(Bloomberg) --

Nuclear energy is having a moment. Europe recently moved to issue green bonds for the power source, and Germany signaled that it may scrap plans to shut nuclear facilities given the country’s energy crunch. Silicon Valley is also embracing nuclear fusion, an unproven technology that promises abundant, cheap and clean energy in the not-too-distant future.

The new US Senate climate pact includes federal funding and incentives for fusion, building on last year’s surge of financing. Now, companies are getting in on the sector, plowing even more money into ventures that are taking the most difficult paths to make fusion’s promise a reality.

Last month, TAE Technologies Inc., a nuclear fusion company in southern California, raised $250 million. Industry watchers describe the company’s approach, which requires creating a fusion reaction in incredibly high heat, as perhaps the biggest scientific gamble in the field.

The company’s latest financing didn’t come primarily from venture capitalists or technology luminaries, the normal backers of these grand science experiments. Chevron Corp.’s venture arm invested, Google cut a check from its treasury department and Sumitomo Corp., a Japanese trading company, made its first investment in the sector with a pledge to bring TAE’s system to Asia. 

Michl Binderbauer, TAE’s chief executive officer, says more corporate partnerships are coming after his company demonstrated a key breakthrough in constructing viable reactors. TAE’s plan is to deliver power to energy grids by 2030, bringing “broader commercialization” in the next decade. “We’re in striking distance of what the machine needs to do,” says Binderbauer. 

Private investors poured a record $3.4 billion into fusion last year, according to research firm Pitchbook. Billionaires like Bill Gates and Jeff Bezos have joined rounds backing dozens of new ventures in the sector. (Microsoft co-founder Paul Allen financed TAE). These companies take slightly different approaches to long-shot fusion process but have a similar thirst for funds. TAE has raised $1.2 billion since it was founded in 1998, Commonwealth Fusion Systems, a Boston upstart, raised $1.8 billion last year alone, while Helion Energy completed a $500 million round in 2021. 

Chris Gadomski, an energy analyst with BloombergNEF, expects overall fusion funding this year to exceed $1 billion, despite a broader pullback in investing. The sources of that money tell a story about the industry. When there is a large showing of wealthy solo investors, “it doesn’t matter if they lose a billion dollars,” he says. “When you see other companies coming into the marketplace, that tells me that there’s much closer scrutiny going on, and it’s becoming closer to reality.”

A Sumitomo spokesperson said its investment is part of a plan to develop an “ecosystem” around fusion, “ultimately expanding its capabilities in the power production business.” Chevron said it sees fusion as “a promising low-carbon future heat and energy source” and noted it has previously backed the fusion startup Zap energy, a spokesman said. Google, which has financed Commonwealth, declined to elaborate on its investment. 

TAE is relying on an unusual approach to make fusion reality, melding hydrogen with boron, a material used in rocket fuel, in a contained magnetic field. It must do this in absurd heat. When announcing its financing, TAE shared that its current test reactor had managed to keep plasma stable at 75 million degrees Celsius (167 million Fahrenheit) — more than double the heat it initially aimed for. 

According to Binderbauer, a key reason for TAE’s recent progress wasn’t pricier equipment but advances in intelligence software. “The reactor prototype runs itself,” he explains. “It learns from its own incremental experimentation.” When Gadomski visited the TAE facility, shortly before the pandemic, he recalled seeing a dozen Google engineers hooking up the machine to data-collection ports. 

The challenge for years has been achieving net energy, where the energy produced exceeds the energy used, through slamming atoms together rather than splitting them. Companies tackling the problem are in a way beneficiaries of all the tech company investments “to make these things faster,” Binderbauer says, holding up his smartphone with a smile. “One or more of us will crack that nut.” 

Each TAE machine costs upwards of $250 million in capital spending, Binderbauer said. TAE’s current model is about the size of a double-decker bus and it plans to use the new funds to build an even larger machine, called Copernicus, to repeat the test in double the temperature.

In 2017, TAE formed a medical subsidiary to market components of its tech for cancer research, a chance to make actual money. (It hasn’t shared financial figures.) Multinationals like Google and Chevron are unlikely to be investing purely for financial returns. They want exposure to this cutting-edge research or early dibs if it eventually works, though Binderbauer says the recent financing doesn't give funders exclusive access to TAE's tech. 

Bloomberg Intelligence strategist Mike Dennis pegged the eventual nuclear fusion market at $40 trillion. Even if its initial contribution to the world's total energy output is tiny, Dennis said fusion will remake energy markets the way Tesla remade the automobile industry.

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