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Economic Observer reporter Shen Yiran In June 2024, China's controlled nuclear fusion commercialization field ushered in three advances: two commercial companies - Shaanxi Xinghuan Ju Neng Technology Co., Ltd. (hereinafter referred to as "Xinghuan Ju Neng") and Energy Singularity Energy Technology (Shanghai) Co., Ltd. (hereinafter referred to as "Energy Singularity") - achieved important breakthroughs in nuclear fusion devices. A nuclear fusion company located in Hefei, Fusion New Energy (Anhui) Co., Ltd. (hereinafter referred to as "Fusion New Energy"), which was established a year ago, completed a new round of capital increase. After the adjustment, the company has gathered almost all types of investors, including large state-owned groups, private capital, local governments, scientific research institutions, etc., and has become the largest commercial nuclear fusion company in China with registered capital.

Since the 1960s, countries have been investing in controlled nuclear fusion because of its huge potential, which is expected to completely change the existing energy production and consumption model, and the required resources are extremely easy to obtain. In recent years, controlled nuclear fusion in many countries has gradually moved from experimental reactors to engineering reactors. With the support of innovative technologies, compact nuclear fusion equipment has been initially verified, which also provides the possibility for commercial companies and social capital to enter this field.

Since 2021, global nuclear fusion investment has grown rapidly. According to the 2023 Fusion Energy Industry Report released by the Fusion Industry Association (FIA) in July 2023, as of the beginning of 2023, nuclear fusion companies around the world have attracted more than $6 billion in investment, an increase of more than $4 billion from $1.872 billion at the beginning of 2021. The number of private nuclear fusion companies in the world has increased from 5 in 2017 to about 50 in 2023. Behind these projects, investors such as Bill Gates and Google and commercial companies can be seen.

The commercialization of controlled nuclear fusion in China is also accelerating. At present, China has initially formed a pattern of two major national projects and multiple commercial companies in the field of nuclear fusion. In 2023, the two major national projects - "Eastern Super Ring" (EAST) and "China Circulation Series" - both made major experimental breakthroughs; two emerging commercial companies, Star Ring Energy and Energy Singularity, also completed the initial construction and operation of experimental devices from 2023 to 2024. Fusion New Energy, which completed capital increase in June 2024, is considered to be an important force in promoting the commercialization of controlled nuclear fusion.

Behind these commercial companies are not only investors with state-owned backgrounds, but also companies such as Weilai and Mihoyo. What these controlled nuclear fusion commercial companies are doing is not only promoting the experiment of compact controlled nuclear fusion equipment, but also promoting the formation of the upstream and downstream industrial chain of controlled nuclear fusion. Commercial companies are pointing to the same goal, which is to accelerate the industrialization process of controlled nuclear fusion.

"Achieve nuclear fusion quickly and economically" is a slogan hung at the Star Ring Energy experimental site.

Controlled nuclear fusion is still "three piles" away from commercialization, namely experimental reactors, engineering reactors and commercial reactors. An investor in a related field of a state-owned investment institution told the Economic Observer that from the world to China, nuclear fusion experiments are at the stage of moving from experimental reactors to engineering reactors, which is also the reason why many commercial companies and social capital have entered the industry.

Shunwei Capital investment analyst Sheng Jiming told reporters that nuclear fusion technology has developed to date and has already achieved a breakthrough from 0 to 1. The challenge is no longer in the scope of basic science, but how to quickly implement devices and iterate technology, which is essentially an engineering problem. Commercial companies have opportunities in terms of product iteration speed and cost control. Shunwei invested in Xinghuan Energy, and Sheng Jiming is a participant in this project.

Although there is still controversy, commercial forces are generally more optimistic about the time it takes to achieve controlled nuclear fusion.

The International Atomic Energy Agency predicts that the world's first nuclear fusion power plant is expected to be built and put into operation by 2050. However, the American commercial company Commonwealth Fusion Systems (hereinafter referred to as "CFS") plans to build the first fusion power plant in the early 2030s. According to the questionnaire data of the Fusion Industry Association on private nuclear fusion companies, 70% of the surveyed companies believe that commercial grid connection of controlled nuclear fusion can be achieved between 2030 and 2040.

Mi Lei, founding partner of Zhongke Chuangxing, told reporters that the breakthrough of small and medium-sized nuclear fusion devices has reduced the cost of controllable nuclear fusion devices, making it possible for commercial companies to enter the market. Most importantly, the breakthroughs of many companies have shortened everyone's expectations for commercialization from several decades to about ten years.

