Australians Enter Fusion Energy Race with AI and Renewables

Published Date : 13/10/2025 

The rapid advancements in artificial intelligence and renewable energy are creating a new landscape in Australia's electricity sector. The insatiable power demands of AI data centers are set to collide with the growing reliance on solar and wind energy, pushing the need for a sustainable and consistent power source like fusion energy. 

The two great technology revolutions of the modern era — artificial intelligence (AI) and renewable energy — are colliding. In September, more electricity was generated by solar and wind in Australia than by coal for the first time. Globally, this milestone was achieved a few months earlier.

In its 2025 Electricity Statement of Opportunities, published in August, the Australian Energy Market Operator (AEMO) predicted that electricity demand from AI data centers would increase at 25 percent a year for 10 years. This, combined with transport and household electrification, will more than triple the rate of growth in electricity demand generally.

The good news is that nearly 40 percent of households now have rooftop solar, contributing 13 percent of the national electricity market in the year to June, up from zero 10 years ago. However, the growth in rooftop solar installations is slowing as saturation is approached. The insatiable hunger for power of AI data centers will soon start to squeeze out other industrial users, leading to job losses in addition to those caused by AI directly, and push wholesale electricity prices higher for everyone.

It's challenging for renewables to supply data centers with power because they need it consistently, 24 hours a day, which solar and wind obviously can't do. According to the AEMO, 16 existing Australian base-load coal-fired power stations are due to be retired over the next 10 years. With the only other consistent power source — nuclear — banned by the federal government and every state, and very unlikely to be unbanned, this is going to put enormous pressure on the storing of power from solar and wind in grid batteries and pumped hydro.

Even in countries where nuclear isn't banned, it's expensive and dangerous, so not preferred. China, racing to electrify its whole country ahead of the rest of the world, is currently building 26 new nuclear power stations, but also about 100 coal-fired ones, as well as about 2,000 wind farms and more than 3,000 solar farms. Nevertheless, Bloomberg New Energy Finance estimates that 83 percent of incremental demand from global data centers will come from fossil fuels by 2030, and this falls to only 63 percent by 2035.

This is why the world is now urgently stepping up the effort to make fusion energy work. Fusion is where atoms of hydrogen isotopes are joined (fused) at 100 million degrees Celsius to form helium. It's the reaction inside stars and is safer than fission nuclear power because the fuel is water, not uranium, and the waste is helium, not plutonium. More importantly, it is limitless.

Today in Chengdu in China, the International Atomic Energy Agency will hold its 30th global fusion energy conference. Fusion has always been the physicists' fantasy, the joke being that it's 30 years away and will always be 30 years away. Except this year's conference will be held against a background of frantic activity: 150 experimental fusion devices and testing facilities are either operating, under construction, or planned, and more than 20 fusion plant designs are being developed.

Two Australian outfits are in the thick of it: super fund Hostplus and a small private company based in Sydney called HB11. Hostplus has invested $330 million for a 4 percent stake in the Boston company that is generally seen as leading the race to commercial fusion in the United States: Commonwealth Fusion Systems (CFS).

China is also racing to develop fusion energy, but not much is known about what it's up to. Last week, an American body called the Commission on the Scaling of Fusion Energy published a paper containing this sentence: 

Frequently Asked Questions (FAQS): 

Q: What is fusion energy?

A: Fusion energy is a process where atoms of hydrogen isotopes are joined (fused) at extremely high temperatures (100 million degrees Celsius) to form helium. It is a safer and more sustainable alternative to fission nuclear power, with water as fuel and helium as waste.

Q: Why is fusion energy important for AI data centers?

A: AI data centers require a consistent and reliable power source 24/7, which is challenging for renewable sources like solar and wind. Fusion energy can provide a stable and continuous power supply, making it ideal for data centers.

Q: What are the main challenges in developing fusion energy?

A: The primary challenges in developing fusion energy include containing the 100-million-degree plasma without it leaking out and incinerating everything around it. This can be achieved using powerful magnets or high-powered lasers.

Q: Which Australian companies are involved in fusion energy research?

A: Two Australian outfits are leading the way in fusion energy research: Hostplus, which has invested in Commonwealth Fusion Systems (CFS) in the United States, and HB11, a Sydney-based company focusing on laser-based fusion technology.

Q: What is the current status of fusion energy development globally?

A: There are 150 experimental fusion devices and testing facilities either operating, under construction, or planned, with more than 20 fusion plant designs being developed. China and the United States are particularly active in this field, with significant investments and research efforts. 

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