Investing in Climate 3/5 : Why Fusion is the Next Big Bet in Energy Transition
Written by Liselotte Forgeot, Shim Jounghyun & Paul-Adrien Marie.
Welcome to the third chapter of our deep dive into climate investing. At Breega, we’re constantly asking:
How can founders and investors most effectively accelerate decarbonisation?
After exploring how best-in-class impact funds like Breakthrough Energy and LowerCarbon Capital approach the energy transition, we broke down the energy space into four key verticals: Energy Management, Renewables, Storage, and Fusion.
Today, we focus on Fusion, a promising and transformative solution for achieving a carbon-free future.
Nuclear energy is making a return to the spotlight, driven by geopolitical shifts, energy security concerns, and the need to meet net-zero targets. While traditional fission is modernising through Small Modular Reactors (SMRs), fusion has hit major technical milestones. This progress is unlocking billions in private investment and creating new public-private partnerships. For Europe, nuclear energy is not just an energy source — it’s a key piece of the energy strategy and decarbonisation efforts. Unlike other sectors, this is one where legacy players don’t hold all the cards.
What is Nuclear Energy?
Nuclear energy harnesses power from the atomic nucleus through two distinct mechanisms:
- Fusion: The process of combining light atoms (e.g., deuterium and tritium) to release energy, mimicking the sun’s power. Fusion remains in pre-commercial stages but has achieved net energy in lab settings.
- Fission: The splitting of heavy atoms (like uranium-235) to release energy. Fission is the basis for all current commercial nuclear power.
For the rest of the article, we will be focusing on fusion, being the less mature technique of the two.
Where does it stand today?
Market Size and Projections
Fusion remains in its early stages, with no commercial revenue yet. However, projections suggest the fusion energy market could reach between $40B and $100B by 2040. By 2050, fusion could contribute up to 10% of the global energy mix, according to McKinsey & BCG. To date, over $6B in private funding has been raised, with the first commercial reactors expected by 2030–2035.
Market Trends and Technological Advances
Cultural Shifts
Public sentiment around nuclear is evolving. Following geopolitical events like the Ukraine invasion, European governments are increasingly warming to nuclear as a climate-resilient and energy-secure option. Fusion, in particular, has gained favor as a “clean nuclear” solution, with high public enthusiasm.
Technological Progress
Significant advances in fusion have been made:
- Breakthroughs in confinement and ignition: In 2022, the US National Ignition Facility achieved net energy from fusion.
- New fusion approaches: Alternatives to traditional tokamaks are emerging, including laser fusion (First Light), magneto-inertial (Helion), and field-reversed configurations (TAE).
- Enabling technologies: High-temperature superconductors, AI for plasma control, and advancements in materials science are propelling fusion forward.
Economic Barriers
Fusion remains highly capital-intensive, with pilot reactors requiring $500M–$5B to develop. Hybrid funding models are emerging, combining public and private capital to de-risk the sector. Fusion must also prove it can compete with rapidly advancing renewables, which are lowering their cost-per-MWh.
Regulatory Landscape
While fusion lacks a mature regulatory framework, the EUROfusion consortium is pushing for harmonised policy across regions. Regulatory uncertainties persist, but Europe’s commitment to nuclear energy is clear, and fusion is starting to benefit from EU funding initiatives.
Who Are the Key Players?
The fusion ecosystem is evolving rapidly, driven by a mix of private startups, public-private initiatives, and key new entrants, particularly in Europe. The landscape is diverse, with different companies targeting various fusion approaches, from magnetic confinement to laser-driven methods.
Private Fusion Startups
Several startups are leading the charge in fusion development, attracting significant venture capital to fund their ambitious projects. These companies focus on different fusion methods and have varying timelines to bring fusion technology closer to commercialisation.
- Commonwealth Fusion Systems (US): One of the most well-funded fusion startups, CFS is focused on developing SPARC, a compact fusion reactor. The company uses high-temperature superconducting magnets, which can achieve the required magnetic fields to confine plasma more efficiently than traditional tokamaks. CFS raised more than $2B, with partners such as Breakthrough Energy Ventures and LowerCarbon Capital.
- Helion Energy (US): Known for its Fusion Engine, which uses a unique approach to magnetically confine and compress plasma. Helion raised more than $1B, positioning itself as one of the frontrunners in terms of commercial fusion power generation. The company targets producing electricity from fusion by 2028 and aims for a prototype fusion power plant soon after.
- Tokamak Energy (UK): Focused on developing compact fusion reactors based on the tokamak design, Tokamak Energy has garnered significant investment from international backers like Oppenheimer Partners and Octopus Ventures. The company is working on an innovative HTS (high-temperature superconducting) tokamak, aiming for commercial fusion electricity by the 2030s.
- Marvel Fusion (Germany): An emerging player in Europe, Marvel Fusion is pioneering a laser-driven fusion approach, which uses high-powered lasers to compress plasma to achieve fusion reactions. With a growing base of investors and support from European innovation funds, the company is targeting commercialisation in the early 2030s.
