For years, the prospect of commercial nuclear fusion felt a long way off. But recent breakthroughs—like Lawrence Livermore National Laboratory’s historic 2022 net energy gain—have marked a new chapter in the quest for fusion. Proving the physics in a lab, however, is a lot different than building a power plant that can compete on the open grid. Massive hurdles remain across physics, financing, and scaling.
In this episode, host Shayle Kann sits down with Carrie von Muench, COO of Pacific Fusion and a former venture capitalist. Carrie brings a unique, investor-minded perspective to this singular challenge.
Shayle and Carrie dive into topics like:
- Net facility gain, and the difference between breaking even at a target level versus breaking even across a facility’s tech stack.
- The distinctions between steady-state and inertial fusion
- Why Pacific Fusion is focused on building modular reactors
- The company’s strategy of utilizing widely accessible commodities like oil, plastic, metal, and water instead of specialized materials that rely on shaky supply chains.
- Unpacking the “ignition cliff;”the point at which a nuclear reactor shifts from relying on outside inputs to producing energy itself
- Why Pacific Fusion emulated pharma’s multi-tranche funding strategies to create milestones around capital deployments and de-risk its early execution
Resources
- Catalyst: Is nuclear fusion getting close?
- Catalyst: The state and future of nuclear waste
- Catalyst: Building a domestic nuclear fuel supply chain
- Open Circuit: Inside Meta’s massive nuclear push
- Latitude Media: ARPA-E awards record $135 million to speed commercial fusion energy
- Latitude Media: General Fusion’s $1 billion deal and the return of the SPAC
- Latitude Media: Trump Media’s bizarre fusion play for TAE Technologies
Credits: Hosted by Shayle Kann. Produced and edited by Max Savage Levenson. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.
Catalyst is brought to you by FischTank PR, an award-winning climate and energy tech, renewables, and sustainability-focused PR firm dedicated to elevating the work of both early-stage and established companies. Learn more about their PR approach and how they can support your company’s messaging by visiting fischtankpr.com.
Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform, by visiting energyhub.com.
Tune into Critical Capital, a brand new podcast from Crux and Latitude Studios. Hosted by Crux CEO Alfred Johnson, Critical Capital explores the interlocking forces powering clean and critical infrastructure. Join us every other Tuesday for in-depth conversations at the intersection of energy, government, finance, and global markets. Listen here, or wherever you get podcasts.
Transcript
Shayle Kann: I’m Shayle Kann. I lead the early stage venture strategy at Energy Impact Partners. Welcome to Catalyst. So let’s check in on fusion. Last time we talked about it here was back in late 2021, I think actually with Scott Hsu, who was at that time at DOE focused on nuclear fusion. I would say the emergent picture back then was there were a bunch of companies pursuing multiple different approaches to fusion power with increasing capital availability to help them hopefully reach the promised land. None yet had hit the key but importantly not final technical milestone of energy breakeven or Q>1 or a net facility gain, various terms to mean something pretty similar. Fast forward to today and basically all of that is still true, but some things have happened in the meantime. Probably most importantly, a DOE national lab did achieve a version of energy breakeven on I think what everybody universally agrees is a non-commercially viable reactor, but still they did it.
And in the private sector, some companies have continued to rake in even more capital. We’ve now seen over $15 billion in private capital flow into the space and a few companies have actually started making moves toward what they claim will be commercial projects.
Commonwealth Fusion Systems, for example, submitted a real life interconnection request. Two of the Stalwart fusion companies that have been around a long time have announced plans to go public via merger, one of which is with a Trump media company. But more broadly, technical progress continues across the board, albeit not equally across attempts. On the outside, this is one of those categories that I think it’s just hard to figure out where we actually are on the journey to commercially viable fusion power. So let’s see if we can untangle it. For this one, I brought on Carrie von Muench, who’s the COO at Pacific Fusion, one of the better funded companies in this space.
Carrie’s not a nuclear physicist herself. She’s actually a former venture capital investor like me, but she’s deeply immersed in this space now and I think is interesting in that she made the jump from investor to operator and has a lot to say about why. That’s coming up after the break.
Shayle Kann: Carrie, welcome.
Carrie von Muench: Thanks. Glad to be here.
