Eni’s Bet on Fusion

Managing Editor’s Note: We’re just one day away from Jeff’s AI Supercharged strategy session…

The Trump administration has been working diligently to establish a regulatory framework for digital assets and to bring the U.S. financial system on-chain.

And Jeff has identified an opportunity at the nexus of this oncoming era of crypto and blockchain innovation and the other critical technology the White House is keen to help develop – artificial intelligence…

“AI coins.”

These coins are uniquely poised to benefit from the further development of these technologies… and Jeff has his eye on five in particular that he’ll discuss tomorrow at 8 p.m. ET, along with why now is the time to move.

You can go here to add your name to the guest list…

It’s the largest deal of its kind in history. And it’s not the dollar amount as much as what it signifies.

Just yesterday, Italian energy company Eni  (US ADR: E, Borsa Italiana: ENI) signed a $1 billion power purchase agreement (PPA) for electricity to be produced by Commonwealth Fusion Systems’ (CFS) first commercial nuclear fusion power plant – its ARC plant in Chesterfield County, Virginia.

Considering that there are not yet any commercialized nuclear fusion plants, this is a strong vote of confidence in the path CFS is taking towards harnessing the power of the sun.

It’s also an odd deal…

Eni is not a power company, nor is it an artificial intelligence company… nor is it a hyperscaler looking for more power.

Eni is an Italian energy company whose business is mostly exploration and production of oil and natural gas, refining of oil, and distribution of oil and gas primarily throughout Italy and the rest of the European Union. Its downstream business – the gas stations – are everywhere in Italy and scattered throughout Europe.

That’s why it seems odd that it’s doing a $1 billion PPA for electricity in Virginia. And it’s worth noting how forward-looking Eni is…

Commonwealth’s ARC plant isn’t expected to come online until the “early 2030s.”

While that is clearly years into the future, it doesn’t mean that nuclear fusion technology isn’t here already.

Building on SPARC

Back in 2019, I predicted that we would see the first net energy production fusion reaction no later than 2025. It was considered a ridiculously optimistic prediction at the time. Most experts were predicting that we were 10 or 15 years away.

And yet, on December 5, 2022, the Lawrence Livermore National Laboratory (LLNL) demonstrated a net energy gain reaction at its National Ignition Facility in Livermore, California. While short-lived and largely a research project using 192 lasers, it was real – no longer theoretical.

To be fair, I think it is highly unlikely that the design used by the LLNL will ever be commercialized for utility-scale energy production. Far more likely will be some form of inertial confinement, field reversed configuration, stellarator, Z-pinch, or a tokamak approach to nuclear fusion, like CFS is pursuing.

Before the ARC plant in Virginia is possible, Commonwealth needs to complete its SPARC reactor in Devens, Massachusetts, and demonstrate net energy production.

CFS SPARC Facility, Devens, MA | Source: CFS

The SPARC reactor is now more than 65% complete, and the company is racing ahead towards being able to produce a stable fusion plasma at 10 million degrees Celsius, which is equivalent to an energy level of 1 kiloelectron volt (keV) – temperatures that represent those of the interior of the sun and are capable of a sustained nuclear fusion reaction.

And while Commonwealth is racing ahead with SPARC, it is expected to begin construction on ARC in Chesterfield County, Virginia, in 2027, which makes perfect sense.

Commonwealth can put in place the physical infrastructure for the ARC plant in 2027 and 2028, readying it for the installation of its commercial fusion reactor design in the years that follow.

Rendering of ARC in Chesterfield County, VA | Source: CFS

The size of a few football fields, ARC will have a pretty small footprint and yet be able to produce around 400 megawatts of clean, emission-free electricity.

Which raises the question, what the heck will Eni do with the $1 billion of electricity that it has committed to buying in Virginia? It’s not like it can ship it back to Europe.

That was never the purpose of the agreement…

Already Spoken For

Eni’s corporate venture capital arm has been proactive and early in making investments in clean-energy technology and energy storage over the last decade. And Commonwealth Fusion Systems has been one of its largest investments.

Eni invested in Commonwealth in 2019, 2021, and most recently this summer. And while the valuations of Eni’s 2019 and 2021 investments in Commonwealth have not been made public, I am confident that Eni is sitting on very large paper gains right now from its first two investments in CFS.

Eni, as an energy company, has a goal of being carbon neutral by 2050, which is achievable with a large number of investments in nuclear fusion and nuclear fission technology. Not only will these smaller-footprint fusion and small modular fission reactor designs fill the gap of increased energy demand from data centers, but in time, they will eat into electricity production from natural gas and coal.

Eni’s $1 billion commitment for electricity from ARC is a signal, both from the perspective of an insider to Commonwealth’s technological progress, as well as a signal to future investors in Commonwealth.

CFS will need to raise billions more to get to commercialization, and knowing that there is a $1 billion PPA in place for electricity means that there is already a customer for the product that Commonwealth’s ARC will produce – clean electricity.

What makes the Eni/Commonwealth deal even more significant is that it comes on the heels of Google’s announcement this June of a similar deal to procure 200 megawatts of electricity from Commonwealth’s ARC, a topic that I covered this July in The Bleeding Edge – Google’s Secretive Investment in Fusion. Google/Alphabet is also an investor in Commonwealth.

Think about that…

The entire 400 megawatts of electricity production from ARC has already been spoken for, before it has even been built. That’s how hungry the industry is for clean, grid-scale electricity.

Who missed out, though? Who got caught sleeping at the wheel?

Racing to “Go Live”

That’s an easy one…

Dominion Energy (D).

Dominion Energy is the power company that operates the power plants and electricity transmission in Chesterfield County and the surrounding areas. It should have been proactive and locked in a PPA deal with Commonwealth.

Now it will have to purchase the electricity from Eni… at a markup.

Eni will pretty much earn 100% gross margins on the resale of its electricity from ARC, and it won’t have to outlay any capital until ARC goes live. Smart.

Google’s and Eni’s PPA deals with Commonwealth weren’t the first, though. Microsoft signed a PPA with another nuclear fusion company, Helion Energy, back in 2023 with the expectation for commercialization by 2028, which is currently the earliest “go live” date for a commercial nuclear fusion reactor.

While we’ll have to be patient for a few more years before the power of the sun (fusion) is harnessed, these promising fusion companies will soon start to access the public markets via IPOs, just like small modular reactor (SMR) fission companies have done, like NuScale (SMR) and Oklo (OKLO) have already done.

I’m so optimistic about nuclear fusion technology. Not only am I confident that the technology will be commercialized, but the economics will be superior as well.

Best-in-class fusion reactors should have no problem producing electricity at or below the costs per megawatt hour of a natural gas plant.

This is why there will be no shortage of investment capital to support the most promising fusion companies on their journey to commercialization.

Limitless, cheap, clean energy is right around the corner. We have so much to look forward to.

Jeff