How Europe can make nuclear energy a key part of its clean industrial future

The Commission announced in the Clean Industrial Deal Communication its intention to simplify state aid rules by adopting a new Clean Industrial Deal State Aid Framework to accelerate the roll-out of renewable energy, deploy industrial decarbonisation, and ensure sufficient capacity of clean tech manufacturing in Europe. This blog highlights CATF’s recommendations for nuclear energy.Our full comments to the consultation can be found here.

The European Commission’s Clean Industrial Deal  marks a bold step toward securing Europe’s industrial competitiveness while accelerating its transition to a low-carbon economy. By simplifying state aid rules, the plan aims to fast-track investments in clean technologies. To achieve its full potential, however, the plan must embrace a balanced, inclusive strategy that recognises the role of diverse clean energy technologies in Europe’s industrial transformation, including nuclear energy. 

A diverse energy mix is essential for industrial decarbonisation 

Europe’s most energy intensive sectors – such as steel, cement, and chemicals – require large volumes of continuous power and high-temperature heat. Variable renewables like wind and solar have driven much of the EU’s energy transition to date, but will need to be complemented by clean firm power to meet these needs at the scale or reliability that industry demands, particularly given land constraints and intermittency challenges. Adding more clean firm power in Europe through technologies such as nuclear fission, fusion energy, or geothermal, can help to complement weather dependent generation reducing the need for extensive transmission infrastructure and decreasing land-use pressures resulting in enhanced speed of decarbonisation. 

To meet the needs of the industrial sector, the EU’s State Aid Framework must adopt a technology-neutral approach, empowering Member States to deploy the solutions best suited to their resources and industrial needs, and the energy mix they decide on. This means supporting not just wind and solar, but also nuclear power, carbon capture and storage (CCS), and clean hydrogen. Ultimately, a diverse energy portfolio is in the best interest of the EU institutions and its Member States, helping to reduce their reliance on fossil fuel imports, strengthen energy security, and keep pace with global competitors like China, which are already investing heavily in advanced nuclear and other low-carbon technologies.  

Nuclear energy can deliver both clean power and industrial heat 

Heavy industries account for over half of Europe’s energy consumption, much of which goes toward heat production – a sector still dominated by fossil fuels. Nuclear reactors, especially small modular reactors (SMRs), offer a more flexible solution by providing carbon-free electricity and high-temperature heat directly to industrial facilities. These systems can be deployed alongside industrial facilities, slashing emissions from the existing on-site fossil generation. In European context, although not widespread nuclear heat has been deployed for both process applications and well as for district networks. Gösgen NPP in Switzerland is an example of a traditional NPP that delivers heat to nearby cardboard and paper factory as well as to a local district heating network. Co-location of SMRs and industrial facilities is gaining momentum amongst EU nuclear projects developers, e.g. OSGE aiming to deploy SMRs across six sites in Poland. 

As Europe continues to bolster its industrial decarbonisation and energy sovereignty efforts, Europe’s nuclear sector needs crucial funding support that national state aid already provides to other clean technologies. Yet the current draft of the State Aid Framework update sidelines nuclear energy in critical areas. It prioritises “renewable heat” but overlooks the potential of carbon-free heat from nuclear reactors. Even more concerning, it also imposes strict deadlines that could block new nuclear projects, which often require longer construction timelines.  

To address this, CATF recommends that the EU state aid framework: 

• Deploy strategic financing mechanisms for clean energy projects to guarantee stable electricity prices and revenue certainty.  

• Replace rigid timelines with milestone-based deadlines tied to project phases, such as final investment decisions or reactor commissioning.  

• Ensure nuclear energy receives funding parity with other clean technologies, such as CCS and hydrogen, which currently qualify for 30–50% state aid intensity.  

A level playing field is essential to unlock nuclear energy’s full potential in securing Europe’s industrially competitive, low-carbon economy future. To accomplish this, the EU must also create market structures that reward grid reliability and long-term affordability.  

Long-term contracts like PPAs and CfDs can stabilize energy costs for industry 

Long-term Power Purchase Agreements (PPAs) and Contracts for Difference (CfDs) could play a pivotal role in decarbonising industry by guaranteeing stable electricity prices and revenue certainty for clean energy projects. Nuclear energy PPAs, in particular, offer a unique advantage: they provide industries with 24/7 carbon-free power at predictable costs, shielding businesses from volatile fossil fuel prices. This makes nuclear energy a compelling option for utilities and corporations aiming to meet environmental, social, and governance (ESG) goals while maintaining competitiveness. 

Europe needs to strengthen its nuclear energy supply chain 

Europe’s nuclear energy revival hinges on a robust manufacturing ecosystem. The EU’s Net Zero Industry Act (NZIA) rightly identifies SMRs as “strategic” for decarbonising energy-intensive sectors, but state aid rules must go further to support localised production of critical components like reactor pressure vessels and nuclear fuel. Without this, Europe risks relying on foreign suppliers, undermining its energy independence. EU manufactories involved into the nuclear supply chain could provide additional boost to the EU economy.  

To scale SMRs efficiently, the EU should prioritise factory-built modular reactors, which can slash construction costs and timelines. Cross-border “Nuclear Valleys” in countries like Poland and Romania – supported by EU funding programs – could mass-produce standardised reactor designs, addressing supply chain bottlenecks. Aligning state aid provisions with the NZIA’s goals would also help fast-track permits and unlock grants for strategic nuclear projects, ensuring Europe remains a leader in clean tech innovation. 

Targeted incentives can unlock private investment 

Nuclear energy projects face high upfront costs, but smart policies can attract private capital. The EU should incorporate: 

• Accelerated depreciation schemes, which allow companies to deduct investments faster from taxable income, would reduce financial burdens and improve project viability.  

• Flexible loan guarantees covering up to 70% of capital costs for SMR factories, de-risking investments in next-gen nuclear infrastructure.  

With these tools, the EU can be a leader in unlocking private investment for nuclear to allow Member States interested in diversifying their energy portfolios to become energy secure and meet their EU decarbonisation targets. This is especially crucial for Member States historically left out of private economic investments, such as Central and Eastern Europe. 

Scaling deployment reduces costs  

Early nuclear energy projects may carry higher costs, but these will decline with standardisation, stronger supply chains and learning by doing. History offers a lesson here: early wind and solar projects were once expensive, but costs plummeted as technologies matured, and production scaled thanks to wide subsidy support. Nuclear energy is poised to follow the same trajectory if the right incentives are put in place. By standardising reactor designs and fostering cross-border collaboration, Europe can drive down costs through repeatable projects – transitioning from costly first-of-a-kind (FOAK) units to affordable nth-of-a-kind (NOAK) deployments within the decade. 

A fair shot for all clean technologies 

Europe’s economic and climate goals depend on a pragmatic, inclusive strategy that harnesses a broad portfolio of low-carbon solutions. By integrating nuclear energy into the Clean Industrial Deal’s State Aid Framework, the EU can ensure industries have access to reliable clean power, strengthen its energy security, and reclaim leadership in the global clean tech race.