Governments view fusion energy as the new 'space race' suggests report

Within the last decade, the perception of fusion energy has shifted significantly, with commercial fusion companies raising over $9 billion to date, while an increasing number of governments see fusion as the modern day 'space race'.

This is according to the latest report from IDTechEx, Fusion Energy Market 2025-2045: Technologies, Players, Timelines.

The report notes that a deep-tech industry like fusion will ultimately need to be supported by government strategy to stand a chance at long-term success. More, specifically, the sector requires suitable regulation that fairly assesses the safety risks that do exist without stifling this emerging industry.

Fortunately, governments and regulators seem to be keen to separate fusion and fission regulation, and are open to input from scientists and industry to guide the regulatory process.

A race driven by electricity demand

According to the report, one key market driver is the growing global demand for electricity.

IDTechEx Technology analyst Noah El Alami explains that with short-term drivers such as the rapid adoption of data centres for AI, and long-term drivers like global development and electrification, global electricity demand is expected to grow through to the end of the century.

Conventional green energy sources like wind or solar face an intermittency problem, where, without energy storage, they cannot provide a reliable base load energy or react to fluctuations in demand.

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This issue is becoming increasingly prevalent with the growing energy demand of data centres around the world, adds El Alami, which is why tech giants like Google, Microsoft, and OpenAI’s CEO Sam Altman are all major investors in private fusion companies.

Countries leading the race for fusion

While promising startups and research is being performed around the world, the report indicates three blocs leading in the commercialisation of fusion energy: the USA, China, and the European fusion effort.

The USA has the highest number of fusion startups and large private investments from industry giants and VC firms. Their national strategy includes the Department of Energy’s Milestone-Based Fusion Development Program, which has been praised by the fusion industry as a great framework for rewarding technical progress with additional funding. However, that same industry has also commented that the fusion programme is critically underfunded, and that the state must do more to drive the industry forwards.

China, meanwhile, leads in public funding for fusion, far outspending any other nation. Despite having less of a history in fusion research, recent results from experiments like the EAST tokamak are promising, and Chinese startups like Energy Singularity have shown that fusion reactors can be built quickly and using largely sovereign materials.

However, there is less variety in the approaches taken by their fusion efforts, with most projects focusing on the popular tokamak approach and neglecting the promising alternatives that are being explored overseas.

Europe is home to the largest academic presence in fusion, with dozens of relevant research reactors and the largest talent pool for fusion researchers. France, a long-term supporter of nuclear energy, hosts the ITER tokamak, the largest international fusion project in history. Meanwhile, the UK hosted the Joint European Torus (JET) and in early June 2025 announced a record investment in fusion of £2.5 billion ($3.4 billion) over the next five years.

However, Europe has repeatedly fallen flat in commercialising emerging technologies from research due to inefficient regulatory processes and smaller magnitudes of funding than the USA or China.

Market outlook

Chinese manufacturing is already a global powerhouse in many other new energy technologies like photovoltaics, batteries, and modern fission reactors.

The point of anxiety for fusion startups in the west, according to IDTechEx, is therefore that fusion could become another technology that China commercialises and commodifies at a rapid pace, enabled by consistent government support.

From IDTechEx’s point of view, the race for fusion is far from over, with multiple different reactor designs, fusion fuels, and dozens of startups in the running.