While eating lunch at a recent energy conference with the usual random selection of delegates and speakers, I asked the co-founder of a leading energy venture capital firm what technology he finds most exciting right now. Without hesitation, he began telling me about his company’s ambitious, longer-term bet on a small nuclear fusion company. He then put me in contact with his partner and co-founder, who helped fill in the details for this story.

Like so many developments in the energy sector today, a combination of technology and innovative thinking is driving a push toward affordable, clean and reliable energy in the form of nuclear fusion.

“Everybody has a right to be skeptical because nuclear fusion is hard, but this has a chance of working,” Chrysalix Energy Venture Capital’s co-founder and CEO, Mike Brown, recently told Breaking Energy in comments about suburban Vancouver based General Fusion. Brown also sits on the company’s board of directors.

A large majority of modern fusion research – with the exception of “cold fusion” – came from work done over 30 years ago at the US Naval Weapons Laboratory located in the Washington DC area. “This idea came from the NWL, but nobody could make it work,” there was no computer control that could handle the reaction, said Brown.

It only became possible about 5 years ago when an innovative thinker – General Fusion’s President and Chief Technology Officer Dr. Michel Laberge – used his unique mix of plasma physics experience and engineering background to come up with the idea for “magnetized target fusion.”

An admitted “part-time science junkie,” the idea caught Brown’s attention. He then spent months working to understand the process, which is a hybrid of “magnetic fusion” and “inertial confinement fusion.”

“Whereas magnetic fusion creates confinement without compression and inertial confinement fusion creates compression without any sustained confinement, magnetized target fusion creates a relatively low-temperature and low-density magnetically confined plasma and then compresses it to thermonuclear conditions,” the company explains on its website.

Numerous technical, financial and regulatory hurdles remain, but if they can be successfully negotiated, commercial reactors could be ready to connect to existing electrical power grids by the end of the decade.

Magnetized target fusion could be easily adapted to a distributed generation model, with several interconnected plants located around an urban center eliminating the need for long distance transmission, Brown said.

Several experiments will be conducted over the next 8 months to prove the physics work the way Laberge and his colleagues believe they do. They need to test whether the plasma can remain stable long enough for the reaction to work as designed.

“The mechanical part is looking good,” said Brown. If all works well – which is a big “if” he stressed – General Fusion plans to construct an alpha reactor around 2014, which could take about 3 years to build.

Successful Financing, Gaps Remain

Venture capital involvement in this project is interesting because VC firms typically prefer shorter-term investment time horizons closer to 3 years, though they do sometimes take a longer view with regard to energy investments.

General Fusion completed its Series A Funding in 2009, when it raised $13.75 million with support from Sustainable Development Technology Canada, a non-profit that supports cleantech development. The funding was led by Chrysalix, and included investments from GrowthWorks, Braemer Energy Ventures, and Entrepreneurs Fund.

In May 2011, General Fusion announced the close of its $19.5 million Series B funding round. Investors included Cenovus Energy – created in 2009 when oil and gas firm EnCana split its operations into an integrated oil company, Cenovus, and a pure play natural gas company. Additional capital was raised from Bezos Expeditions – Amazon founder Jeff Bezos’ personal investment company – and the Business Development Bank of Canada.

Additional funding will be required, as Brown estimates the alpha reactor could cost about $1 billion to construct. The developers are looking to major corporations and governments to help close the funding gap.

Although there is little interest at this stage, organizations with a lower risk threshold than the VC community like sovereign wealth funds, could become involved in the future as the project nears commercialization and risks decrease, Michael Delage, General Fusion Vice President told Breaking Energy in a phone call.

Magnetized target fusion’s lower costs compared to other forms of fusion currently being researched are a major advantage and a big reason for the technology’s attractiveness.

The primary feedstocks are derived from seawater, and once perfected, the plants themselves can theoretically be mass produced in an assembly line manufacturing process, Brown said. The fuel costs are virtually zero, so operating and maintaining the power plants would account for a bulk of the cost.

According to Brown, the electricity produced by these plants would cost about $0.05 to $0.10 per kilowatt hour and a 100 megawatt plant would require about an acre of land. The power plant itself would be roughly the size of a 747 aircraft and setting the physics aspect aside, the power plant’s mechanical complexity is also similar to a commercial airplane, said Brown, which should help facilitate the permitting process.

Delage said the cost of power is expected to be competitive with fossil fuels and $0.10/kWh would likely be toward the higher end of the cost spectrum.

No one in the world has ever permitted a nuclear fusion power plant,” – Delage

“A great advantage of fusion is that if something goes wrong, the reaction just stops,” Brown said, unlike a fission reaction that continues for a period of time after the plant is shut down.

Educating regulators will be a major hurdle and company representatives have been meeting with US and Canadian regulatory bodies to explain the technology and initiate that part of the process. “No one in the world has ever permitted a nuclear fusion power plant,” said Delage.

He said the feedback from the US Nuclear Regulatory Commission was that they understand this falls within their jurisdiction, but do not currently have a regulatory regime in place to handle it. However, the NRC also understands the safety risks are much lower than those associated with fission plants because there is no chance of a meltdown and no radioactive waste.

Regulatory issues are not slowing the process down and will be of greater importance later in the development process, Delage said.

Brown contends that permitting a magnetized target fusion plant should be no more onerous than obtaining a permit to build a natural gas-fired plant.

The General Fusion representatives and investors with whom Breaking Energy spoke stressed this is by no means a “slam dunk” proposition and is a high risk investment, but the potential rewards cannot be understated. The first people to successfully commercialize nuclear fusion power will alter the global energy industry in a way that has not been seen for generations.

“It’s an exciting time to be involved, they are in a real critical stage right now – proving the science and moving into engineering,” said Rick Wills, General Fusion’s Chairman.