Shayle Kann: All right, fusion is one of these categories where I feel like you see announcements here and there. I expect we will see an increasing volume of announcements in the coming years, assuming things are going well, but it’s sort of hard on the outside. I think to actually figure out what various announcements mean and how important different milestones are and things like that. Can you walk me through how you think about what are the milestones that we really should be looking out for if we are trying to track the progress of fusion on its way toward being a commercially viable source of electricity?
Carrie von Muench: It’s an important question and I’m glad you asked. I’ll start with what was recently proven because I think it really changed the field and it’s important for folks to understand. Infusion, obviously the running joke has been 30 years away and always will be and it’s important to understand what happened in the last couple years to put this moment into context. And then we can talk about some of the milestones that are yet to come. But I think the most important thing to start with is that a couple breakthroughs in 2022 completely change what’s possible in the field. So first, researchers at Livermore National Laboratory up the road from where I’m sitting in the Bay Area right now demonstrated controlled ignition, which is a really, really big deal. They got more energy, quite a lot more energy out of a little fusion target than they drove into the target.
And what that means is that we in the field now definitively know the conditions for ignition and as a result, also high gain fusion. And the challenge has now become how do you drive fuel to those conditions with a system that is a practical basis for a power plant? And that’s a really, really different challenge than this question of where in the physical landscape can we get more energy out of a fusion machine that then went in?
Shayle Kann: Yeah. So let’s talk a little bit more about that milestone. So they demonstrated energy breakeven or Q>1, whatever you want to call it, but my understanding is that there are various different versions of that. They did it at the reactor level but not a plug breakeven or whatever other term you want to use. Or orient me, what did that actually show and then what’s different about that from what we’re going to have to show when we want to turn fusion power plants into something real?
Carrie von Muench: So what they did, and you’re going to have to forgive me if I get some of the details wrong. I’m not a physicist. I’m an operator in the field, so disclaimer. What they did was they stored about 300 megajoules of energy in a capacitor bank. They used a laser to drive about two of those megajoules into a target and then they got five megajoules of energy out of the target. So really, really big achievement. They’ve since improved on an achievement, gotten closer to eight megajoules out of the target. And so if you draw your proverbial box around that fusion target, then you got more energy out of the target than you drove into the target. But to your point, if you draw your box around the entire fusion machine, including the capacitor bank, you only got percent and a half or so of the energy stored in the system out of the machine and obviously that’s not a practical basis for a power plant.
You need to get about 5X more out of the machine than was stored in the system to have a practical basis for a power plant. And so to your question about milestones, that is the next big milestone for this field. It’s demonstrating something called net facility gain, which is getting more energy out of the entire machine than everything required to run the machine. We like to define it as all of the energy stored in the system and a number of companies are saying they’ll do that in the next couple years. We’re on track to do that by 2030.
Shayle Kann: Okay. So net facility gain in your mind is like the next big thing. I guess the other thing that I’m wondering if you can help elucidate a little bit is you hear this, okay, so the proof point that we’ve had of getting more energy out of the target than came into it is not a commercially viable or practical fusion power plant design. And so as a result, the folks like yourselves and others who are saying, “Okay, we’re going to get net facility gain in the next few years are generally not doing the same thing that INL did for that system.” Why is that system not practical and what is the fundamental, what needs to be true to imagine that a design is practical?
Carrie von Muench: There are a lot of things that are important to consider here. So part one of practical might be what needs to be true to get more energy out of the entire fusion machine than was stored in the system. So what needs to be true to get in that facility gain? The second half of that question, which is equally important, I would argue, is what needs to be true to have a fusion power system that can scale as in be maintainable, deployable and affordable such that it’s a competitive source of power, right? Energy is a commodity market at the end of the day, this whole thing is a race to the bottom on cost. So to start with the first, there are two things to consider. The first for lots of different fusion approaches is do you build on an established path to ignition and high gain, right?
Is there experimental evidence that says the physics of what you’re doing is going to work? And then the second piece is, is your system efficient enough to do that in such a way that you get more energy out of the whole machine than was stored in the system? And so for example, the national ignition facility at Livermore was not designed to be a power system. It was designed for a different mission. And so it wasn’t designed to get more fusion energy out of the whole system than was required to drive it. It has a relatively inefficient driver technology. What we do at Pacific Fusion is similar from a physics perspective, right? We’re driving that fusion fuel to very similar physics conditions. The fuel doesn’t care how it gets to those conditions, but we have a much more efficient driver. So instead of using a capacitor bank to charge a laser and a laser to drive a target, we use a capacitor bank to make a large electrical current.
