Fusion Energy Emerges as a Practical Answer to AI-Driven Power Demand
Australia sits at a crossroads of two transformative currents: artificial intelligence and renewable energy. As the nation witnesses solar and wind generating more electricity than coal for the first time in September, the pressure on the grid from data centres and electrification grows louder. The question now is whether fusion energy can bridge the reliability gap while keeping emissions in check.
In its 2025 Electricity Statement of Opportunities published in August, the Australian Energy Market Operator (AEMO) warned that electricity demand from AI data centres could surge 25 per cent annually for a decade. When transport and household electrification are added, overall growth could outrun traditional projections by more than threefold. The practical implication is clear: renewables alone may struggle to deliver consistent power around the clock for a digital economy that never sleeps.
The Realities of Renewables and the Nuclear Question
The market has already embraced rooftop solar, with nearly 40 per cent of households installed and contributing about 13 per cent of the national electricity market by June. Yet solar and wind—despite their rapid growth—face a fundamental constraint: intermittency. AI data centres require a stable, reliable power supply, 24/7. Batteries and pumped hydro can help, but storing vast amounts of energy to cover every cloudless day remains a formidable challenge.
Equally pressing is the looming retirement of 16 base-load coal-fired power stations over the next decade. Australia’s traditional option for continuous power—nuclear energy—remains politically constrained. At the federal level, and in most states, nuclear energy is effectively banned, creating a long-term gap that must be filled by storage, grid improvements, or new forms of generation. While some advocate for reform, the path to a nuclear revival in Australia looks uncertain at best.
Fusion Energy: A Global Race with Australian Involvement
Against this backdrop, fusion energy is gaining global attention as a potential source of limitless and cleaner power. Fusion creates energy by fusing hydrogen isotopes, a process that uses water as a fuel and yields helium as a waste product—addressing many of the safety and waste concerns associated with traditional nuclear fission. If technically and economically viable, fusion could supply baseload power with minimal carbon footprint.
Globally, the fusion race is accelerating. The International Atomic Energy Agency’s fusion conference in Chengdu reflects growing activity: hundreds of devices and facilities are underway, with more than 20 different fusion plant designs in development. Two Australian outfits have positioned themselves in the field: Hostplus, a major retirement fund, and HB11, a Sydney-based private company focusing on laser-driven fusion research. Their involvement illustrates how Australian capital and science intersect with a global pursuit of practical fusion.
Australian Investment and the Fusion Outlook
Hostplus has invested about $330 million for a 4 per cent stake in Commonwealth Fusion Systems, a leading contender in the United States’ race to commercial fusion. This bet reflects a broader view: fusion could reshape the energy mix in a way that makes power cheaper, cleaner, and more abundant than many conventional sources. Sam Sicilia, Hostplus’s CIO and a physicist by training, has described fusion as potentially the biggest shift in the world’s energy landscape in a lifetime. He envisions a scenario where fusion power is distributed to data centres, factories, and communities alike—expanding the reach of reliable, low-emission energy.
HB11, meanwhile, is pursuing a laser-based fusion approach in Adelaide and contends with the practicalities of bringing a pilot plant to fruition in the 2030s. The Australian approach mirrors a broader trend: diverse technologies, from magnet-based and laser-driven confinement methods, are being developed in parallel, increasing the odds that some path will become commercially viable sooner rather than later.
Policy, Safety, and the Path Forward
Despite the optimism, there are cautions. Fusion’s ultimate success hinges on achieving net energy gain, controlling extreme plasma temperatures, and delivering the cost advantages that make it competitive with existing power sources. In Australia, policy alignment will be essential to remove barriers, attract investment, and ensure safety. Even if fusion does not supplant coal or displace all renewables in the near term, its potential to deliver consistent, low-emission power could be a critical complement to an evolving grid that must support AI-driven demand, industrial growth, and everyday energy needs.
What This Means for Australia’s Energy Future
As AEMO’s outlook evolves and the role of data centres expands, fusion energy offers a narrative of long-term resilience. It speaks to a future where a fusion-powered grid could reduce volatility, lower emissions, and provide a reliable backbone for the country’s ambitious electrification plans. Whether fusion becomes a mainstream solution or a strategic hedge, Australia’s involvement signals a readiness to explore bold technologies in the pursuit of secure and affordable energy for all.
