A multidimensional nuclear resurgence: Differing drivers and challenges

European countries, primarily those with existing reactors, are promoting nuclear energy as a key part of their decarbonization pathways. At the same time, this technology faces risky and rising investment costs of up to €15 million/MW. Interest in new nuclear comes amid increased energy security concerns, aging nuclear fleets and growing system needs for firm, low-carbon power. To mitigate these risks and attract capital, governments are seeking new frameworks to ease the burden.

Europe’s 2021–23 gas and power crisis turned the spotlight on new nuclear as the only source of firm, low-carbon power that provides energy security and grid stability, is expandable at scale, curbs capital expenditure — unlike wind and solar — and has a limited physical footprint. After record French net exports in 2024, in February 2025, President Emmanuel Macron and state-owned Électricité de France (EDF), owner of the majority of Europe’s nuclear capacity, said 1-2 GW of existing nuclear capacity — and land around reactors — could feed the dynamic growth in datacenter demand, which contrasts with persistently weak domestic and European demand.

Europe is expecting a partial nuclear comeback, except in countries such as Germany, Spain and Belgium, which have shut or intend to permanently close capacity. EDF’s new Flamanville 3 plant in France was connected to the grid in December 2024, though construction took 17 years. Currently, outside France, new nuclear construction totaling 6 GW of net capacity is focused on only three countries: the UK, Hungary and Slovakia. About 15 large reactors are planned for commissioning in the 2030s but have not reached final investment decisions in France — where preparatory works are progressing — the UK, the Czech Republic, Poland, Romania or Bulgaria. These new builds are crucial to rejuvenating aging fleets, and we expect the use of Western and South Korean technology.

In Europe, small modular reactors (SMRs) are not yet an alternative to large-scale nuclear, despite boasting attractive features such as simplified reactor design, lower capital intensity and more flexibility to meet demand. While several SMR projects have been announced and the EU has initiated an SMR industrial alliance, these remain in the early stages of development compared with large reactor projects.  

Overnight costs, or the cost of immediate construction without factoring interest incurred, are likely to be about €10 million/MW for a new European pressurized reactor, or over €30 billion (in 2024 euros) for a pair. This is more than double the annual funds from operations of any European integrated utility other than EDF and over triple that of the largest renewable projects.

The European pressurized reactor is the nuclear reactor design selected for most current large-scale new builds in West and North Europe, with reactors recently commissioned or under construction in Finland (Olkiluoto), France (Flamanville) and the UK (Hinkley Point). Its unit size is 1,600-1,700 MW.

Factoring the project’s real weighted average cost of capital (WACC) raises costs by about 50%.

Estimates of nuclear’s levelized cost of energy highlight its lack of cost competitiveness and high sensitivity to assumptions regarding asset life, WACC or load factors. While the levelized cost of energy does not capture nuclear’s full power system value, it is helpful to compare the economics of generating electricity across technologies.

Current funding mechanisms for new nuclear include strong taxpayer or consumer support, such as the Czech Republic’s combination of a subsidized state loan and 40-year contract for difference; the combination of state ownership and either regulated asset base support from the first day of the construction phase (e.g., Sizewell C in the UK) or state lending (e.g., Poland); or lending-only state support, as seen in Hungary.

Affordability remains a constraint for regulated asset base models if new nuclear faces cost inflation and delay risks during construction, which contracts for difference do not protect against.

Overall, exposure to new nuclear builds tends to constrain ratings from a business and financial perspective. New nuclear projects typically stretch corporate balance sheets for European utilities, absent considerable state or consumer support for construction, access to financing, long-term arrangements to support revenue stability and end-of-life-cycle liabilities.

Remedies include revenue support and WACC mitigation; the latter is much less visible from a media/society viewpoint, but can support creditworthiness until commissioning, when the new reactor starts generating strong and dependable free cash flow.

As in Europe, decarbonization challenges — such as renewable intermittency and the need for firm power — coupled with energy security concerns led to a reevaluation of US nuclear energy early this decade.

Federal support to extend the life of existing US nuclear and develop additional capacity was established with the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022, including tax incentives to bolster nuclear economics. Under the Inflation Reduction Act, production or investment tax credits are available for the construction of new nuclear. According to the act's energy community special rule, new US nuclear facilities sited in a qualifying geography are eligible for 10% tax credit step-ups, bringing overall tax breaks to 40%. These rise to 50% if domestic component thresholds are met. The fate of policies promoting carbon-free energy is uncertain under the new Trump administration.

ChatGPT and related advances in generative AI followed in 2022 — the latest chapter of the Fourth Industrial Revolution — necessitating millions of square feet of power-hungry datacenter space and magnifying energy transition growing pains.

