European Alliance Wants EU to Reconsider Nuclear Energy Policies
VanEck Uranium and Nuclear ETF has returned approximately 20% in last month
The European Nuclear Alliance has called upon the European Commission to consider nuclear energy as “essential contributors” to decarbonization pathways in Europe.
The alliance comprises 12 members, including Bulgaria, Croatia, Czech Republic, Finland, France, Hungary, Netherlands, Poland, Romania, Slovakia, Slovenia, and Sweden.
“We strongly encourage the upcoming college of Commissioners to deliver a paradigm shift in our energy policy by fully recognizing the role of nuclear energy, alongside renewables, for the future of our integrated energy system,” said the Nuclear Alliance in a joint statement at the Energy Council meeting held in Luxembourg on October 15.
“Without such energies, there is no path for the EU to provide to its citizens affordable, reliable and abundant low-carbon energy while achieving Net-Zero by 2050,” the alliance said.
However, some experts have argued for a faster deployment of cleaner alternatives like solar and wind power backed up by batteries. They cite the environmental risks associated with nuclear energy and the disposing of reactor waste.
EU states like Germany and Spain have pushed to keep nuclear out of EU renewable energy goals. They have warned that taking into account low-carbon energy like nuclear in the 2030 targets would slow down the deployment of renewables.
For the EU specifically, the region must compete face-to-face against already invested countries, including the U.S. and China, which plan to construct several new Conventional and small modular reactors.
Nuclear Could Satisfy Demand for AI, Data Centers
With rising demand from data centers and artificial intelligence (AI) increasing the need for electricity generation, big tech companies around the globe are jumping into the nuclear option.
US-based tech giants Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOGL) announced their investment in small modular reactors (SMR) on October 16, seeking new sources of carbon-free electricity. Amazon’s cloud computing subsidiary, AWS, committed more than $500 million in a partnership with Virginia’s utility company, Dominion Energy (NYSE: D).
Last month, Constellation Energy (NASDAQ: CEG) announced plans to reopen the Three Mile Island nuclear power plant under a 20-year agreement with Microsoft (NASDAQ: MSFT). The tech giant aims to supply its data centers with carbon-free energy.
The Pennsylvania plant was the site of the U.S.’ worst commercial nuclear power accident in 1979, with a partial meltdown that destroyed one of two reactors.
Biden Administration Pushes for Nuclear
The Constellation-Microsoft agreement comes amid a push by the Biden administration to reconsider using nuclear power to limit greenhouse gas emissions from the power sector. In 2023 alone, nuclear plants generated 2602 TWh of electricity, with around a third, 772.2 TWh, attributed to the U.S.
The International Energy Agency forecasts that total electricity consumption for data centers could exceed 1,000 TWh by 2026, more than doubling from 2022 levels. Unlike renewables, nuclear reactors provide a steady power supply, making them attractive to tech firms looking to invest in alternate forms of energy.
SMRs offer a lower initial capital investment, greater scalability, and can be constructed in locations unable to accommodate larger reactors.
The push for nuclear is having a positive impact on ETFs and companies operating in this emerging space.
The VanEck Uranium and Nuclear ETF (ARCA: NLR), which comprises miners, industrial companies that make reactor components and industrial exposure to nuclear, has returned approximately 20% in the last month alone. Oklo (NYSE: OKLO), Sam Altman’s start-up, has surged around 240% in the same period.
European Investments in Nuclear Energy
Following Russia’s invasion of Ukraine in 2022, Europe’s need to invest in nuclear energy has accelerated, according to a survey published in December 2022. The Flash Eurobarometer 514 survey showed that 58% of EU respondents believed member states should invest in nuclear.
As the demand for low-carbon energy surges, Europe is investing heavily in nuclear energy. However, the UK and France are in the lead.
The UK announced a “major acceleration of homegrown power” to “boost long-term energy independence, security and prosperity.”
In the UK, reactors generate about 15% of electricity at 6.5 GW. The government plans to increase this usage to 25% or up to 24GW by 2050.
In France, 70% of electricity already comes from nuclear energy. In 2023, the French government abandoned plans to reduce nuclear energy, instead focusing on building six new reactors. France is the world's largest net exporter of electricity.
Hungary, the Czech Republic, and Poland are also investing in new nuclear projects, reflecting a broader trend of reinvesting in nuclear energy.
Nuclear Investment Uncertainty in the EU
The European Union's plans to dramatically increase nuclear power could face major financing challenges.
A recent report from Finance Watch warns that high levels of EU debt, fiscal constraints, and uncertainties surrounding the future structure of the electricity market may create a substantial funding gap.
With the funding gap, the EU nuclear industry could only meet its target of increasing energy capacity by 50% from 100 GW to 150 GW with reforming fiscal rules.
Nuclear energy accounts for almost one-quarter of the electricity produced in the EU and 50% of the low-carbon electricity.