It isn’t too often that a news release promises to redefine our entire civilization, but that just happened last week.
Lockheed Martin’s legendary Skunk Works program, the DARPA-infused source of stealth and aerospace technology decades ahead of its time, has branched out to tackle the “holy grail” of physics.
For nearly a century, scientists have known how the sun produces massive amounts of energy. For 60 years, give or take, they have been trying to replicate fusion in a way that gives more energy than it takes.
All attempts have failed at great cost. Now, we may be a decade away from hauling the power of stars around in a 7-foot-by-10-foot box on the back of a truck.
The team at Lockheed Martin has been working on this for four years, and announced its plans to test a design within a year and have a working prototype within five years.
To put this in perspective, the most promising similar project — International Thermonuclear Experimental Reactor — will weigh 23,000 tons, stand 100 feet tall, cost seven nations about $13.5 billion, and won’t be up to speed for decades.
Instead, you could park four of Lockheed’s fusion reactors on flatbeds in the back of a 7-11 parking lot and power all of Baltimore. Put 100 of them in a Walmart lot and it’d power all of Maryland.
This is exactly the kind of thing investors should be all over. Fusion can produce 10 million times the energy by weight compared to fossil fuels, there is no meltdown risk or long-term radioactive waste, and there is no pollution.
Yet, as much as I hope the Skunk Works team is right –and as much as it could be the most meaningful investment in the history of mankind– there is nothing to do but sit on the sidelines.
Profiting while kindling a new golden age of humanity is irresistible in theory, but there is no way to do it in reality.
In that sense, this is a perfect example of how to approach scientific and technological breakthroughs to see if you can profit from them.
Questions to Ask
First off, we’re just going to assume that the Skunk Works team is going to be successful.
That is a bit of a stretch considering generating power via nuclear fusion has eluded physicists and engineers for decades, but we’ll do it for the sake of this discussion.
Is the announcement tied to a publicly traded company?
This should be a no-brainer, but a lot of very promising announcements are made by privately-held companies or universities.
Sometimes, a company will be exclusively working with a university that holds the patents. The devil is in the details here, so the company better have an exclusive, long-term contract.
This fusion project easily passes this criterion.
Is there sufficient investment?
Lockheed has some deep pockets and government backing, but its bread and butter rests in defense contracts.
After four years, it is still in the design phase, and it went public to find potential business and government partners.
What this tells me is that Lockheed doesn’t want to support the needed capital expenditures for either the talent or the prototype. The lack of any information on how much the project has and will cost doesn’t help.
The fusion project doesn’t pass muster here, especially on the lack of cost estimates. This leads to the next thing to consider…
Is there a clear path to revenue?
This is pretty much all-important. In the big picture, this technology could replace all electrical generation in the world. But you have to consider how the lifetime cost of these fusion reactors will compare.
Solar is a good point of reference. Once the panels are up and running the power is free. The real cost includes manufacturing and installation, and it is still significantly more expensive than coal or natural gas.
We don’t know what these will cost, how long they’ll stay operational or how much the fuel will cost (we’ll get to that shortly). The fusion project doesn’t give us the information we need here
What is the potential market size?
Assuming there is a clear path to revenue, next up is the potential market and the impact the project will have on the company. Lockheed Martin is a massive $55 billion company.
In this case, the project passes with flying colors. The potential market is beyond comparison at untold trillions of dollars stretching far into the future.
This is quite the outlier. Biotech is filled with examples that show the other end of the extreme. If it weren’t for government funding for orphan drugs, breakthroughs for rare conditions and diseases with only a couple thousand or million potential patients worldwide would always be worthless.
Finally, are the infrastructure and resources to support the technology available?
Even if a technology can pass all of the criteria so far, there still needs to be an adequate environment for it to enter. This project passes in one regard, and utterly fails in another.
The fusion reactors themselves can be dropped into the existing electrical grid, but the resources are a problem.
The fusion reaction requires deuterium and tritium. These are hydrogen atoms with one and two extra neutrons, respectively.
Deuterium is natural, abundant, and cheap. You can buy 10 liters online right now for under $250.
The tritium is the problem. According to a paper released by the Columbia University Applied Physics and Applied Mathematics web site, tritium consumption in a 1000 Megawatt fusion reactor comes out to just under 60 kilograms per year.
However, the tritium supply available for fusion accumulated over 40 years of production will peak at 27 kilograms in 2027.
Then there is the price tag. Tritium costs $200 million per kilogram. Lockheed estimates its reactor will use about 25 kilograms for 100 MW. That puts the yearly cost for fuel at $5 billion, and it would shut down from lack of fuel a couple weeks into the second year of operation.
Assuming it runs nonstop all year, and without the cost of building the reactor, already the cost per kilowatt hour is $5,000. For perspective, the average cost of electricity in the U.S.A. is 11 cents per kilowatt hour.
The Secondary Play
As we can see, this project just doesn’t warrant any attention; at least for now. There are a whole lot of vague and undefined factors we’d need to know, and a whole lot that makes these fusion reactors look like they’ll never be commercially viable.
As promising as this looks in a press release, it simply won’t do a thing for Lockheed Martin’s bottom line or investors that buy its shares.
However, this process often opens up new possibilities for us. After crunching the numbers, I wanted to see who is in the business of selling tritium.
In this case, it was a dead-end. The only nuclear reactor producing tritium is owned by the Dept. of Energy.