After decades of weak electricity demand growth, the boom in facilities housing the hardware and software supporting AI has taken the US energy sector by storm. S&P Global Market Intelligence 451 Research anticipates US datacenter power consumption to reach 795 TWh in 2029 — more than double 2024 levels and about 1.6 times what Texas consumes on an annual basis. While many datacenter owners have set net-zero emissions goals, rapidly growing power demand is leading hyperscalers to deprioritize clean energy requirements and seek any available power.

Energy developers and grid managers have markedly revised their demand expectations upward. In July 2024, the Electricity Reliability Council of Texas published a revised long-term load forecast anticipating a potential 148 GW peak load in 2030, a nearly 64% hike from its forecast of 90.3 GW in January 2024.

Datacenter stakeholders have set their sights on nuclear as a result, announcing multiple high-profile deals and partnerships with energy providers and developers. Amazon kicked this off, announcing in March 2024 that it purchased a datacenter colocated with, and powered by, a portion of the 2.5-GW Susquehanna Steam Electric Station in Pennsylvania.

In September 2024, Microsoft and Constellation Energy signed a 20-year nuclear power purchase agreement to restart the undamaged reactor at Three Mile Island Nuclear Generating Station, renamed the Crane Clean Energy Center, which was the site of a partial meltdown in 1979. The news led to Constellation's share price jumping 22.3% on Sept. 20, 2024.

In December 2024, Meta announced a request for proposals to identify nuclear energy developers, targeting 1-4 GW of new nuclear generation capacity in the US. There are 17 announced nuclear projects in the US, including the restart of unit 1 at the Crane Clean Energy Center.

In contrast with Europe, 11 of these projects involve developing SMRs, though with lead times well into the future. While the cost of electricity from such facilities is uncertain, current estimates in the US, including available tax credits, suggest SMRs could deliver power at a first-year power purchase agreement price of $79/MWh. This represents an estimated 26% premium over forecast wholesale PJM Interconnection market revenue and is competitive with recent datacenter procurement data points. US clean energy credits and carbon pricing in regions of the US and Europe also reduce the merchant revenue shortfall.

Nuclear's edge over other energy technologies — the ability to provide carbon-free power around the clock — complements the needs and environmental objectives of datacenters. Mismatches in development timelines, however, present challenges. For a new datacenter build in the US, the time from land acquisition to up-and-running facility generally ranges from 18 to 24 months.

That compares to a midpoint estimate of six years for an SMR or light water reactor, according to the US Energy Information Administration. The latest additions to the US civilian nuclear fleet, units 3 and 4 of the Alvin W. Vogtle Electric Generating Plant in Georgia, entered commercial operation in 2023 and 2024, respectively — about 15 years after the utility received approval to expand the facility.

It takes three years on average to build a combined cycle gas plant, according to the EIA, and two years to complete a hybrid solar-plus-storage project. Overall, power project development timelines are often compounded by lengthy permitting processes, including impact studies to assess grid connectivity.

Once up, nuclear reactors perform well, with nuclear boasting the highest capacity factor across all energy sources. The US nuclear power fleet ran at 93.1% capacity in 2023, according to the EIA, versus 33.2% for wind and 23.5% for solar. The utilization rate for natural gas power plants has hovered around 55%.

China is a different story; rather than seeking a revival, it has been growing at a strong and steady clip. By the end of 2024, China's installed nuclear capacity was at 58 GW, with nuclear output representing 5% of total electricity generation. The acceleration of nuclear power development in China is being driven by consistent policy frameworks, robust supply chains and advancements in domestic technologies. Capacity additions are anticipated to exceed 40 GW during 2026–30, more than double the additions of 2021–25. This increase is primarily attributed to the approval of a substantial project pipeline totaling 38 GW over the past three years, which exceeds total global additions over the same time frame.

China’s installed nuclear capacity is expected to more than triple by 2050 to reach over 260 GW. Consequently, the share of nuclear in the country’s overall generation mix is projected to double to 10% by 2050 from 5% in 2024. Nuclear energy will continue as a critical base load source in China, addressing the supply gap from the phaseout of coal. The capacity factor for nuclear power is anticipated to remain above 80% in China in the long term, enabling nuclear reactors to distribute substantial capital costs.

Energy security and decarbonization have been key drivers of interest in nuclear, though current activity and plans for new builds vary by region. Whereas China has been adding new reactors, a “nuclear renaissance” in Europe and the US has yet to materialize. Unlike Europe, the US is combining more advanced SMR projects with considerable datacenter firm power needs. Interest in the US comes from the private sector responding to markets and is supported by different policy incentives. Europe’s prioritization of new, large-scale reactors creates challenges for securing stakeholders’ credit, leaving projects more dependent on public support, though it bolsters government commitments to a net-zero power sector and energy security.