Nuclear Energy in Europe: High Costs and Financial Challenges Hindering Growth

Financial Barriers to New Nuclear Projects in Europe
Building new nuclear reactors in Europe remains a financially unviable proposition for most utilities due to extremely high construction costs and financial risks. According to a report by S&P Global Ratings, new nuclear plants cost upwards of €10 million per megawatt, with total investments for a typical pair of European Pressurized Reactors (EPRs) reaching around €50 billion. These costs are five times higher than the largest offshore wind projects, making nuclear construction a major financial burden, especially for all but a few energy giants like EDF. The ongoing construction challenges, such as cost overruns and delays, have already weakened EDF’s financial position, as seen in the costly developments at Hinkley Point C in the UK and Flamanville in France. These difficulties highlight the high financial and operational risks tied to nuclear energy development.

The Strategic Importance of Nuclear in Europe’s Energy Mix
Despite the financial hurdles, nuclear energy is seen as essential for Europe’s energy security and decarbonisation efforts. Nuclear power contributes around 20% of the European Union’s electricity generation and provides firm, low-carbon capacity. This is particularly important as Europe strives to reduce its dependence on fossil fuels in light of the energy crisis exacerbated by Russia’s invasion of Ukraine. Unlike natural gas, which is subject to geopolitical risks, the uranium used for nuclear power is sourced from a more diversified and stable supply chain. Additionally, nuclear energy helps stabilize the grid, balancing the intermittency of renewable sources like wind and solar, and plays a pivotal role in meeting Europe’s growing energy demand from industries and data centres.

Aging Nuclear Infrastructure and the Need for New Reactors
With many of Europe’s nuclear reactors now averaging 40 years of age, there is an urgent need for new reactor projects to replace aging infrastructure. Many existing plants are scheduled for decommissioning by 2040, creating a significant gap in firm power generation capacity. Replacing these reactors is critical to avoiding potential electricity shortages, especially as demand continues to grow, driven by the electrification of industrial sectors and expanding data centres. The growing need for decarbonised, reliable electricity underpins the case for nuclear energy in the continent’s future power mix.

Government Support: Essential for Nuclear Financing
Given the prohibitively high costs, the report from S&P Global underscores that no European utility can undertake nuclear projects without significant government involvement. State-backed financing models—such as regulated asset base (RAB) schemes, subsidized loans, and contracts for difference (CfDs)—are necessary to distribute the financial risks associated with nuclear development. Governments in countries like the Czech Republic, Poland, and Slovakia are already leveraging such models to support their nuclear ambitions. France has also announced plans to build new reactors but continues to face challenges in finalizing financing details. Despite innovative funding models, the report warns that the financial burden of nuclear projects remains substantial, and it is unlikely that they can proceed without strong government backing.

Recommissioning Old Nuclear Plants: A Possible Solution?
A potentially faster and cheaper alternative to building new reactors is the recommissioning of recently shut-down nuclear plants. This option is being considered in Belgium and Spain, where reviving closed reactors could provide a more immediate solution to meeting growing electricity demand. However, recommissioning existing plants is not without its challenges, as countries like Germany face public opposition to nuclear power. Regulatory hurdles and political resistance further complicate the process, making it a less viable option in some regions.

Conclusion: Nuclear Energy’s Role in Europe’s Decarbonisation Future
While the high cost and complexity of new nuclear projects present major barriers, the role of nuclear energy in Europe’s future remains crucial. With aging reactors requiring urgent replacement, and the push for decarbonisation intensifying, nuclear power continues to be seen as a key pillar in Europe’s energy strategy. However, the success of new nuclear projects will depend on continued government support, innovative financing mechanisms, and political will to overcome the financial and regulatory obstacles. The future of nuclear energy in Europe hinges on finding ways to balance the substantial upfront costs with the long-term benefits of clean, reliable power.