Commercialization Begins

In September 2021, CFS, a commercial company based on the Massachusetts Institute of Technology, first used high-temperature superconducting materials to make magnets into nuclear fusion experimental devices. The maximum field strength of this magnet reached 20 Tesla, which is higher than the 5.3 Tesla magnetic field strength expected to be used in the ITER device. ITER is the International Thermonuclear Experimental Reactor, known as one of the world's largest and most far-reaching international scientific research cooperation projects, with participants including seven economies including China, the United States, and the European Union.

Jin Zhijian, a tenured professor at Shanghai Jiao Tong University and founder and chairman of Shanghai Yixi Technology Development Co., Ltd. (hereinafter referred to as "Yixi Technology"), told reporters that superconducting magnets are one of the key components of the Tokamak device in magnetic confinement controlled nuclear fusion, accounting for almost half of the cost of the Tokamak. In magnetic confinement fusion, the plasma temperature exceeds 100 million degrees, and the plasma can only be confined by a magnetic cage (Tokamak device) composed of strong field magnets. If the magnetic field strength can be effectively improved, the confinement force on the plasma can be greatly improved, and the volume of the entire Tokamak device can be greatly reduced.

Regarding the breakthrough of CFS, Jin Zhijian said: "This means that miniaturized fusion reactors will become possible, which can not only significantly reduce costs, but more importantly, greatly shorten the research and development cycle. Nuclear fusion, which was originally expected to take 30 to 50 years, is expected to be achieved in a 10-year cycle."

The basic scientific principle of nuclear fusion is to combine the nuclei of two isotopes of hydrogen, deuterium and tritium, under extremely high temperature and pressure to trigger a fusion reaction and release huge amounts of energy. Deuterium is abundant in seawater and has a low extraction cost, while tritium can be produced by using the neutrons produced by fusion to react with abundant natural lithium.

In the past 70 years of development, nuclear fusion has been regarded as the ultimate energy source for mankind. The International Atomic Energy Agency has stated that it can overturn the existing energy production and consumption patterns, including fossil fuels, nuclear fission, wind power or solar energy and other renewable resources. The resources required for nuclear fusion are easy to obtain, and the success of the experiment will bring about great changes, so it is regarded as a "power generation device with a high return on investment". Countries and regions such as the United States, the European Union, China, Japan, and Russia all regard nuclear fusion as a strategic technology and invest a lot of resources in research.

However, the technical complexity and integration of this experiment are very high, and it spans an extremely long period, because it attempts to simulate the extremely high temperature and high pressure conditions of the core of the sun on the ground, which greatly challenges the limits of physics. What is even more difficult is that researchers cannot make a perfect experimental device in one go, and need to go through multiple iterations to gradually approach the final technical indicators. "It's like a person who has never made a car can't make a supercar right away." Chen Rui said.

Since the 1960s, tokamaks have been the main equipment for countries to promote controlled nuclear fusion experiments. Tokamaks are mainly composed of a ring-shaped vacuum chamber, coils that generate magnetic fields, and other auxiliary facilities. In the 1980s, economies such as the United States, Japan, South Korea, and the European Union successively invested in large tokamak equipment, and China's EAST also completed a discharge experiment in 2006. These tokamaks are huge, expensive, and mainly rely on scientific research funding from various countries, and the overall iteration is slow.

But the CFS project, which started in 2018, has brought some changes. On the one hand, due to its stronger magnetic field, high-temperature superconducting materials have greatly reduced the size and cost of the tokamak device, allowing compact nuclear fusion equipment to be verified; on the other hand, the project has commercial investors such as Bill Gates and Google behind it, and has also raised a lot of funds.

Mi Lei said that the American CFS company has set a precedent by using innovative technology, allowing the industry to see the possibility of another path.

After the CFS project was launched, a large number of nuclear fusion companies began to emerge around the world. According to the 2024 Global Fusion Industry Report released by the Fusion Industry Association (FIA), there are 45 nuclear fusion reactor companies in the world, of which the United States ranks first with 25 companies. In addition to CFS, there are also HelionEnergy, TAE Technologies, Type OneEnergy, TheaEnergy, etc.

The International Atomic Energy Agency stated in its "Overview of Nuclear Fusion Activities in 2022" that driven by a variety of factors, private capital investment in the global nuclear fusion field has increased in recent years. International organizations are working to promote joint research and development between public and private institutions. Moreover, in the commercialization process of nuclear fusion experiments, it is critical to establish a comprehensive set of universal design standards and regulatory frameworks.

China's controlled nuclear fusion commercialization

Around 2022, Shunwei Capital decided to invest in a nuclear fusion company. Sheng Jiming said that one of the significances of the CFS project breakthrough is that the cost of nuclear fusion experiments is not an astronomical figure, which has given Chinese social capital an opportunity.

