• Direct Air Capture: By capturing CO2 directly from the atmosphere, DAC technology has the potential to significantly
counteract the emissions that are heating up the globe. By 2050, DAC is expected to capture around 1 gigaton of CO2 per
year, according to the Global CCS Institute. Baseload, non-intermittent power sources like fusion (and nuclear fission)
are ideal for DAC because they can provide the continuous and reliable energy supply needed for continuous CO2
capture operations, and thus maximize CO2 removal.

• Zero-carbon hydrogen production: Fusion has the potential to be a key power source for producing the zero-carbon
hydrogen that will be needed to decarbonize hard-to-abate sectors that can't be powered directly with electricity.
Examples of processes that hydrogen could power include steel manufacturing, cement production, and many other
industrial applications. Zero-carbon hydrogen production is expected to reach between 250 and 300 million tons
annually by 2050, depending on scenario.

• Heat generation: In addition to electricity, fusion power plants can generate excess heat, which can be used to produce
steam. Steam can then be integrated into hydrogen production processes using advanced solid-oxide electrolyzers
(SOECs) — high-temperature electrolysis devices that use both electricity and steam to produce hydrogen. Due to their
high efficiency — 80% to 90% versus around 65% for conventional alkaline electrolyzers — SOECs reduce the overall
energy requirements for hydrogen production.

• Zero-carbon ammonia production: Fusion could also be essential for producing zero-carbon ammonia at scale.
The Haber-Bosch process for producing ammonia — an increasingly valuable resource in the low-carbon economy —
operates under high temperatures and pressures, and requires hydrogen. While the nitrogen required is obtained from
the air, the hydrogen must be produced using low-carbon sources of power, and fusion could be ideal.

Exhibit 2 - Total Private Funding in Fusion Technology Has Exceeded

$5.5 billion Over the Past 10 Years

Source: Crunchbase; BCG analysis.

5 FUSION ENERGY CAN UNLOCK OUR LOW-CARBON FUTURE — AND IT MAY BE CLOSER THAN YOU THINK
 Add EyeEm Image

“
The current level of
international commitment is
bringing us closer to a fusion
future than ever before.
- Rafael Mariano Grossi,
Director General,
International Atomic
Energy Agency
 The Sooner the Better

W
hile a significant amount of uncertainty remains around when controlled fusion will
become a commercial reality, the signs of progress are good. Companies pursuing
both magnetic confinement and inertial confinement fusion have achieved notable
technological milestones, and are now transitioning from proving the viability of the physics
to addressing the significant engineering challenges.

In December 2022, scientists at the US’s National Ignition Facility (NIF) achieved an energy
gain from fusion, generating more energy in the reaction than delivered by the lasers in their
confinment system — 3.15 megajoules (MJs) produced, compared with 2.05 MJs consumed.
It should be noted however that the energy from fusion was not greater than the overall
energy used to conduct the reaction, meaning that net energy gain remains unachieved. In
the meantime, CommonWealth Fusion Systems (CFS) has successfully tested high-
temperature superconducting magnets, a critical step in their journey towards practical
fusion energy.

Investment in fusion is experiencing significant momentum, indicating a potential tipping

point. Over the past ten years, private capital exceeding $5.5 billion has been invested in
fusion, highlighting increased interest and confidence in the field (see Exhibit 2). Microsoft,
for example, has already signed a power purchase agreement (PPA) with Helion Energy,
aiming for delivery of fusion-produced electricity by 2028.

Turning on the power

So how should companies prepare for the advent of fusion energy? Large industrials, oil and
gas companies, utility providers, technology companies, and financial players with a need for
consistent sources of power can begin preparing for fusion by engaging in strategic activities
and exploratory steps. These actions would allow companies to monitor progress, identify use
cases, evaluate potential sites, and establish partnerships without having to make substantial
financial investments.

