Europe revisits nuclear power as gas prices surge and growth forecasts collapse

The contrast could hardly be starker. French households and businesses face electricity prices for next month that are one-fifth of what German industry will pay, according to forward contracts. France generates roughly 65% of its power from nuclear reactors; Germany shut its last three plants in April 2023, a decision taken after the 2011 Fukushima disaster. The result is an energy-hungry industrial economy, cars, chemicals, steel, almost entirely exposed to global gas markets.

This week, Germany's five leading economic research institutes more than halved their 2026 growth forecast to 0.6%, explicitly citing the surge in gas prices triggered by Middle East tensions. Iran's pressure on shipping through the Strait of Hormuz has lifted European gas benchmarks across the board, but the pass-through to electricity bills depends entirely on each country's generation mix. Spain, which has invested heavily in wind and solar, is forecast to pay roughly half the wholesale electricity price of Italy, where gas sets the marginal price 90% of the time.

A strategic mistake, belatedly recognised

At the European Nuclear Energy Summit in Paris last month, Ursula von der Leyen described the continent's broad retreat from nuclear power as a "strategic mistake". In 1990, nuclear supplied around a third of Europe's electricity. Today the average is 15%. The Commission president, who served in the German cabinet that initiated the phase-out, argued that the decline has left Europe "completely dependent on expensive and volatile imports" of fossil fuels, putting the continent at a structural disadvantage against competitors with cheaper, firmer power.

Europe imports more than half its energy, predominantly oil and gas. That dependence has been weaponised twice in recent years: first when Russia cut pipeline flows after the EU imposed sanctions over Ukraine, and now as Middle East instability drives up global LNG and crude prices. The European Commission's immediate response, urging citizens to work from home and reduce travel, mirrors the demand-side measures deployed during the 2022 crisis, but policymakers acknowledge these are stopgaps.

France presses the advantage

No capital has lobbied harder for nuclear's rehabilitation than Paris. Emmanuel Macron told the Paris summit that "nuclear power is key to reconciling both independence, and thus energy sovereignty, with decarbonisation, and thus carbon neutrality". He went further, linking nuclear expansion to the continent's artificial intelligence ambitions: the steady, carbon-free output of reactors, he argued, could give Europe "the ability to open data centres, to build computing capacity and to be at the heart of the artificial intelligence challenge." France's state-owned EDF operates 56 reactors; the newest, Flamanville-3, finally entered commercial operation in late 2024 after years of delays and cost overruns that saw its budget swell from €3.3 billion to over €13 billion.

Until last year, Berlin blocked EU efforts to place nuclear on an equal regulatory footing with renewables, a source of persistent friction with Paris. That opposition has now dropped. Diplomats suggest the shift owes less to energy economics than to defence: Germany has asked France to extend its independent nuclear deterrent to European partners, an agreement formalised this month. The quid pro quo, implicit but widely understood in Brussels, was German acquiescence on nuclear taxonomy.

The UK charts its own course

Britain, outside the EU but facing the same gas market, has adopted a markedly different tone. While the Commission urged behavioural change, the UK government has essentially told voters to "keep calm and carry on". Chancellor Rachel Reeves, speaking at a nuclear industry event, declared: "To build national resilience, drive energy security and deliver economic growth, we need nuclear." New YouGov polling shows a majority of Scots now back nuclear as part of the energy mix, a notable shift in a country where the SNP has historically opposed new build.

Last month, Environment Secretary Emma Reynolds published the regulatory justification for Rolls-Royce's small modular reactor (SMR) design, the first step toward a potential UK deployment. The company aims to build a fleet of factory-assembled 470 MW units, each roughly a tenth the size of a conventional plant. The government sees SMRs as a hedge against the delays and cost escalation that have plagued Hinkley Point C, the EDF-led project in Somerset now targeting first power in 2029, eight years late, with a budget that has doubled to £34 billion.

Small modular reactors: promise versus proof

The European Commission has rushed to embrace SMRs, unveiling a €330 million investment package with the goal of bringing the technology online by the early 2030s. The attraction is clear: standardised, factory-built units could slash construction time and financial risk, while their smaller footprint suits industrial heat, hydrogen production and data-centre clusters. The United States and Japan announced a $40 billion joint SMR programme in Tennessee and Alabama last week, signalling a transatlantic race to commercialise.

Yet as of early 2026, not a single construction licence for an SMR has been granted anywhere in the EU. The technology remains unproven at commercial scale. Licensing frameworks are still being adapted, supply chains do not exist, and the economics of mass production, the core cost argument, have yet to be demonstrated. Fusion research also receives EU funding, but a commercial plant remains decades away.

Ageing fleet, empty coffers

Chris Aylett of Chatham House warns against treating nuclear as a quick fix. "You're ignoring the history of nuclear in Europe if you think it can just slot in as an easy energy crisis solution," he said. The continent's existing reactor fleet is old: the average age exceeds 35 years. Many units face licence expirations in the 2030s. Extending their lives requires massive capital, for safety upgrades, component replacement, and waste management, at a time when governments are already stretched. Berlin has committed to raising defence spending to NATO's 2% target under pressure from the Trump administration, while welfare systems across the euro area face demographic strain.

Aylett notes that wind and solar costs have fallen dramatically, undercutting new nuclear on levelised cost metrics. The International Energy Agency's 2025 data shows utility-scale solar PV and onshore wind now consistently cheaper than new nuclear build in Europe, even before accounting for decommissioning and waste liabilities. Renewables also deploy in months rather than decades. The Commission's own modelling for the 2040 climate target assumes renewables provide the bulk of new generation, with nuclear holding roughly its current share.

Eastern dependencies complicate the picture

A further strategic wrinkle: several Central European countries, notably Hungary and Slovakia, still rely on Russian-designed VVER reactors and, in some cases, Russian uranium supply chains. Hungary's Paks II expansion, built by Rosatom, is proceeding despite the war in Ukraine. Slovakia's Mochovce units were completed with Russian technology. Diversifying fuel and maintenance contracts is technically feasible but politically sensitive, and progress has been slow. The EU's 2024 Nuclear Fuel Supply Security report flagged that Rosatom still supplies enrichment services to multiple member states.

Environmental groups argue that every euro directed to nuclear is a euro not spent accelerating renewables, grids and storage. They point to the opportunity cost of long lead times: a reactor approved today will not generate a kilowatt-hour until the mid-2030s at best. Meanwhile, gas-fired plants continue to set marginal prices across much of the continent, and the next price shock, whether from the Middle East, a Russian decision, or a hurricane in the Gulf of Mexico, will arrive long before any new nuclear capacity.

The immediate gap

For now, Europe's energy security rests on the same foundations that failed in 2022: LNG import terminals, pipeline gas from Norway and Algeria, and demand destruction when prices spike. The Commission's REPowerEU plan accelerated permitting for renewables and mandated gas storage targets, but the structural imbalance, too much gas-fired generation setting the price, too little firm low-carbon capacity, remains. France's nuclear fleet provides a buffer, but its availability has been volatile: corrosion issues in 2022-23 cut output to a 30-year low, forcing France to import power from Germany at the height of the crisis.