That electric current squishes the target and that’s a whole lot more efficient because you don’t have this lossy step of a laser in the middle.
Shayle Kann: Yeah. That’s maybe a good segue into talking about the different approaches that are out there right now. Can you just, high level, walk me through obviously from a non-nuclear physicist perspective, like how do you think about the different categories of like real attempts that we are seeing? As you said, there’s multiple folks saying they’re going to, or hoping to hit net facility gain this decade. So among that group, what are the different approaches that are being taken and how do you think about the trade offs between them?
Carrie von Muench: There are two leading ways to do fusion and a bunch of different sort of subcategories within those ways to do fusion. The first is steady state fusion. So tokamaks or stellarators, usually you’ve got relatively low pressures, relatively long confinement times and the closest experimental result for steady state fusion is from a tokamak from the ’90s, a factor of a few from the scientific finish line. So you’ve got a scientific basis that is founded on many decades of work and a number of folks out there trying to build the next generation of system to improve on that record from the 90s. The other way to be —
Shayle Kann: — Commonwealth Fusion, for example.
Carrie von Muench: Exactly. Or Proxima in Europe is building a stellarator or others, but steady state is sort of one big bucket. The other big bucket of ways to do fusion is called inertial fusion and it’s sort of the other side of that spectrum. So instead of having relatively low pressures for long amounts of time, you have really high pressure for short amounts of time. It’s pulsed, like a combustion engine you can think and there are sort of two big ways to do inertial fusion. The first is laser driven inertial fusion like they do at Livermore National Laboratory and the second is pulser driven inertial fusion like they do at Sandia National Laboratory. And inertial fusion entered the field more recently, originally for defense applications and progressed so rapidly that it crossed the scientific finish line defined as scientific gain in 2022, which is a big deal. There are a number of private fusion companies building inertial systems.
And then there are a number of other ways to do fusion that are factors of a thousand or more from the scientific finish line. So for the purpose of this conversation, I’ll focus on those first two. Each of those waste to do fusion has different challenges associated with building an affordable, maintainable, deployable power system, right? There are different engineering challenges, there are different technoeconomic challenges. And if it’s helpful, I’m happy to spend a moment on what it is that we do and why we think it makes so much sense because that’s where we’re spending all our time.
Shayle Kann: So tell me about Pacific Fusion and like where you fit in that landscape and why your approach.
Carrie von Muench: Yeah. We fit in the second category, so an inertial fusion and we do what’s called pulser driven inertial fusion, similar to what’s done on the Z facility at Sandia National Laboratories today. And there are a couple advantages to this approach. First, we get to build on the number one and number two highest performing approaches to fusion today on laser driven inertial fusion and pulse are driven inertial fusion at Livermore and San Diego National Laboratories respectively. But equally importantly, for fusion who actually scales a power source, you have to build power systems that are buildable, maintainable, deployable, and can be delivered at a cost structure that makes sense. And the system we’re designing is designed against those goals. So first on the buildability side, right? Buildability ultimately means modularity. If you want something to come down the cost curve fast, if you want to be able to quickly deploy large systems, we’ve learned that modular systems really outperform non-modular systems and by modular —
Shayle Kann: Can I interrupt you on that one? When you say modular, what do you mean? Obviously if we’re talking about fission world, there’s like such a broad spectrum. If people talk about modular, they could be talking about a microreactor that’s a megawatt, or they could be talking about like versions of SMRs that they call modular that’s literally in the name SMR, but it’s still 300 megawatts plus. So what’s a pixel size for modularity for you?
Carrie von Muench: I just mean big things that themselves consist of many small things. So tabletop scale fusion doesn’t work, but our goal is to build fusion power plants in the couple hundred megawatt range, so in the two to 300 megawatt range that themselves consist of modular mass manufacturable building blocks. And so in our case, most of the capital cost and footprint sits in the driver, this is true for a lot of different fusion approaches. For us, that driver consists of 156 identical modules. Each of those modules produces more than a terawatt of peak power and sits in about the footprint of a shipping container and is made from oil, plastic, metal, and water. So we bring two things that make a big difference, right? The first is an established scientific foundation based on decades of work at the national laboratories and the breakthroughs that I mentioned at the beginning of this conversation, but also a path to a modular, maintainable, deployable system that can scale more readily as a power source.
