Fusion investment trends in 2025 in relation to other clean firm power
By Naomi Scott-Mearns, Membership Project Manager, Fusion Energy Insights
In our member Q&A session on the 20th February 2025, we discussed fusion investment trends for the year ahead with our expert speaker Guy Cohen, Senior Research Associate at Sightline Climate.
The discussion highlighted the growth in fusion investment over time, with significant investments in 2021 and 2024. Fusion in 2024 outperformed other clean firm solutions in terms of funding raised, but the conversation also covered future investment competition that fusion will likely face, including from Small Modular Reactors (SMRs) and next-generation geothermal power.
Here are three key insights from the event.
1. Fusion is bucking the recent trend of falling investments.
2024 was a bumper year for fusion investments and fusion in 2024 opposed the trend of falling investments generally. In 2024, private investments in clean technologies generally declined, apart from in fusion.
Guy says: “Fusion’s been on a run … particularly 2021 and 2024 which together, combined, made up over half of total investment in fusion in the recent period.”
Transportation has been the biggest sector in the climate technology investment space since 2020, with energy second. However, “that flipped for the first time in 2024,” says Guy, “and energy overtook transport.”
The tokamak approach to fusion has raised the most private investment over the past four years compared to other fusion approaches. Most of that investment has been in Commonwealth Fusion Systems and Energy Singularity, plus some others in the tokamak space. Magneto-Inertial Fusion (MIF) comes second, followed by Inertial Confinement Fusion (ICF).
Will fusion continue to buck the trend of falling investments? Guy notes that future funding for fusion may be challenged due to the long-term timelines of fusion deployment.
“At the moment, a lot of the investment that we're seeing in fusion comes from venture capital (VCs),” says Guy. “And there's a challenge there, which is that while some VCs are patient capital and are willing to wait, most have a 10 year horizon. So they're looking to first deploy most of their funds in the first couple of years of the launch of a new fund and invest in new startups in the first couple of years. Second, they’ll have follow-on rounds over the next few years as those companies grow, but then be looking to exit somewhere 6, 7, 8 years after their initial investment. That model is a challenge for fusion, because for most of these fusion companies, they're not going to be hitting revenue and scaling in that decadal time frame. If this need for capital increases, as I expect it will for fusion, it's going to be necessary to show returns in a shorter time frame.”
2. Fusion is going to face investment competition. For fusion to scale it will need to beat other options such as next-generation geothermal.
The main energy sources that are going to provide competition for fusion are nuclear Small Modular Reactors (SMRs) and next-generation geothermal.
Guy doesn’t think that the competition element between fusion and other energy sources has been considered fully. “The thing I find surprising about fusion is because there's such an incredible accomplishment that is in the process of being achieved, that the competition element is often not a focal point. But, actually, for it to scale, it's going to need to consider these other [energy] options, and they're doing really well.”
Nuclear SMRs and fusion are often compared, but Guy thinks that fusion is significantly behind SMRs in the timeline to commercial deployment. But, like fusion, SMRs are also not a classic VC investment. Contrary to SMRs, where the technology is more secure, fusion needs to jump from lab-scale to demo-scale to unlock $10s of billions for fusion powerplants. Because of this challenge, Guy is sceptical about the timelines for fusion.
Capital costs per kilowatt hour of electricity produced are predicted to be initially higher for fusion than other energy sources and likely to remain so for many years, which will make it hard for fusion to compete with other energy sources in the future. “I still think super-critical geothermal is ahead of fusion. But it's not ready yet. There's a lot of technological advances that are needed. But if that comes in in the 2030s, they're targeting $25-$40 per megawatt hour and when does fusion get to that price point?” says Guy.
3. There has been a recent shift to supply chain companies emerging in the fusion market, rather than solely fusion developer companies. But fusion supply chain companies must appeal to other industries to persist in the market.
Guy says supply chain companies have to consider “what are you exposed to if it [fusion] goes well? And what are your options if it doesn't?” For example, what if fusion couldn’t be deployed? Can the company survive by supplying other industries?
Guy argues that supply chain companies are stronger if they can also sell to other industries. For example, shielding is critical for fusion to protect core components from the harsh plasma fusion environment, and there are also opportunities for shielding businesses outside of fusion—like in the space sector, which is also experiencing growth.
Guy says: “Over the last four years we've seen a lot of primary core fusion device developers stepping in and that's who's been raising money. If you look at other energy areas that are slightly further along than fusion, often the latest stage, VC money is not going to those companies. Those bets have been made. The money's going to the supply chain companies. So I wonder if we'll start seeing a shift away from that to more for supply chain companies or to other elements of the fusion industry.”
For the fusion device companies, thinking about the supply chain also helps to diversify income. Guy argues that spin-off technologies from fusion device companies could become separate revenue streams and attract specialised investors. Ensuring products have viable ‘Plan B’ markets, so they are not entirely reliant on fusion’s success is critical.