The promise of nuclear fusion energy has long trailed reality.

Widely viewed as a holy grail technology due to its potential for near-limitless amounts of clean energy, the inability to get fusion power on the grid despite decades of research has led to a running joke: Fusion energy is always 30 years away.

But that timeline may be finally shrinking thanks to recent technological breakthroughs and increasing capital from private investors, including Bill Gates, Jeff Bezos, and Sam Altman. The industry has now attracted more than $6 billion in funding to date, according to data from the Fusion Industry Association (FIA), with companies such as Google (GOOG) and Chevron (CVX) as part of a growing list of backers.

“Previously, it was always the government making investments to the Department of Energy or other governments around the world,” FIA CEO Andrew Holland told Yahoo Finance. “Well, now it's private industry, private businesses, startups, who are saying, 'What do we need to design from the beginning? How do we design for commercial applications?' That makes for some different calculations.”

'An entirely new source of energy'

Fusion energy has been considered a game changer largely because of how the power source is generated. Unlike nuclear fission, which occurs when a neutron slams into a larger atom, splitting it into two, fusion occurs by taking two atoms and smashing them together to create a heavier atom.

The fusion process is the same process that powers the sun and other stars. What's even more attractive to researchers is fusion doesn’t produce nuclear waste that can be weaponized.

“If it's successful, the development of fusion energy could dwarf even AI in terms of its meaning for humankind,” said David Callaway, founder of Callaway Climate Insights. “We’re talking about an entirely new source of energy.”

Despite the excitement around its potential, technological breakthroughs have largely been limited to government research labs.

In 2022, researchers at Lawrence Livermore National Laboratory achieved ignition, a critical milestone that demonstrated that it was possible to generate more energy than the amount of energy it took to create the fusion reaction. But that energy gain lasted for less than one-billionth of a second. Researchers are now looking to extend that plasma reaction so it can be sustained for commercial use.

Challenges remain in race to commercialize fusion

Now, more than 40 startups are racing ahead with the goal of becoming the first to commercialize fusion. Washington-based Helion Energy has set one of the most aggressive targets, signing a commercial agreement with Microsoft (MSFT) to provide power generated by fusion in four years. Meanwhile, MIT-backed Commonwealth Fusion Systems, which has raised funding from Gates’s Breakthrough Energy Ventures, Jeff Bezos, and Richard Branson, aims to have a commercial plant up and running by the 2030s.

Bloomberg Intelligence estimated that the valuation for fusion energy is likely to grow to $40 trillion if it captures just 1% of the global gigawatt energy output.

“What we do know is that we have a very targeted set of goal-driven experiments and research efforts going on around the world that are trying to solve remaining challenges,” said David Pace, deputy director at the DIII-D National Fusion Facility, which is home to the country’s largest magnetic fusion facility and is funded by the Department of Energy. “The challenges are very laser-focused on issues that prevent us from building the kinds of facilities that produce net energy and then facilities that convert that net energy into electricity.”

Governments are also increasing funding to help accelerate commercialization. The US government set aside a record $1.48 billion for fusion research in its 2024 budget alone. And in France, home to the world’s largest fusion reactor — known as ITER — 35 countries have joined forces to build a facility estimated at roughly $20 billion.

But the path forward is far from clear, including the process by which fusion energy is likely to be commercialized. Facilities like ITER and DIII-D, for example, are utilizing doughnut-shaped machines known as tokamaks, which rely on powerful magnets to confine and insulate the plasma so temperatures are hot enough for the fusion reaction to occur. The breakthrough at Lawrence Livermore National Laboratory was achieved through a process using lasers.

Experts say the key to commercialization, in addition to maintaining net energy gain, is to build smaller, less expensive reactors at a rapid rate. In the most recent FIA report, 25 companies expressed optimism that the first fusion plant will deliver electricity to the grid before 2035.

The push to commercialize nuclear fusion has come with renewed urgency for a reliable source of clean energy in the face of climate change as governments look to limit global warming to 1.5 degrees Celsius.

At the most recent UN Climate Change Conference, former White House climate envoy John Kerry laid out a framework for international cooperation to accelerate the advancement of fusion energy while acknowledging its “scientific and engineering challenges.”

“There's not many other options. We have to invest in something,” Callaway said. “We have to throw the Hail Mary, so to speak, of technology to try to solve this problem, which is driving oil interest and gas interests and countries against each other in response to climate change. So we're going to start to see more talk of fusion.”

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