Shayle Kann: I guess that gets to the next question and really for me, probably the biggest question that I have, which is, okay, I’m not smart enough to know how likely Pacific Fusion or anybody else is to achieve net facility gain in the next few years, but let’s take it as a given that it happens. The more interesting question to me then is what happens after that and what is the path from there to commercially viable power plant and what should we be expecting out of the cost curve there? Because one presumes, as you would expect with any first of a kind thing, like that facility you’re going to hit net facility gain in is going to be expensive.
But what I don’t know is how I should be thinking about the steepness of the cost curve from there and the path from net facility gain to sufficient net facility gain to be viable as a source of electricity. So I guess walk me through how you see the post net facility gain path.
Carrie von Muench: That path is hugely dependent on the technology in question, so it looks pretty different depending on the type of fusion you’re talking about, but I can certainly speak to what it looks like for pulsar-driven inertial fusion and for Pacific Fusion in particular. First, let’s talk about capital cost and path to come down the cost curve from an overnight capital cost perspective. Then we can spend a little bit of time on maintainability because that’s equally important if you’re thinking about a system that’s going to provide reliable power and then we can spend a minute on the end about your question about gain because to your point, driving up fusion gain is also really important to have a practical basis for a power system. First on the capital cost side, I’ll speak to two parts. The first is what is actually a cost driver, right? One way to think about this is what’s the multiple on the bill of materials that you need to achieve for the overnight capital cost to make sense and that is just dependent on what your fusion machine is actually made of.
Our fusion machine, at least the fusion driver in which most of the capital cost sits, is relatively straightforward from a bill of materials perspective. These modules that I mentioned consist largely of capacitors and switches, in essence, oil, plastic, metal and water. And so when you think about the multiple and the bill of materials that you need to achieve there, it’s readily achievable with today’s manufacturing technologies. The second thing that’s important to note about modular systems we talked about this earlier is you can iterate way faster and come down the cost curve way faster when you’re working with these modular building blocks. So the time and cost to go from generation one to generation two to generation three of the underlying technology gets much, much shorter when that technology itself consists of a bunch of identical units. The second thing I’ll mention … Go ahead. I can see your gears turning. I want to hear what you have to say.
Shayle Kann: They’re turning. I guess the thing I still want to wrap my head around a little bit is like I get the concept of modular building blocks that form the components of part of a system and that does seem key to me in understanding what a cost curve over time might look like, but I still don’t have a picture in my head exactly of I guess how big a driver of the overall system cost those modular building blocks might be. What we’ve seen interestingly in, let’s just take other categories of power in solar for that matter, batteries even, right? You do have these modular building blocks. In the case of solar, it’s cells or panels. In the case of batteries, it’s also cells or modules and you do get this really steep cost curve on those things over time as manufacturing scales up and so on. And then what ends up happening is that everything else ends up dominating the overall installed cost of the system. You get the modular building blocks ultimately to be pretty cheap, but the cost curve there is way steeper than it is on the rest of the balance of system and on all the soft costs that come along with it. And so I guess what I need to understand is your modular building blocks that are, whatever you said, oil, plastic, water and something else, are those like 50% of the capital costs or the BOM or are they 10% of the BOM or you know what I mean? How much are you going to be able to drive cost as a result of scale of those components?
Carrie von Muench: It’s a really significant portion of the capital cost. It’s much, much more than 10%. I think there’s a lot of, as you know, we live in a seller’s market for balance of plan equipment right now, which is common to all energy technologies. Those numbers are moving and so it would be premature to give you a specific percentage, but it is a very significant cost driver, like not a small percent. It’s a very large percent of the overall system at least today. And it’s the stuff that’s common to the demonstration system that we’re building by 2030, right? We’re not buying a turbine to put on that thing, but we are building the whole pulse power driver in many ways as we would for a first power system. The other pieces of the system to think about, like if you think about the system in categories of major subsystems, you’ve got the driver, which we talked about.
