Study: Clean fusion energy could add $125 billion to California economy

Study: Clean fusion energy could add $125 billion to California economy

Fusion Energy's $125 Billion California Promise Collides With Financial Reality

State study projects major economic windfall, but timeline and opportunity costs raise questions about betting on technology that won't arrive for decades

BOTTOM LINE UP FRONT: California could capture $125 billion in economic activity from fusion energy, according to a new state study—but only if the technology succeeds commercially in 20-40 years. When adjusted for the time value of money, those future benefits are worth just $9-23 billion today. With the state's 2045 clean energy deadline approaching and proven alternatives like solar and wind delivering returns within 5-10 years, critics argue fusion represents a speculative long-term bet, not the near-term economic development strategy being promoted.

---

California stands at a crossroads in energy policy. A comprehensive analysis released this week by the San Diego Regional Economic Development Corporation projects that fusion energy could inject $125 billion into the state's economy and create more than 40,000 jobs. The rosy forecast arrives three years after scientists at Lawrence Livermore National Laboratory achieved fusion ignition for the first time, demonstrating that a fusion reaction could produce more energy than was required to initiate it—a breakthrough repeated in subsequent experiments.

Yet a closer examination of investment timelines, financial risks, and opportunity costs reveals a more sobering picture. The projected economic windfall won't materialize for decades, and basic financial analysis suggests the actual present value of those future benefits may be a fraction of the headline figure—raising fundamental questions about resource allocation during a climate crisis that demands immediate solutions.

The Numbers Behind the Headlines

California currently hosts 16 fusion companies, employs approximately 4,700 people in the sector, and generates $1.4 billion in annual economic output from fusion-related activities. Major players include General Atomics, which operates the DIII-D National Fusion Facility tokamak reactor on the UC San Diego campus, and TAE Technologies in Orange County. General Atomics recently completed construction of giant superconducting magnets for ITER (International Thermonuclear Experimental Reactor), the $25 billion international project under construction in France.

The state's advantages include world-class universities providing talent in plasma physics and nuclear engineering, established clean energy infrastructure, and ambitious climate goals—including a mandate for 100 percent clean electricity by 2045.

"With the right support, California can lead in the commercialization of fusion energy, capturing the economic benefits that come from it while reshaping the global energy landscape," said Eduardo Velasquez, senior director of research and economic development at the San Diego Regional EDC.

But those benefits remain distant. Even optimistic scenarios project first demonstration plants in the 2030s, first commercial plants in the 2040s, and meaningful grid penetration only in the 2050s-2060s—a 20-40 year investment horizon with substantial technical uncertainty still unresolved.

The Time Value Problem

Financial analysts point out that the EDC's $125 billion projection appears to ignore a fundamental principle: the time value of money. Future dollars are worth less than present dollars, and high-risk investments require correspondingly high discount rates.

If California invests $10 billion over the next decade to capture those projected benefits, the math changes dramatically. At a 7% discount rate—conservative for speculative technology—$125 billion arriving in 2050 has a present value of approximately $23 billion. At a 10% discount rate, more appropriate for high-risk ventures, that future benefit is worth only $9 billion today. And these calculations assume the optimistic scenario actually materializes.

Compare this to solar and wind technologies, where capital costs have dropped 90% over the past decade, return on investment occurs within 5-10 years, technology is proven and deployable immediately, and no scientific breakthroughs are required.

The opportunity cost looms large. Every dollar committed to fusion development is unavailable for grid-scale battery storage, enhanced geothermal systems (potentially viable in 5-10 years), advanced nuclear fission, grid interconnection infrastructure, or offshore wind—all technologies with nearer-term deployment potential.

For California specifically, this creates a timing mismatch. The state's 2045 clean energy deadline is only 20 years away—within the timeframe when fusion might achieve first commercial operation, not widespread deployment. Fusion represents insurance for 2060 and beyond, not a solution for the state's immediate decarbonization needs.

The Investment Reality

Global investment in fusion research has been enormous. The United States has spent approximately $30-40 billion since the 1950s. Globally, cumulative investment likely exceeds $100 billion over seven decades. Private fusion companies have recently raised $6-7 billion, with some projecting demonstration plants by 2030-2035.

But "demonstration" doesn't equal "commercial." A demonstration plant proves the concept works at scale—then comes developing commercially viable designs, obtaining regulatory approval for an entirely new technology, building manufacturing capacity, achieving economies of scale, and competing on price with alternatives that have had additional years to improve.

ITER won't even attempt to generate electricity—it's an experimental reactor expected to achieve first plasma around 2035. The Department of Energy's fusion budget runs approximately $800-900 million annually—a substantial sum, though notably less than what the United States spends on fossil fuel subsidies each week.

Risk Assessment and Competition

Financial risk modeling presents challenging odds. Industry analysts suggest roughly 30% probability that technical challenges prove insurmountable at commercial scale, 40% probability that fusion works technically but cannot compete economically, 20% probability that it arrives too late with other solutions already deployed, and just 10% probability that fusion delivers transformative clean energy as promised.

Moreover, fusion won't compete against 2025 technology when it reaches market. It will face solar, wind, and battery storage that have benefited from decades of additional cost reductions and efficiency improvements—a moving target rarely acknowledged in fusion promotional materials.