- Proxima Fusion (Germany): A leader in Europe, Proxima focuses on stellarator-based fusion reactors, which aim to improve plasma confinement and stability. In June 2025, Proxima raised a €130M Series A to develop its prototype fusion plant, with an ambitious target to demonstrate commercial fusion by 2031. This represents a significant step for Europe’s fusion capabilities, with strong backing from both VC and public funds.
Public-Private Initiatives
In addition to private companies, there are several large-scale public-private partnerships that are fundamental to fusion’s progress. These collaborations are aimed at de-risking the technology and providing necessary research infrastructure.
- ITER (International Thermonuclear Experimental Reactor): Based in France, ITER is the world’s largest fusion experiment and the cornerstone of global fusion research. This international collaboration involves 35 nations and is focused on proving that fusion power can be produced on a commercial scale. The EU has already contributed €5.6B to ITER through Euratom, and further investments are expected as the project advances towards a net-positive energy demonstration by the mid-2030s.
- DEMO (EU): The next step after ITER, DEMO is a European Union-funded initiative focused on building the first fusion power plant that can produce electricity in significant amounts. It aims to transition fusion from experimental to operational, with a prototype expected in the 2030s.
- STEP (UK): The Spherical Tokamak for Energy Production (STEP) is a UK government-backed project aiming to build the world’s first fusion power plant by 2040. This initiative is key in aligning government policy with the commercialisation of fusion, with substantial investment already allocated by the UK government. The UK has announced a £2.5B investment in fusion over five years, alongside a £17.8B budget for Sizewell (recently topped up by £11.5B) as part of its broader energy strategy.
Europe’s Growing Ecosystem
Europe is positioning itself as a major hub for fusion development, with growing support from both public and private sectors. The EU Green Deal and Horizon Europe are key drivers for the sector, opening doors for private investors to partner with governments and public research bodies.
- Proxima Fusion’s recent €130M Series A raise is a clear indicator of the strong venture capital and public backing now available for fusion startups in Europe. This funding round places Proxima on track to deliver its first prototype fusion reactor by 2031, aligning with Europe’s broader energy transition goals.
- Germany, France, and the UK are becoming central players in the European fusion ecosystem, with robust public funding schemes like the German BMBF, the EU Horizon 2020, and UK government support propelling these initiatives. European companies are leading the way in terms of technological innovations, with a growing number of startups targeting fusion reactors for commercial electricity generation by the 2030s.
- France’s commitment to nuclear energy, especially fusion, remains strong, with initiatives like ITER and the EU fusion roadmap providing a solid foundation for growth. EDF (France) is also stepping up, with plans to commit £1.1B to fusion energy development, further solidifying the country’s leadership in the sector.
- The EU is taking significant steps to support fusion, with a “Call for Evidence” set to be published by the end of 2025, outlining its first comprehensive Fusion Strategy. This will define the policy, funding, and research agenda to foster fusion innovation across Europe.
Europe’s increasing fusion capabilities, backed by substantial public-private investment, will be crucial in the global race to bring fusion to market. The combination of strategic government policies, cutting-edge research institutions, and growing support from venture capital is accelerating the region’s efforts to become the world leader in fusion energy.
Unlocking Opportunities and Navigating Risks
Fusion offers considerable potential across several areas:
- Tritium Fuel Ecosystem: Scalable production and management of tritium will be vital.
- High-Performance Materials: Advances in neutron-resistant materials and radiation-hardened sensors will be essential.
- Fusion Grid Integration: As fusion energy integrates into the grid, innovations in load smoothing and microgrid technologies will become key.
But still there are substantial risks to consider:
- Technical Scale-Up: Achieving net energy at scale is unproven, and significant technical challenges remain.
- Regulatory Delays: Fusion’s regulatory framework is still evolving, creating uncertainty around timelines.
- Capital Intensity: The high cost of developing fusion reactors is a major barrier, requiring long-term, blended capital stacks.
- Market Competition: Fusion must compete with low-cost renewables and SMRs, as well as face challenges around grid integration.
What Breega takes from this
Fusion is poised to play a crucial role in the global energy mix, especially as Europe accelerates its commitment to nuclear energy. The sector is still in its infancy, but the momentum is undeniable. While there are risks — technical, regulatory, and financial — the potential rewards for the first movers could be huge.
At Breega, we are always looking for disruptive, hardware-driven startups like those in the fusion space.
We’ve made bold moves in the past with investments in companies like Alice & Bob in quantum computing and Exotec in logistics, and we’re on the lookout for the next big opportunity in Europe to make a move in fusion.
As fusion technology continues to evolve, we’re excited to support founders who are laying the foundation for the next generation of energy infrastructure.
If you’re a founder in the fusion space, we’d love to connect.
Let’s build the future together.