You’ve got these fusion targets, which are tiny little cans filled with fusion fuel and they’re really important for the fusion gain that you mentioned. You have what we consider the fusion chamber, so the area surrounding the target that has to breed Tridium, capture the fusion energy output and heat exchange with your balance of plant equipment. Then you have all the balance of plant equipment that’s common to lots of different energy technologies. You need to account for losses at different stages of the process and you need to have an economical power plant. The interesting thing about inertial technologies and our technology in particular is that you can improve the performance and reduce the effective cost of existing facilities just by adding new improved fusion targets. So those fusion targets are going to continue to improve over time and as a result, be able to improve the performance of an existing fleet without building new capital infrastructure, which also gives you a path to coming down the cost curve much more quickly than you otherwise could.
Shayle Kann: I don’t want to jump ahead to it necessarily, but is it true to a first order that basically every additional point of gain that you can get translates to like pretty linearly higher, essentially what would be higher efficiency in another type of system, which is lower LCOE. Should an equal amount of focus be placed on every additional point of gain as it is on every additional reduction of CapEx?
Carrie von Muench: Yes, with some footnotes. So one way to think about it is if you treat, imagine a system and you treat it as fixed, like a fixed capital cost of the system. The nameplate capacity of that system, so the amount of power that it produces is going to be determined in a pulse inertial system like what we’re building by the gain, so the amount of energy you get per shot and the rep rate, the number of fusion shots that you take per unit time. And so if you imagine building infrastructure, right, building fusion power systems, you can imagine building a fleet that starts with the ability to produce some amount of power per unit system at some nameplate capacity and then with improvements over time, so upgrades to the fusion chamber to accommodate a higher up rate and upgrades to those fusion targets as we iterate on them on the demonstration system that that same physical thing can produce more power and as a result have a lower effective LCOE.
Shayle Kann: That makes sense. But so the target, the high level target initially, you think what sort of like triggers this is commercially viable is something in that like 5X gain.
Carrie von Muench: Yeah, approximately. Approximately, right? It depends on the ultimate efficiency of a lot of the supporting systems, but that’s a good ballpark.
Shayle Kann: And I’ve heard that like generally it is believed that the path to 1.01 is way, way, way harder than the path from one to five. Is that your general view on it? Like you get over this mountain that is net facility gain and then after that you’ve just got like some version of engineering tweaks to make to get to five, or is that the wrong way to think about it?
Carrie von Muench: Yeah. I think we have to be careful, right? Nothing infusion is ever easy and I think trivializing the work required to make those improvements is not a good idea. But one way to think about what’s often described as the ignition cliff is that to get your fusion fuel to generate more energy than is driven into the fuel, you have to get it to start self-propagating burn and once you do that, it’s easier to add a little more energy and get a lot more energy out. So there’s lots of published literature on this. You can see different curves of the ignition cliff where you have for a very significant amount of current. For instance, in the case of a pulse system, you add a little more current, you don’t get much more energy out; a little more current, you don’t get much more energy out; a little more current, you don’t get much more energy out.
Then you hit this ignition cliff and suddenly a little bit more energy onto the target starts getting you way more energy out of the target. So that is why there’s been a lot of focus in the field on finding that ignition cliff and now on building systems that can drive targets up that ignition cliff and obviously design all the supporting systems to be able to work in those kinds of yield regimes.
Shayle Kann: Yeah. Okay. So back to sort of the original question of like, what’s the path post net facility gain? So walk me through for you guys, I guess, assume you successfully achieve net facility gain on this demonstration facility by 2030 or so, what does it look like after that?
Carrie von Muench: After that, we go build power plants.
Shayle Kann: You’ll still have to do a first of a kind that has the net gain of 5X and right there’s like another version of a … I guess there is a first of a kind. The demonstration’s a demo, the next is first of a kind. Is that the way to think about it?
Carrie von Muench: It’s a good way to think about it. I think people tend to … If you talk to people and ask them, define a demo system, define a pilot system, define a first of a kind system, everybody means something different. But what I can talk about is sort of what our demo system can do from a capability perspective and how we think about what will be new on a first power system and then what it looks like to scale from there. So the demo system is designed in many ways to demonstrate net facility gain and also importantly to iterate on these fusion targets. So we have a lot of diagnostics on the demo system. We’ve designed it such that we can test prototype components of commercial systems on it, a commercial chamber on it. So take shorter runs at higher rep rates, for example, and as a result, it serves as a really important de- risking platform for a lot of the core technologies including the targets and a platform upon which we can continue to iterate on targets that are relevant for commercial systems.