The Technical Challenge

Fusion combines light atoms—typically hydrogen isotopes—into helium, producing no greenhouse gases and only short-lived radioactive byproducts. The fuel is abundant: deuterium from seawater, tritium bred from lithium. A fusion plant would be inherently safe, with no possibility of runaway reaction.

However, achieving sustained, controlled fusion reactions that produce substantially more energy than they consume remains elusive. The National Ignition Facility's achievement involved a tiny fuel pellet producing a brief burst; scaling to continuous power generation requires entirely different approaches.

Multiple technological pathways are being pursued. Tokamaks use magnetic fields to confine plasma in a donut-shaped chamber. Inertial confinement compresses fuel pellets with powerful lasers. Alternative concepts offer different trade-offs in complexity and efficiency.

Materials science presents formidable obstacles. Fusion reactors must withstand temperatures exceeding 100 million degrees Celsius, intense neutron bombardment, and powerful electromagnetic fields. Developing materials that endure these conditions for decades remains an active research area.

What Economic Projections Miss

Critics argue the EDC's $125 billion figure reflects economic development marketing rather than rigorous investment analysis. The projection appears undiscounted and conditional on optimistic assumptions that assume away the hardest engineering and economic challenges. The analysis doesn't appear to account for opportunity costs—alternative capital uses that could generate returns sooner with greater certainty.

Such projections are common in studies commissioned to support industry development initiatives, but rarely reflect the disciplined financial analysis private investors conduct before committing to multi-decade, high-risk technology bets.

The Rational Case for Continued Research

Despite financial headwinds, a rational argument exists for continued fusion investment—though perhaps not at the scale or with the expectations sometimes promoted.

Basic research generates valuable knowledge about plasma physics, materials science, and extreme engineering with applications beyond energy production. The option value—possibility that unexpected breakthroughs yield transformative returns—justifies sustained investment. For the very long term, fusion could provide critical clean energy capacity for the latter half of the century.

The key question is portfolio balance. Dedicating 5-10% of energy research budgets to fusion represents a reasonable bet on long-term innovation. Allocating 50% or more to technology that won't contribute to mid-century climate targets while proven alternatives need scaling would be difficult to justify from a risk management perspective.

Global Competition and Workforce Implications

The international fusion race is intensifying. China has invested heavily in fusion research, operating several major tokamak experiments. The United Kingdom recently announced its STEP program, targeting a prototype plant by 2040. Private investment has surged globally.

The projected 40,000 California jobs would span plasma physicists and nuclear engineers to technicians and construction workers. Fusion draws on expertise from multiple disciplines: plasma physics, nuclear engineering, materials science, superconducting magnets, high-performance computing, and advanced manufacturing.

California's universities are expanding fusion-related programs, but scaling training to meet anticipated industry needs requires coordinated efforts between academia, industry, and government—assuming the technology reaches commercial viability.

Policy Implications

Anantha Krishnan, senior vice president for the General Atomics Energy Group, outlined key needs: "California companies will need financial incentives, regulatory support, and streamlined land-zoning processes. In addition, public-private collaborations to build test facilities and train the future fusion workforce will be critical."

The challenge for policymakers is determining how much to invest in distant possibilities while immediate climate and energy needs demand solutions that exist today. California's fusion strategy must balance the state's historical leadership in technological innovation against the urgent timeline for decarbonization and the financial discipline required for sound public investment.

The fundamental question isn't "Will fusion eventually work?" but rather "Does the potential payoff justify the investment given more certain alternatives available today, and should fusion be positioned as a centerpiece of economic development strategy or a long-term research bet pursued at modest scale?"

As Velasquez noted, success requires "scaling from fusion R&D hub to a production powerhouse." That transition, if it occurs, will mark a fundamental shift in humanity's relationship with energy. But the real test won't come from the science—it will come from whether the time value of money, opportunity costs, and risk-adjusted returns support the level of investment being contemplated.

---

Sources

1. Jennewein, C. (2025). Study: Clean fusion energy could add $125 billion to California economy. Times of San Diego. https://timesofsandiego.com/politics/2025/study-clean-fusion-energy-could-add-125-billion-to-california-economy/

2. San Diego Regional Economic Development Corporation. (2025). Catalyzing CA's Fusion Advantage: Roadmap to Commercialization. San Diego, CA.

3. Lawrence Livermore National Laboratory. (2022, December 13). National Ignition Facility achieves fusion ignition. https://www.llnl.gov/news/national-ignition-facility-achieves-fusion-ignition

4. U.S. Department of Energy, Office of Fusion Energy Sciences. (2024). Milestone-Based Fusion Development Program. https://www.energy.gov/science/fes/milestone-based-fusion-development-program

5. ITER Organization. (2024). What is ITER? https://www.iter.org/proj/inafewlines

6. General Atomics. (2024). DIII-D National Fusion Facility. https://www.ga.com/magnetic-fusion/diii-d

7. National Academies of Sciences, Engineering, and Medicine. (2021). Bringing Fusion to the U.S. Grid. Washington, DC: The National Academies Press. https://doi.org/10.17226/25991

8. Intergovernmental Panel on Climate Change. (2023). Climate Change 2023: Synthesis Report. https://www.ipcc.ch/report/ar6/syr/

9. California Energy Commission. (2024). Senate Bill 100: The 100 Percent Clean Energy Act of 2018. https://www.energy.ca.gov/sb100

10. Lazard. (2024). Levelized Cost of Energy Analysis—Version 17.0. https://www.lazard.com/research-insights/levelized-cost-of-energyplus/