Nuclear Energy’s Inflection Point: Strategic Momentum and Enduring Challenges

Spotlight

• The Middle East conflict could enhance civilian nuclear energy’s momentum by catalysing the search for resilient energy ecosystems.
• Structural and technological improvements will improve nuclear energy’s appeal to energy security and strategic autonomy.
• Specific challenges in nuclear energy’s adoption must be addressed to optimise its potential.

The Middle East conflict has reiterated the criticality of resilience in energy security calculations. Efforts to integrate greater resilience into national energy portfolios has led to attempts to diversify oil and gas sources, as well as a fallback on other sources, such as coal. Simultaneously, however, it has also highlighted the value of more indigenised forms of renewable energy, such as solar and wind, supplemented by advances in battery technology, and led to a growing global interest in the expansion of civilian nuclear energy.

What Underpins the Nuclear Momentum? 

The growing interest in nuclear energy predates the outbreak of the Middle East conflict, as reflected by more than 31 countries operating nuclear reactors, around 80 nuclear reactors being under construction, and 42 nations committing to tripling their nuclear capacity by 2050.

Table 1: Nuclear Reactors Under Construction (as of 1 July 2025)

Source: Author’s own, based on World Nuclear Industry Status Report, 2025.

Yet, the search for diversification and resilience post the unprecedented supply disruptions to hydrocarbon markets have reinforced the value of five structural considerations that may argue the case for nuclear power better this time.

First, the conflict has ingrained securitisation into national energy security calculations. This, in turn, has reconfigured the cost calculus of nuclear energy ecosystems, which demand high capital investment. The value of nuclear energy, when evaluated through the prism of securitisation, makes the associated high capital expenditure seem a reasonable and necessary investment in a country’s long-term energy security and strategic autonomy. Countries could be more amenable to a relatively costlier form of energy, such as nuclear, if the associated higher capital expenditure is seen as a security premium to fortify greater energy resilience and improve energy sovereignty.

The value of nuclear energy, when evaluated through the prism of securitisation, makes the associated high capital expenditure seem a reasonable and necessary investment in a country’s long-term energy security and strategic autonomy.

Second, there has been a significant change in the nuclear financing ecosystem over the past two years. The recalibration by the World Bank (WB) to cooperate with the International Atomic Energy Agency(IAEA) to reverse their moratorium to underwrite funding for nuclear projects globally is one. The WB’s willingness to finance nuclear energy projects can be expected to reinforce the growing investment by both public and private sectors. The Asian Development Bank’s (ADB) collaboration with the IAEA to finance nuclear projects in both Asia and the Pacific is also indicative of this. Both steps improve the financial architecture to support the momentum for nuclear energy. Furthermore, developments in technology and the potential for Small Modular Reactors (SMRs), including Micro Reactors, as feasible options suggests that eventual design standardisation could lead to economies of scale, making nuclear energy more cost competitive. Simultaneously, policy recalibrations by countries, with India being an important example, to achieve regulatory clarity can induce greater confidence in the private sector to invest in the domain.

Third, technological innovations will improve nuclear energy’s production potential and safety measures. SMRs mostly remain at the design and prototype stage today. Yet, promising feasibility reports and a few successful iterations in countries such as China and Russia have led to more interest in the global policy and investment community about their potential deployment. SMRs and Advanced Reactors have passive safety features that are inherently more secure and offer greater resilience against accidents and failures without the need for human intervention. Additionally, their size can localise grid applications while better integrating them into national energy ecosystems by offering reliable low-carbon baseload energy to remote locations as well as industrial ecosystems, such as Special Economic Zones or data centres.

Global energy demand and consumption patterns are changing due to the suitability of nuclear energy to the needs of data centres and renewable energy integration.

