A desert outside Albuquerque could soon become ground zero for one of the world’s most ambitious energy experiments. Pacific Fusion plans to build a $1-billion research facility in the vast desert to recreate nuclear fusion.
The New Mexico State Investment Council, the body that manages revenues from oil and gas, supported the project. State officials encouraged the nuclear startup to pursue the research project.
The project has gained strong backing from the New Mexico State Investment Council, the state body that manages billions of dollars from oil and gas revenues. Officials encouraged the startup to pursue its large-scale plans and signaled that financing could be mobilized if private capital proved insufficient.
To support the emerging fusion industry, mimicking the process that powers the sun and stars, the state’s sovereign wealth fund has already committed hundreds of millions of dollars to venture capital firms developing fusion technologies and related innovations.
Revamping an expensive program
The push is part of a broader strategy to revive returns from the state’s private equity investments. Officials recently overhauled a long-running economic development initiative and replaced it with a venture capital program aimed at backing companies that can grow within New Mexico.
The investment council is now ramping up funding for venture firms searching for breakthroughs in defense technology, advanced manufacturing, and clean energy, while encouraging them to invest locally.
Although the program represents only a small portion of the state’s roughly $70-billion investment pool, its impact could be significant. Earnings from the fund help finance more than 20% of New Mexico’s government spending, including public education and universal childcare programs.
State-level investment programs often produced mixed results elsewhere. In 2023, the Alaska Permanent Fund began phasing out its own in-state investment strategy after officials concluded it was not delivering the best returns.
But the approach is different in New Mexico, officials said. “Programs tend not to work when they’re not set up to make money,” Chris Cassidy, the council’s director of private equity and venture capital, said in a Bloomberg report. “We want financial returns as well as economic impact.”
Billions flowing into venture funds
The New Mexico State Investment Council has invested about $1.8 billion in dozens of venture capital funds. Since 2022, nearly one in every five dollars (20 percent) the fund allocates to private equity has gone to supporting companies in the state.
The state is inclined toward industries where it believes it has a competitive edge. That includes aerospace and defense technology.
New Mexico hosts two major US Department of Energy laboratories, the Los Alamos National Laboratory and Sandia National Laboratories. It is also home to Spaceport America, near the U.S. Army White Sands Missile Range in southern New Mexico,
Defense industry expansion
One such company is Castelion, a defense startup founded by former SpaceX engineers. It recently started a massive manufacturing site in Sandoval County to produce hypersonic missiles. The project could create at least 300 jobs and generate more than $650 million in economic output for the state over the next decade, according to the company.
But the fusion energy could be New Mexico’s most ambitious gamble. Although researchers at Lawrence Livermore National Laboratory in California demonstrated fusion ignition in 2022, the practical application of that brief laboratory breakthrough is still a major challenge.
The three-year-old Pacific Fusion is among many startups trying to commercialize the technology. Experts, however, remain cautious. “Nobody really knows what it’s going to cost,” said Steve Koonin, a senior fellow at the Hoover Institution at Stanford University. “You have to be patient and risk-tolerant to invest in this.”
State officials, however, believe the potential rewards could be transformative. “This is unimaginably good in terms of an opportunity for New Mexico,” Bruce Brown, who leads strategic climate initiatives for the state investment fund, said.
“It’s like nothing I’ve ever seen,” Brown, who leads strategic climate initiatives for the nation’s second-largest sovereign wealth fund, added.