On a power system, there’s a really big difference between a power system and the demo system from a technical perspective. There are many, but one important one to understand is that the power system will be reparated at about a hertz, so once a second, whereas the demo system will be reparated at a shot a day. And when you think about a lot of the capital components like the pulser and preparing them to do hertz like rep rates for 30 years, that’s a pretty meaningful reliability engineering challenge. The good thing is that we can demonstrate that technology at a much smaller scale. So at this module level scale, iterate at a much smaller scale and then deploy those modules once they’ve been shown to meet production criteria into the first power system. One thing that’s great about this modular design is that you can, to maintain the system, just swap out a module and put a new one in and go maintain that module.
You can upgrade them in place as you make design changes that improve the performance of the fleet. Similarly, you can design the system such that the whole fusion chamber can be upgraded without swapping out most of the capital infrastructure and you can experiment with different targets. And so really the first of a kind power system is designed. There’ll be some commissioning phase where we’re making a lot of those upgrades, likely over a first year or two, but it’s designed to be rapidly upgradable to reach commercial performance for a customer, which is unusual. I think for most energy technologies, you build it and then you have to build another one and then you have to build another one and it’s in building those big capital projects that you come down the cost curve and improve performance. Our objective is to design these systems such that you can come down the cost curve and improve performance without necessarily needing to build new facilities.
Shayle Kann: I don’t know if you’ve made a public target or anything like that, but whether for Pacific Fusion or just generally, do you have a view on like what we should be anticipating as the asymptotic, how cheap can this get? Basically what are we targeting here for either capital cost or level life cost of energy? Where should we think about fusion in 15 years in the context of the overall energy supply landscape?
Carrie von Muench: What we ask ourselves when founding this company is, is there a path ultimately to be cheaper than combined cycle natural gas? Because if there is, you have a really exciting business and if there’s not, you can still build an interesting business, but it’s not going to be as scalable as we’d like to see Fusion be. And obviously that at the beginning ends up being a thought exercise, right? You use the best available data to make capital cost estimates, you figure out what you need to believe from an uptime perspective, from a yield perspective, and then you have a nice spreadsheet that tells you we see a path to do this. And then you actually get into the work of building and that tells you how quickly you can achieve or move toward those goals. So for me to tell you, you know, we’re going to be at 150 bucks a megawatt hour in 2038 would obviously be misleading at best. But I think the thing that’s exciting is that if you look at the capital cost of the driver, if you look at the capital cost of balance of plan equipment, if you look at the fusion gain that you need to believe in, there’s nothing preventing fusion from being as cheap as anything else out there and our objective is to move toward that goal as quickly in capital efficiently as we can.
Shayle Kann: Not to spend much time comparing fusion to fission, but one of the reasons to even consider doing fusion over fission, obviously there’s the waste one, which is probably the biggest one, but beyond that, there’s also a supply chain thing, right? Vision does suffer from, in certain areas, a pretty constrained supply chain. I think what people don’t often talk about is what the equivalent of that is There isn’t on the fusion side. So when you think about the supply chain, obviously this is going to vary depending on which of the approaches we talk about. Some of the approaches require high temperature superconducting magnets, which has its own pretty limited supply chain. But I’m curious what you think of as the potential, let’s say we do scale up a fusion power generation market, where might supply chain bottlenecks emerge?
Carrie von Muench: I think you said it well when you said it’s really dependent on the technology. So something like high temperature superconductors are a relevant piece of the puzzle for steady state approaches like tokamaks and stellarators. They’re not relevant for inertial approaches like what we do. Our objective in designing our systems and one of the reasons that we founded this company is because we see a path to avoid reliance on what I would call broadly speaking specialized materials. So as I mentioned, a lot of the system is built from oil, plastic, metal, and water. We’ll have the same procurement work to deal with as any other energy system. We think about balance of plant and other such components, but there’s nothing inherently rare or expensive, meaning that the bottleneck to scale up ends up being effectively a manufacturing bottleneck. So for a lot of these core components, you can procure them in small volumes today, maybe not quite at the performance and lifetime requirements you need, but a lot of the vendors do these in small volumes as a result.
