Across Europe industrial competitiveness is being undermined by high energy costs, disrupted supply chains, national energy policies, as well as aggressive US tariff policies. At the same time, competition from Asian countries in core manufacturing sectors such as chemicals, automotive and manufactured goods is adding to the decline in European industrial competitiveness. These challenges have already led to a shift of manufacturing activity away from Europe, leading to significant economic, social, and energy sector change.
Responding to these challenges is not a trivial matter. It is evident, however, that the current approach to the energy transition does not support European industrial competitiveness and is a key area that must be addressed if this decline is to be turned around. Acknowledging this reality, European countries apart from Germany are now reconsidering nuclear energy as a vital option to enable better industrial competitiveness by their domestic economies. However, the sector itself has been declining since the Fukushima nuclear disaster and requires its own turnaround if it is to play a key role in stemming deindustrialisation.
The challenge of high European energy prices
Looking at energy costs, the impact on European competitiveness is clear. According to a recent Arthur D. Little study, on average European wholesale electricity prices were €79.6/MWh in 2024, compared with €55.4/MWh in the United States and €60/MWh in greater Asia. For wholesale gas prices the gap between Europe and the US was even greater, ranging from just €5.9/MWh in the US, to €31.7/MWh in Europe.
The evolution of energy-related costs has been a key factor in the decline of manufacturing production in many European countries, with recent plant closures announced in multiple sectors. For example, Nyrstar suspended operations at its Buden zinc facility in the Netherlands in early 2024, BASF has shut several chemical lines in Germany, ArcelorMittal plans to close two facilities in France, while Audi ended production at its Brussels plant at the end of February 2025. The impact goes beyond those employees that are directly affected by closures fi energy-intensive industries account for around 9% of total EU industrial employment and have a high multiplier effect on other sectors, leading to major societal and economic impacts.
The EU’s strong commitment to decarbonisation, which is far more ambitious than the US and Asia and includes mechanisms like the Emissions Trading System (ETS), adds to the financial burden on energy-intensive industries. Carbon pricing drives emissions reductions but also raises operating costs for industries that have yet to adopt low-carbon technologies.
To overcome this, some energy-intensive industries have turned to importing semi-finished goods from outside the EU to circumvent high energy and production costs. For example, imports of energy-intensive products like fertilisers and certain chemicals have increased, substituting local production and further reducing the domestic value contribution of these sectors.
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By GlobalDataThe consequence of this development is that new approaches to electrifying European industries to provide electricity and process heat are needed, if the EU’s ambition to reduce carbon emissions remain valid and industrial competitiveness is to be improved and manufacturing safeguarded.
The decline of European nuclear
Electrifying European industries requires access to cost-effective generation that provides access to constant power and heat to run specific manufacturing processes. Given its always-on nature, nuclear is one obvious choice for supporting European industry.
However, the sector itself has seen declines in output, skills, and active plants in Europe. Globally, according to the IAEA there are currently 417 reactors in operation, with an installed capacity of 377,221 MWe. Of these, 101 are in the EU, but this is down from 136 in 1989. New builds in France, Finland and the UK have been plagued by enormous cost overruns and delays, while many skilled staff have left the industry, often due to retirement, without being replaced. By contrast, total nuclear capacity in China has increased to 55,320 MWe with a further 28 reactors under construction. Nuclear’s share of Chinese electricity production has grown from 2.03% in 2005 to 4.86% in 2023.
The advantages of nuclear
Nuclear offers further advantages beyond providing baseload power. New Small Modular Reactors (SMRs) hold out the potential for faster, more cost-effective deployments, with many designs able to produce process heat which can be used to replace natural gas plants in many industrial applications. On the long-term horizon, fusion energy can possibly offer even more opportunities, if recent breakthroughs in research can be commercialised and industrialised.
What is required is a revitalisation of the European nuclear industry to increase energy security and deliver cost-effective power. This must be achieved in the short-, medium-, and long-term in a way that is able to support the industrial base.
As part of this push, and to meet net zero commitments, several European governments are taking action, through a combination of investing in new large nuclear plants (such as in Hungary and Poland), encouraging the development of SMRs (in Italy and Belgium), and by looking to prolong the lifetimes of existing nuclear assets (for example, in Switzerland and The Netherlands).
Fostering positive momentum is key to revitalising the European nuclear sector. For example, the UK government has announced plans that would allow nuclear plants to be built anywhere in the country, rather than at its eight currently specified nuclear sites. In Germany, multiple nuclear suppliers have allied in the “KernD‚ initiative to call for the six youngest German nuclear power plants to be restarted, with a specific aim of reducing energy prices and tackling deindustrialisation. Finnish energy utility Fortum has carried out a detailed feasibility study into nuclear new build in Finland and Sweden and is now using this to lobby for favourable framing conditions for nuclear moving forward.
All of these measures provide a potential means to bring down industrial energy costs, keep skills alive, preserve and add to jobs in the sector and provide a bridge to small modular reactors in the mid-term and possibly fusion energy in the long-term.
Energy’s role in combating deindustrialisation
An economic downturn of energy-intensive industries in Europe would have profound implications for energy companies operating across the energy value chain, from energy generators to distributors to retailers. For example, the current contraction in energy demand caused by high prices directly translates to a significant reduction in revenue for generation companies, intensifying their financial strain.
The good news is that energy companies can dramatically reduce the risk of deindustrialisation by supporting the transition to a more competitive and sustainable industrial landscape. Generation companies, network operators, and retailers must go beyond energy provision to act as architects and lobbyists of a competitive industrial future in a technology agnostic manner. This requires a focus on four key areas fi innovative pricing models, operational efficiencies, technology innovation, and market design and innovation. Some of these are already in development, while others still need to be activated.
At the same time, the energy sector should engage with government and regulators to gain their support. This includes advocating for policies that align energy and industrial strategies, such as subsidies for energy-intensive industries that are transitioning to low-carbon processes and working with governments to implement carbon border adjustment mechanisms to level the playing field with global competitors. In terms of nuclear specifically, the sector has to encourage governments and regulators to provide a stable, positive environment that supports both new builds and the extension of the lifetimes of existing reactors.
Generation companies and asset operators need to be incentivised and supported by authorities to invest in nuclear through subsidies and new financing mechanisms, both for industrial competitiveness and energy security. This is especially important in delivering SMRs, which have additional benefits for industrial users, as they can be located closer to demand due to their smaller footprint as well as offering the ability to provide process heat to industrial users. However, as no First of a Kind (FOAK) SMR has yet been deployed in Europe, the whole sector has to work together in order to maximise the chances of both reaching this milestone and then scaling the spread of SMRs across the EU.
Meanwhile, transmission network operators and distribution network operators must understand and plan how nuclear, especially SMRs, can support the existing grid, and reduce volatility. They need to ensure that the grid can connect to these assets and therefore provide power to industrial businesses moving forward.
There is a growing urgency to tackle the high energy prices that are impacting European industrial competitiveness and leading to deindustrialisation. Revitalising nuclear will help provide more stable, reliable, and decarbonised energy supplies for the manufacturing sector, while protecting energy suppliers themselves by guaranteeing continuing demand, and creating high-value green jobs within the industry. What is needed is a cohesive approach that brings together energy companies, industrial customers, governments, and regulators to rebuild the European nuclear industry for the short-, medium-, and long-term.