Fourth, global energy demand and consumption patterns are changing due to the suitability of nuclear energy to the needs of data centres and renewable energy integration. A standard AI data centre consumes as much electricity as 100,000 households. Nuclear energy is highly energy-dense and this, along with its grid-scale baseload characteristic, makes it suitable to meet this energy demand. Nuclear plants’ high energy density also means that they have the highest capacity factors[1] when compared to other forms of energy. Its ability to guarantee a baseload high density reliable power and amenability to be co-located with data centres make it a viable option for AI hyperscalers. Further, co-locating existing grids within data centre complexes helps reduce pressure. By offering grid stability, nuclear energy ecosystems could also enable better integration of renewable forms of energy while reducing marginal costs.

Finally, there are essential differences between the nature of uranium (that generates nuclear energy) and the characteristics of its trade and oil and gas ecosystems. While the potentially growing demand for uranium could overwhelm its supply, the logistical overheads of fossil fuel ecosystems and the volatility surrounding their supply routes are not as applicable to it.

Source: Author’s own, based on data from Nuclear Energy Institute (NEI) and US Energy Information Administration (EIA).

Enduring Challenges

The fact that nuclear energy expands the threat surface at a time when energy infrastructure attacks are a part of geopolitical contestation is undeniable. In addition to the ever-present concerns regarding potential proliferation of uranium and complexity of its waste management, there are additional challenges that must be considered as well.

1. Like any other energy infrastructure, nuclear power remains vulnerable to kinetic risks. For decades, attacks on nuclear plants were avoided because of the anticipated radioactive fallout and the escalatory nature of such strikes. Russia’s attacks on Ukraine’s Zaporizhzhia (2022 onwards), Iran’s on the United Arab Emirates’ (UAE) Barakah nuclear plant’s perimeter (2026), and the US strikes on Iran’s Bushehr nuclear plant (2026) have challenged that assumption. Such attacks could also be aimed at nuclear waste repositories, apart from operational nuclear facilities. Additionally, natural disasters could overwhelm structural and technical resilience, as demonstrated by the Fukushima Daiichi incident in the aftermath of the 2011 tsunami off the coast of Japan. The risk here is higher in comparison to other forms because of the radioactive nature of the material. However, the new passive safety features embedded in the Gen IV nuclear plants offer far higher safety standards than the previous versions.
2. Nuclear energy cooperation can create strategic dependencies of its own, albeit different from the ones in the case of hydrocarbons. Countries entering into civilian nuclear agreements typically do so with the understanding of long-term multi-decadal commitments, given the long operational life cycles of nuclear plants. Fuel supply tends to be a long-term contract, as does any technical partnership maintenance agreement. The likelihood of this external dependence developing into strategic leverage remains strong.
3. The opportunity cost of investing in nuclear energy at a time of constrained fiscal manoeuvrability should be considered. Nuclear facilities tend to have considerably high capital costs. When contextualised against the long timelines—8 to 15 years on an average—for these facilities to start generating electricity, the sunk costs of these projects raises questions regarding the potentially suboptimal use of capital. It becomes important to factor in which sector/priority will be affected to provide the massive funding needed.
4. There is potential for leverage and weaponisation. India’s experience post the restrictions imposed on its civilian nuclear programme after the Pokhran nuclear tests of 1974 is an instance. The global nuclear supply chain has, admittedly, been reconfigured today with a more diversified pool of suppliers. While an embargo comparable to the one imposed on India may no longer be viable, the potential for such weaponisation, including through nuclear commerce, remains.

Like any other energy infrastructure, nuclear power remains vulnerable to kinetic risks.

Conclusion

Several issues surround nuclear energy and its deployment. This article highlights these challenges, but not to undercut the value of nuclear energy as a viable strategic hedge against hydrocarbon dependence and disruptions. Instead, it recommends addressing these concerns to create a foundation that could sustain global interest and lead to nuclear power making energy baskets more diversified and resilient.

Cauvery Ganapathy is Fellow, Climate and Energy, ORF Middle East.

[1] Capacity factor is the ratio between what a unit is capable of generating at maximum output versus its actual generation.