The multiple on the bomb is relatively high. And so the challenge is in building the capacity both in the supplier base and internally to deliver those components at the scales and at the performance requirements needed.
Shayle Kann: What about fuel? Talk to me about the fuel supply chain.
Carrie von Muench: Yeah. Fusion fuel obviously is very different from fission fuel. There’s no uranium, no plutonium, nothing that you can use to make a weapon. For fusion systems, the fuel is deuterium, so it’s an isotope of hydrogen found commonly in seawater and tritium. And what that means in practice is that it’s deuterium and lithium because every fusion approach out there needs to breed its own tritium to be economical. So make tridium from fusion events using deuterium and lithium. That stuff is readily available. Tritium is important to consider though because every fusion approach to be commercially viable needs a sustainable tridium economy. So that means you need your startup volume of tritium to be relatively small and then you need your operating fusion power system to produce more tritium than it consumes such that you can start additional systems and cold start your system when needed. And there are a number of people working on this in the field.
It’s a challenge that’s common to the whole field, but there are differences across different fusion approaches around the volume of Tridium required to start up and then how rapidly that tritium can be bred or how efficiently that tritium can be bred with the system that exists.
Shayle Kann: All right. Final question for you that I guess is sort of about fusion, but it’s really more about Pacific Fusion, which I find interesting. And you’ll have a unique perspective on this as a former venture capital investor before you became an operator at Pacific Fusion, which is you guys have financed the business in a pretty interesting way. They sort of came out of stealth with a quote billion dollar financing, but it’s structured interestingly and in a way that I’ve thought about a bunch as to where something like this could apply elsewhere in other technology companies that have a big capital intense journey ahead of them, which you certainly do and did, but want to de- risk that as much as they can from day one. So can you just talk a little bit about like how you have financed Pacific Fusion and what works and doesn’t work about it?
Carrie von Muench: Yeah. I’m glad you asked the question and I know you bring real appreciation for how big of a role financing risk can play in the success of young companies, especially hardware companies. I mean, we saw the story so many times in CleanTech 1.0 where you have a company that doesn’t have line of sight to the necessary capital to place procurements with four year lead times or get a building built or actually make material progress against this big thing, meaning it’s hard to make progress, meaning it’s hard to raise and you just get stuck in the cycle of death. And so for something like a fusion system to be able to go fast, you need line of sight to the capital to go fast. We’re building large facilities. This is the kind of thing that works on a tabletop. The lead times associated with getting those things built or long.
When this company was founded, this is actually how I met the team. The team had come together and realized that based on the demonstration of ignition at Livermore, we knew the conditions for ignition and high gain, based on researchers at Sandia achieving the second best fusion performance ever and our CTO inventing technology that more than doubles the efficiency and power density of systems like Z, we had a practical path to deliver those same physical conditions with an affordable modular mass manufacturable system That means put together, you have a big fusion project that’s a massive engineering and execution effort and has all the things that are hard about that, but not something that has a lot of binary scientific risk and that lends itself very well to defining a clear set of milestones against which you can finance a business. And my old team when I was on the venture capital side had sort of solved for this in biotech a few times by saying, let’s assemble the capital we need to do a big project and then let’s call that capital as milestones are achieved.
And so we thought we’d borrow that for fusion and we were super, super fortunate to find the right partners around the table. I mean, you know this at the end of the day, it’s all about who’s around the table and how well you can align incentives and how you can work with them to make this successful and Hemant of General Catalyst led our round. He had also seen this movie before in Clean Tech 1.0 and felt really strongly that if we were going to take a crack at this massively ambitious thing, we needed to be resourced to do it well. And so we worked together with him and our other investor directors, Eric Schmidt and Patrick Collison to design a set of milestones that made sense to everybody and since then we’ve been executing to plan. So far it’s worked really, really well and it’s really been possible because of the risk profile of what we do and equally importantly because of the vision and ambition of the investors we’ve got around the table.