China has maintained its competitiveness in key technologies in the field of controlled nuclear fusion. In 1993, the Institute of Plasma Physics of the Chinese Academy of Sciences built the first superconducting tokamak device HT-7. In 2002, the Southwest Institute of Physics of the Nuclear Industry built the Chinese Tokamak 2A (HL-2A). In 2006, the world's first fully superconducting tokamak device, the Eastern Super Ring (EAST), successfully discharged for the first time. This means that China also has the potential to commercialize controlled nuclear fusion.

Shunwei Capital has invested in a number of technology fields including semiconductors, biotechnology and aerospace. Sheng Jiming said that the agency's judgment at the time was that even in the best case scenario, the commercialization cycle of nuclear fusion would be longer than other industry projects, and it would take 8 to 10 years to achieve commercialization. Moreover, the project is more risky because so far, no team, whether it is a national project or a private team, has achieved positive energy gain in the fusion device.

Sheng Jiming said: "However, if the projects we invest in can achieve breakthroughs ahead of the national team, then its potential profit margins will far exceed those of other scientific and technological projects." At that time, Shunwei Capital specially established the "Shunwei Exploration Plan" with an investment scale of 1 billion yuan, and nuclear fusion was one of the investment areas.

Shunwei discovered two commercial projects in the market: Energy Singularity and Star Ring Energy.

Xinghuan Energy was founded in 2021 as a project for the transformation of scientific and technological achievements of Tsinghua University. One of the company's founders was responsible for the construction of China's first spherical tokamak and has more than 20 years of experience in magnetic confinement nuclear fusion research. In 2021, the founding team's technical route was also ready, so they decided to turn the experimental device into a company.

Energy Singularity was founded in 2022. It uses high-temperature superconducting magnets, plasma physics and artificial intelligence as key technologies to create a high-magnetic field, high-parameter high-temperature superconducting advanced tokamak device, and also develops operation control software systems.

Shunwei Capital eventually chose Xinghuan Energy from the two companies. Later, many investment institutions also realized the possibility of commercializing controlled nuclear fusion. At the same time, driven by policies, local governments also began to realize the opportunities in this field. A number of early investment institutions and local guidance funds entered the market and invested in controlled nuclear fusion start-ups and upstream and downstream companies in the supply chain. In addition, local governments and scientific research institutions also began to join in promoting the commercialization of controlled nuclear fusion.

In June 2024, according to the National Enterprise Credit Publicity System, Fusion New Energy saw a round of capital increase. New shareholders include China National Petroleum Corporation Kunlun Capital Co., Ltd. and Hefei Science Island Holdings Co., Ltd. The company's shareholder list also includes Wei Ju Technology, Hefei Industrial Investment, Anhui Science and Technology Investment, and Anhui Wanneng Fenghe Fusion. The company's registered capital also increased from 5 billion yuan to 14.5 billion yuan. Among them, Wei Ju Technology is a wholly-owned subsidiary of Weilai Holdings.

The Economic Observer learned from people related to the project that Fusion New Energy is a project jointly invested by the Chinese Academy of Sciences and local industrial funds. It is a comprehensive device platform company in the industrial chain. The company will lead the construction of an experimental device called BEST, which is based on the East Super Torus (EAST) device of the Institute of Plasma Physics of the Chinese Academy of Sciences. It is also responsible for the procurement and traction of the supply chain.

The race for compact devices

The first experimental device built by the Xinghuan Energy Institute weighs only 30 tons and costs about 150 million yuan, which is very different from traditional large-scale nuclear fusion devices. Take the international cooperation project ITER as an example. According to the ITER official website, this experimental device weighs 23,000 tons, and the construction lasted for many years. The total project cost is about 22 billion US dollars.

Chen Rui, CEO of Xinghuan Energy, said: "The plasma shape of a traditional tokamak device is a bit like a donut, but our device has some differences in structure, and the plasma shape is more like a sphere."

Currently, three commercial companies on the market are accelerating the construction of a compact and miniaturized experimental device, which can reduce material and construction costs and reduce the investment of the entire project.

Chen Rui said that compared with national projects, commercial companies are more pursuing cost-effectiveness and speed under the premise of ensuring the safety and effectiveness of experiments. The principle of Xinghuan Energy is to "achieve nuclear fusion quickly and economically."

Chen Rui also said that in addition to the breakthrough in high-temperature superconducting materials, the application of AI, 3D printing and many other new technologies have helped to improve experimental efficiency, reduce the size of experimental equipment and reduce experimental costs. It can be said that the development of fusion technology is the result of technological progress in many aspects.

Xinghuan Energy has made a bolder plan: to achieve fusion power generation within the next decade. The company has already built the first generation of experimental devices, and will carry out two iterations in succession. It is expected that the next generation experimental device CTRFR-1 will be completed in 2027, and the plasma will be heated to 100 million degrees Celsius through repeated reconnection schemes continuously and stably to thoroughly verify the feasibility of the project. Next, it will take another 3 to 5 years to build a commercial demonstration fusion reaction that can output electricity.

