Oil giants are backing fusion: A CO2 turning point?

Source: By David Iaconangelo, E&E News reporter • Posted: Monday, August 17, 2020

Chevron Corp. last week made the first investment in nuclear fusion by a U.S. oil and gas company, targeting a technology that theoretically could power the world with carbon-free energy but has struggled from high costs and technical challenges.

The Houston-based company said it took part in an initial round of investments in Zap Energy, a Seattle-based startup that is seeking to develop a “next-generation” type of nuclear reactor at lower cost than other fusion concepts. The company received funding from the Advanced Research Projects Agency-Energy at the Department of Energy.

“We see fusion technology as a promising low-carbon future energy source,” said Barbara Burger, president of Chevron Technology Ventures, the company’s venture capital arm for emerging technology. She added that the investment “adds to Chevron’s portfolio of companies we believe are likely to have a role in the energy transition.”

A source with knowledge of the investment round said it raised $6.5 million for Zap Energy, with $2 million coming from Chevron.

Serious interest from the oil and gas industry could be a turning point for fusion technologies, said Ethan Bellamy, an analyst at oil and gas research firm East Daley Capital, in an email to E&E News. “If we are to commercialize the holy grail of energy technology, nuclear fusion, it will take a huge balance sheet and a highly sophisticated and technologically proficient organization like Chevron,” he said.

Chevron’s investment also is “significant psychologically” for fusion researchers, and “it probably will encourage other oil companies to start looking at fusion,” said Stephen Dean, president of Fusion Power Associates, a nonprofit advocacy and research group.

Andrew Holland, executive director of the Fusion Industry Association, said startups would take the announcement as an indication that if they can “break even” — produce more energy with their technology that it consumed — an established energy company might acquire them.

But he noted that the amount invested was “a relatively low dollar value” for a hugely endowed company, calling it “a rounding error for Chevron.”

The U.S. government, by contrast, spends hundreds of millions of dollars per year on fusion research, Holland added. “It gets [Chevron] in on the ground floor of a potentially transformative energy resource. I hope it drives interest,” he said.

Oil and gas majors based in Europe have made much larger investments in fusion. Italy’s Eni SpA, for instance, put $50 million into a Boston-based fusion startup, Commonwealth Fusion Systems in 2018, and launched a $660 million fusion research center with the Italian energy research authority. Norway’s Equinor ASA also took part in a separate, $84 million funding round for Commonwealth Fusion this spring.

That reflects a “divide” in how the two continents’ fossil fuel industries “deal with climate and carbon concerns,” said Bellamy.

In Europe, where policies are less favorable to continuing oil and gas production indefinitely, BP PLC, Royal Dutch Shell PLC and Total SA have all said they are aiming to become carbon-neutral by 2050, Bellamy said. Neither Chevron nor its American peer Exxon Mobil Corp. has unveiled a similar goal.

ITER and the ‘break even’ point

Fusion technologies aim to produce power by fusing nuclei from two atoms — the inverse of conventional nuclear power, which splits the nucleus of an atom to release energy. Researchers see it as a way to provide zero-carbon power more safely and with less long-lasting waste.

The world’s largest planned fusion device, the International Thermonuclear Experimental Reactor (ITER), passed a milestone last month when developers formally began assembling the project in France (Energywire, July 29). The United States is a partner with multiple countries on ITER, which has been hit with cost overruns and delays.

Yet no fusion concept has reached the “break-even” point of consuming more energy than is required to drive the process — a key threshold in the technology’s commercialization.

Zap is among dozens of fusion startups that are trying out simpler, less cost-intensive concepts, said Dean, the president of Fusion Power Associates.

“I think they’ve all got a shot, but it’s all at a very early stage,” he said.

Some startups have said they believe they could commercialize projects to come online before 2050 — the point at which the world must reach net-zero emissions in order to stay within the 2-degree-Celsius limit of global warming set out by the Paris accord. Dean was skeptical of those startups’ claims, saying, “It’s all speculative.”

Oil companies with net-zero goals would likely be “forced to limit themselves to technologies that have been technically proven already,” he said. “By 2050, all of these alternatives have got to be out there on the grid.”

Reporter Mike Lee contributed.