The stellarator: A clean energy idea whose time has finally come?

As we highlighted in our recent Moral Money documentary film on the sector, the race for fusion power is heating up.

Long mocked as a sci-fi pipe dream, the industry has attracted billions of dollars in private sector funding over the past couple of years. Dozens of start-ups are pursuing the goal of low-carbon, massively abundant energy without the long-lived radioactive waste that dogs the nuclear fission plants in use today.

There are still ample grounds for scepticism. Thanks to the mind-numbingly complex physics involved here, the drive for a working fusion power station has already dragged on for decades longer than predicted by wide-eyed 20th-century optimists.

The December announcement by US scientists of a fusion reaction with “net energy gain” generated huge excitement. But the full process, taking into account the power consumed by the lasers it used, consumed far more energy than it gave off — hardly a prototype for a working power plant.

Even if one of the start-ups can hit the target — widely viewed as hugely optimistic — of getting a commercial fusion power station online in the 2030s, it will still be many more years before these plants can roll out at a sufficient scale to make a major dent in global carbon emissions.

There are concerns, too, about scarce global supplies of tritium — a hydrogen isotope that is crucial to the processes being developed by many fusion start-ups.

Yet the long-term implications of large-scale fusion power for climate change and energy access could be transformational. So the continuing wave of investment into fusion start-ups, such as the one we feature today, is well worth keeping an eye on.

Also today: you’ll recall our coverage of the European Central Bank’s promise to start greening its corporate bond holdings. How has that been working out? Kenza has the latest. (Simon Mundy)

The stellarator fights for a place in the green energy future

It was on a ski lift in Aspen in 1951, according to legend, that the physicist Lyman Spitzer dreamt up the stellarator — a machine that would provide abundant, safe, clean energy through the power of nuclear fusion.

Helped by its intriguingly futuristic name, the stellarator generated some early excitement — but was soon superseded by the rival tokamak model created in the Soviet Union, and looked set to become a historical footnote.

Seven decades on from its inception, however, the stellarator concept has won backing from one of the biggest names in climate tech investment.

Yesterday, US start-up Type One Energy announced it had raised $29mn from investors including Bill Gates’ Breakthrough Energy Ventures to build the world’s first stellarator power plant.

It’s not a big investment by the standards of the fusion sector, which has raised about $3bn over the past two years. Massachusetts-based Commonwealth Fusion Systems, featured in Moral Money last year, alone has raised about $2bn.

But Type One chief executive Chris Mowry told me that the early support from Breakthrough — and other investors including TDK Ventures — would give credibility to his fledgling business, which grew out of stellarator research by scientists at the University of Wisconsin-Madison. That, he hopes, will pave the way for the much larger funding rounds that will be needed if Type One is to have any hope of cracking the fusion challenge. And while tokamak-focused fusion start-ups have attracted the lion’s share of the attention — and money — so far, Mowry insists the stellarator’s time has finally come.

Scientists hypothesised back in the 1940s that the ideal chamber for a fusion reaction would be a torus — a doughnut shape — lined with magnets that would suspend a floating mass of hydrogen plasma. But they soon realised there was a problem. For reasons too complicated to detail here, this arrangement would cause electrons to separate from their nuclei, meaning the plasma would end up touching the walls of the chamber — shutting down the whole reaction.

Spitzer’s brainwave was to build the chamber in a twisted, figure-of-eight shape, which he calculated ought to avoid the problem outlined above. But for years, the machines built on his model failed to match his predictions.

Then in 1968 the Soviets released the results of their tokamak model: built in a torus shape, but adding a “twisting” effect by running a strong current through the plasma. Experiments showed far more impressive results than Spitzer’s, and the stellarator concept was, to all intents and purposes, junked.

What’s changed, Mowry says, is computing power — the arrival of supercomputers that can design the hugely complex configurations needed to make a stellarator work. This, he claims, means that Type One will be able to work directly towards building a working power plant, without having to burn investor cash on experimental prototypes. And because the stellarator won’t have a powerful current coursing through its plasma, he adds, it should prove more stable and reliable than the rival tokamak designs.