• Research and monitoring: Stay informed about key technological milestones and
breakthroughs in fusion research, to understand the progress and readiness of fusion
technology for commercialization.

• Key use cases: Identify specific high-emitting processes within the company's operations
that align with fusion power's capabilities.

• Stakeholder collaboration: Foster relationships with academic institutions and fusion

startups. By allying with these entities, companies can gain insights and explore early-
stage collaborations without making massive capital commitments.

• Power Purchase Agreements (PPAs): As fusion starts to show more promise, explore
the possibility of signing PPAs with fusion energy providers, as Microsoft has already done.

All companies with a stake in the low-carbon future would be wise to closely follow — and
perhaps even invest in, if they have the risk appetite — controlled nuclear fusion. Given
the importance of capturing this truly clean and nearly limitless source of energy, and the
speed at which its many players are moving toward commercialization, the time to begin
contemplating the future of fusion is now. By doing so, they can position themselves for the
potential integration of fusion energy into their operations, a move that could significantly
contribute to their sustainability goals.

7 FUSION ENERGY CAN UNLOCK OUR LOW-CARBON FUTURE — AND IT MAY BE CLOSER THAN YOU THINK
 About the Authors
Ilshat Haris is a Managing Director & Partner at BCG based in Houston. He is a global
leader in BCG’s Low Carbon Solutions and a core member of the Energy, Climate &
Sustainability, Strategy, and Global Advantage practice areas. Ilshat has partnered with
energy and industrial companies to implement major commercial transformations, and
strategies. Ilshat holds a PhD in Economics. [email protected].

Benjamin Vannier is Managing Director & Partner at BCG based in Philadelphia. He is

heavily involved in BCG’s Energy practice, and focuses on advising clients in the utilities,
power generation, and energy retail sectors. He is a co-leader of the energy practice of the
Eastern Coast of the United States, and lead’s BCG’s nuclear work. Benjamin holds an M.Sc
in Engineering from Ecole des Mines de Paris, an M.Phil in Industrial Economics from
Universite Paris Dauphine, and an MBA from the Kellogg School of Management. Vannier.
[email protected].

Emmauel Ricolfi is a Managing Director & Partner at BCG based in Houston. He is a core
member of BCG's Energy and Climate & Sustainability practice areas. He partners with
energy companies to shape their transition journey, specializing on decarbonization, low-
carbon business and operating models, and ESG strategies. Emmanuel holds degrees in
Mathematics and Economics from Ecole Centrale Paris. [email protected].

Vasilii Triandafilidi is a Project Leader at BCG based in Toronto. He is member of the

founding cohort of Climate & Sustainability practice area, and a core member of the Energy
practice area. His work revolves around helping companies understand the challenges and
opportunities associated with the green transition. Vasilii holds a PhD in Chem & Bio
Engineering, and a degree in Physics. [email protected].

Michael Caspersen is an Associate Director at BCG based in Copenhagen. He serves

private and public sector clients through BCG’s Climate & Sustainability practice, with a
focus on Decarbonization and Hydrogen. In addition, Michael is a core member of the
Global Center of Excellence in Hydrogen. Michael holds a PhD in Hyd­­rogen Technology from
the Technical University of Denmark. [email protected].

Vladimir Novakovic is an Associate at BCG based in Calgary. He has assisted clients in

heavy industries to understand opportunities associated with the green transition. Vladimir
holds a BASC in Engineering Physics from the University of British Columbia. Novakovic.
[email protected].

Acknowledgements

The authors thank their colleague Bart Kolodziejczyk for his insights into hydrogen markets
and electrolyzers. They also thank Mikhail Alekseenko, and Kathleen Ceccarelli for their
contributions to the research and analysis in this article.

For Further Contact

If you would like to discuss this report, please contact the authors.

8
8 FUSION ENERGY CAN UNLOCK OUR LOW-CARBON FUTURE — AND IT MAY BE CLOSER THAN YOU THINK
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