One of the characteristics of commercial companies is the ability to add newer technologies to each iteration while improving performance indicators, thereby reducing the number of iterations and significantly shortening the R&D cycle.

Chen Rui said that commercial companies can innovate more flexibly, but all innovations are accompanied by risks. How to find a balance between risk and innovation is actually a decision-making problem. "Different teams have different styles, some are conservative, some are radical, and there is no so-called optimal solution or unique solution."

In June this year, the "Honghuang 70" device designed, developed and built by Energy Singularity successfully achieved plasma discharge. Public data shows that after "Honghuang 70", the next generation of high-magnetic field high-temperature superconducting tokamak device "Honghuang 170" is already in the physical design stage and will start engineering design next year. The device aims to achieve a deuterium-tritium equivalent energy gain greater than 10 and is expected to be completed in 2027.

The person from the above-mentioned state-owned investment institution told the reporter that compared with traditional low-temperature superconducting materials, the large-scale preparation technology of high-temperature superconducting materials is not mature and stable enough. The experimental equipment of the national team project is larger and the amount of materials used is also larger. Magnets are a key part of the experiment. Even though high-temperature superconducting materials provide many conveniences, the national team is cautious in adopting this technology.

Industry chain integration

Yixi Technology was established in June 2022. The company's core goal is to break through the high-temperature superconducting fusion high-field magnet technology. Jin Zhijian said that according to the company's plan, the large-scale supply capacity of high-field magnets will be achieved starting in 2027.

Controlled nuclear fusion is one of the target markets for high-temperature superconducting materials. As a complex integrated system, the industrialization of controlled nuclear fusion requires the support of the supply chain.

According to Huibo Intelligent Investment Research Report, the nuclear fusion industry chain includes upstream raw material supply, midstream technology research and development, equipment manufacturing and downstream nuclear power applications. Upstream raw materials require the supply of non-ferrous metals (tungsten, copper, etc.), special steels, special gases (deuterium, tritium) and other raw materials, as well as the supply of high-temperature superconducting materials. The midstream involves the development of components such as the first wall, divertor, steam generator, superconducting magnetic coil, and simulation and control software. At present, companies such as Lianchuang Optoelectronics (600363.SH), Yongding Co., Ltd. (600105.SH), Western Superconducting (688122.SH), and Antai Technology (000969.SZ) in the A-share market have the ability to supply related components.

This huge experiment requires the coordinated work of the entire industrial chain, and the leading enterprise responsible for the construction of the device is also equivalent to the role of the chain leader. The above-mentioned state-owned investment institution said that in terms of the supply chain, China's industrial production capacity and industrial chain can basically meet the industrial needs of controlled nuclear fusion, and there are some technical bottlenecks in some areas. However, as the requirements for each generation of experimental devices become higher and higher, the standards for the project in material selection, structural design, manufacturing process, inspection and testing are becoming more and more stringent.

The source said that this increases the complexity of procurement. Many supply chain companies not only serve nuclear fusion experiments, but also face other markets. How to guide these suppliers to supply suitable materials within a certain period of time and invest resources in joint research and development, especially in the early stage when it is difficult to get returns, is difficult to achieve by market mechanisms alone. It is more efficient and faster to integrate resources by relying on the country's guidance.

Chen Rui said that for nuclear fusion, China has not yet formed a complete set of regulatory rules or official documents at the national level. At present, the company is also cooperating with relevant departments to conduct research and collect opinions. The technical routes of the national team and commercial companies are different, and the two are complementary and not conflicting.

The person from the above-mentioned state-owned investment institution said that in the future in China, there may be no more than three companies that can survive and specialize in manufacturing the entire device for nuclear fusion experiments. It is still difficult to accurately predict which companies they will be. Successful projects can acquire other companies, and large-scale devices led by state-owned enterprises can also acquire private companies or use private companies as suppliers.

Sheng Jiming said that from the perspective of institutions, when the project party proposed that it would take 10 years to complete this, it was acceptable, but many institutions were too optimistic and expected to see results in two or three years. "Institutions have prepared for the worst case scenario, and if the goal is not achieved technically in the end, it is acceptable. Those institutions that cannot bear this risk or have high requirements for the return cycle will not choose to enter the market."

The person from the above-mentioned state-owned investment institution said that many investors have found that the laws of nuclear fusion experiments themselves determine that it must be a very high-investment and long-cycle thing. This cannot be changed by flexible mechanisms and innovative technologies. It will be very difficult to rely solely on commercial companies to do it. Even if it is a national project, it is not easy for a single participant to support all the experimental equipment.

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Shen Yiran, reporter of Economic Observer

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