Breakthrough, meanwhile, seems to be hedging its bets, having also invested in CFS and Zap Energy, which is pursuing yet another fusion model that doesn’t use magnets at all (details here in case you’re curious).

“We have [invested in] about 110 companies now,” Phil Larochelle, the Breakthrough partner who oversaw the Type One investment, told me. “For some of the fields where we think the prize is really big, we do have several different approaches that are kind of going after the same thing.”

Sceptics argue that fusion is an unhelpful distraction from the rollout of clean energy technologies, such as wind and solar, that are already proven to work. Commercial fusion power is 30 years away, the saying goes, and it always will be.

The sums of money being pumped into this space by investors like Breakthrough, however, are new. And Larochelle insists that it is time to start taking this industry seriously.

“Fusion is the ultimate energy source,” he said. “I think we’re now getting to a point where if you can solve a bunch of the difficult engineering problems — and the science keeps going in the direction it seems like it’s headed — you could potentially start to have the first commercial plants in the 2030s.” (Simon Mundy)

Inflation bites into ECB’s promised green tilt

How do the promises central banks make in an era of ultra-loose monetary policy fare when inflation means the policy has to be torn to shreds?

On the surface, the European Central Bank’s publication of its first climate-related financial disclosures last week showed it has successfully followed through on its decision two years ago to take climate risks into account when it buys bonds.

The bank more than halved the carbon intensity of its bond purchasing programme in the last three months of 2022 compared with the previous nine months, from nearly 400 tonnes of CO₂ per million euros of bonds to about 160.

But the macroeconomic context has changed dramatically since the ECB made buying greener bonds a central plank of its climate programme.

Pressure is growing on central banks to renew their focus on price and financial sector stability, rather than the planet. The Bank of England, which previously led the way on green bond purchases, has started to cut its spending on climate change due to tighter budgetary constraints.

And in the past year the ECB has had to slash its bond-buying programme to try to stem rising prices. Earlier this month it even stopped replacing some bonds when they mature, which means its balance sheet is shrinking.

The problem is that the Frankfurt-based bank’s “green tilt” only ever covered its purchase of new bonds — which means the policy could fast become a dud unless it is expanded to cover the bank’s existing portfolio.

“At this rate it would take a long time for the whole portfolio to be greened. I think some evolution in the tilting policy is going to be needed,” Katie Kedward, a research fellow in central banking and sustainability at University College London, told me.

This could mean actively selling off bonds by polluters, in other words “selling dirtier bonds first and faster . . . to green the remaining stock of bonds more quickly”, Kedward said.

In a speech in January, Isabel Schnabel, a German economist and member of the ECB’s board, hinted the bank would consider making “additional efforts” on the climate because of its balance sheet tightening. But so far, even the most hawkish ECB governing council members have ruled out actively selling bonds before they mature.

Another issue is that the “tilting” policy only applies to a small portion of its bonds — those in its corporate sector purchase programme and the corporate bonds bought in its pandemic emergency purchase programme. And the metric it uses to gauge progress is tonnes of greenhouse gas emitted for every million euros raised through bond issuances, not overall direct emissions (which rose across its corporate bonds last year).

Rens van Tilburg, who directs Utrecht University’s sustainable finance lab and its monetary policy research programme, argues that loans, not bonds, are the most powerful climate weapon in a central bank’s arsenal.

The lab has been pushing central banks to launch preferential lending programmes for banks to support clean energy companies, which could be hit particularly hard by higher financing costs. “If you think about the role of monetary policy in climate change in Europe, a new playing field has become much more important,” Van Tilburg told me. (Kenza Bryan)

Smart reads

• A delayed shift to a low-carbon economy could leave global equities more than a third lower than in a rapid transition, the UK’s largest asset manager has warned. Legal and General Investment Management warned investors to prepare for a “bumpy ride” in the years ahead.

• Gucci, Nestlé, McKinsey and others may have overstated their progress in combating climate change. That’s because a Swiss seller of carbon offsets was wildly off in its projections of deforestation in a rural part of Zimbabwe, according to this Bloomberg long read.