Articles

Originally published on Inc.

The news of a successful fusion energy test at the Lawrence Livermore National Laboratory in California was met with both fascination and trepidation. All this talk of nuclear energy and “unleashing the energy of the sun” makes people squeamish. 

But there is a reason why many scientists are so excited about the breakthrough. The Ukraine war only amplified facts already in evidence–the global supply chain of energy is fragile.

Energy scarcity presents an existential threat to our businesses and way of life:

• The largest nations of the world have proved incapable of keeping up with commitments they made in the Paris Accord, even though emissions were reduced during the pandemic.
• Adoption of green technologies: Oil and gas substitutes have been too slow to stem the tide, in part because their costs are too high. According to BP, carbon fuels still account for 83 percent of world consumption. 
• The global supply of energy is unreliable, in part because of the complex political-economic risks.

Dramatic swings in energy prices have been costly for businesses and consumers. Oil and gas are price-inelastic commodities. Minor changes in supply cause disproportionate, sometimes wild changes in price. This is in part because oil is the transport fuel of energy. The price of gasoline impacts the cost of gasoline.

To understand the cost of energy further requires some understanding of the geography of oil sources:

Persian Gulf: According to the Energy Information Administration (EIA), the Gulf provides 30 percent of the world’s oil, is a hotbed of regional conflicts, and is vulnerable to terrorist attacks. Without the protection of the U.S. military, OPEC supplies are more vulnerable. 

North America: Twenty-five percent of the world’s energy comes from NAFTA countries (the U.S., Canada, and Mexico). During the Ukraine conflict, the U.S. and Canada were unable to provide enough supply to overcome shortages, and the cost of transportation to Asia and Europe was prohibitive. 

Eastern Europe: The Ukraine war has exposed on Europe’s reliance on Russia, Kazakhstan, and Azerbaijan–a region with some of the most difficult terrain in the world to produce oil. The region is also ripe with geopolitical risk. The extreme weather and deep wells require years of exploration and development.

Other: Forty-three % of the world’s energy comes from smaller producers such as Venezuela, Nigeria, and Algeria, which do not have the infrastructure or military protection to sustain a reliable source of fuel. 

One of the reasons why inflationary pressures are worse in Europe than in other regions is that European nations produce virtually no oil, but consume 15 percent of the world’s supply.

So, what’s the point of all this? Our energy supply is not only dirty, but also unreliable and subject to huge swings in cost. Our global energy infrastructure is insufficient and poses a significant threat to businesses that rely on energy, from crypto miners to freight companies. 

The global economy is struggling with this shift toward renewables. There are several barriers slowing growth, including a shortage of lithium batteries and battery storage capacity. While the U.S. Infrastructure Investment and Jobs Act passed this year and will bring new investment, it will take years for the U.S. to add enough battery charging stations and other mitigations to reduce our carbon footprint.

The chair of the bipartisan Fusion Energy Caucus, Don Beyer, said, “Fusion has the potential to lift more citizens of the world out of poverty than anything since the invention of fire.” Its potential to bring energy close to a place where it is consumed at low cost with no carbon emissions is unmatched. 

To be clear, it could be 20 years before homes are powered by fusion. But a small amount of such material could fuel a home for a hundred years, power factories independently, and dramatically reduce cost.

It’s too early to understand the potential applications of fusion energy in industrial production and other high-consuming industries. But there is plenty to be excited about.