Shayle Kann: So yeah, the only other place where I’ve seen this is in biotech and pharma and I’ll tell you what I think is common about that and what you’re doing and the reason why I think there is a limited set of other kind of markets and technologies wherein it could apply, but I’ve struggled to like really execute this vision in a lot of other places, which is there is a set of clear milestones that you can define. They’re largely technical milestones in your case and it’s clear in that hitting each milestone is a clear de- risking event and you can define them ahead of time very well. A lot of businesses, if you tried to do that, even hard tech companies, if you tried to do that at day zero, you just get the milestones wrong, right? There’s like so much pivoting that goes on along the way that if you tried to line up a billion dollars of capital that was like tranched, tied to milestones, you’d have a really hard time defining the milestones such that they would still work years later.
Fusion is sort of unique in that you sort of know like we’re leading toward net facility gain. There are milestones along the way to net facility gain. You probably set some other milestones along the way. So I really like it conceptually because it is a way to de- risk capital early on for something that will be capital intensive and is a big swing, but I’ve struggled to find other situations where the milestones are so well definable early on in the journey and I’m curious what you think about that.
Carrie von Muench: Yeah, I think it’s a good way to think about it. I think that there are two things that kind of have to be true for a structure like this to make sense. I think one of them is that you have to have very high conviction in how the market will value this big end thing or not ending, but like this big intermediate milestone that you’re resourcing a business toward, that’s certainly true in biotech, you know what certain endpoints are worth in the market, it’s true in fusion. Nobody has questions that net facility gain is a massively valuable milestone for the whole business. And then you also have to kind of think that the market on the whole is not going to know how to value the intermediate milestones along the way. Because if it does, if you’re living in a regime like software where you kind of know what a series A investor expects to see, series B investor, et cetera, et cetera, then why do the tranche capital thing?
Like, just raise your initial round. That financing risk doesn’t exist. And so when you think about a milestone gated financing round, really the thing it is solving for is how do we maximize the probability and the speed at which we can reach this thing that’s going to be massively valuable for everyone around the table and how do we do that in such a way that investors aren’t putting a ton of capital at risk without seeing execution against that plan? And so being able to define the milestones is important, but I also think that market dynamic matters because it’s sort of the critical incentive structure that makes this whole thing make sense.
Shayle Kann: It’s a very good point. I mean, implicitly within the structure is that those subsequent tranches are priced ahead of time too. So you’ve defined the pricing all the way through the end of whatever your full scope of that original deal is. And so as you said, you have to pretty high conviction that you can assess what the market value of any given milestone will be, or at least the final milestone, I suppose.
Carrie von Muench: The interim pricing doesn’t matter. It doesn’t really matter. It’s just how much do investors own with all capital called? Like that has to make sense and then you have to deploy that capital in a way that everybody feels good about and you have to bake into your structure some flexibility such that when you inevitably learn things along the way, everybody wants to come to the table and make sure that what you’re doing still makes sense.
Shayle Kann: That also makes another good point, which is the reason that the interim financing steps don’t really matter is because it’s kind of binary, right? If it were not binary and if this were a software company and you could the milestones are like 10 million of ARR or 50 million of ARR or whatever, you’d believe there’s some intrinsic value to the company if you exited in the middle there and so the ownership and the pricing along the way would also matter to investors. In the case of Fusion, I would argue there is very little intrinsic value in the company until there is a lot and it becomes pretty clear at that point.
Carrie von Muench: Yeah. I mean, you can look at other comps in the market and think about whether the market has said that that’s true. I think you can see plenty of fusion companies that haven’t reached that facility gain that have raised at high valuations because I think the thing that’s true is that you’re not going to see an exit prior to that milestone. We’ve seen examples. Yeah. But I think that investors are not expecting an exit prior to that milestone, which means it’s all sort of in the noise.
Shayle Kann: Yeah, I think that’s right. Okay. Well, enough about Pacific Fusion. Thank you for your time. I really appreciate speaking to somebody else who’s also not a nuclear physicist, but is deeper in it than I am to help me understand a little bit about like what we’re really looking out for in the next few years, because it will be very interesting. As you said, Pacific Fusion is among a small group of companies that are saying, we’re not that far from net facility gain, so we got to monitor this. So I appreciate your time. Good to see you.
Carrie von Muench: Likewise.
Shayle Kann: Carrie von Muench is the founding COO of Pacific Fusion. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today’s topics. This episode was produced by Max Savage Levenson, mixing and theme song by Sean Marquand. Anne Bailey edits the video version of this show. Stephen Lacey is our executive editor. I’m Shayle Kann, and this is Catalyst.
