Europe's power prices threaten AI data centre investment

Access to power has become the main competitive battleground for AI data centre investment in Europe, according to White & Case, as high electricity prices put parts of the region at a disadvantage.

Demand for data centres is rising as governments and investors race to build the infrastructure needed to support artificial intelligence. That has shifted attention beyond semiconductors and computing hardware to the cost and reliability of the electricity needed to run large facilities.

Energy infrastructure is becoming more closely tied to AI infrastructure as developers decide where to place new projects. In Europe, that calculation is increasingly shaped by power prices, which remain well above those in rival markets.

Figures cited from the International Energy Agency show that prices for energy-intensive industries in Europe last year were, on average, about double those in the US and 50% higher than in China and India. The gap is raising concerns about Europe's ability to compete for AI-related investment.

The issue is also likely to create uneven outcomes within Europe. Lower-cost power markets could attract data centre construction at the expense of countries where electricity remains more expensive, reshaping investment flows across the continent.

Nuclear focus

Several European governments are responding by placing greater emphasis on nuclear energy. Belgium, Switzerland and Italy have announced plans to reverse historic bans, while Finland and Sweden are pursuing broader nuclear strategies and the UK is cutting regulation linked to project development.

France stands out because its existing nuclear fleet provides about 70% of the country's electricity. The government has confirmed plans to build six new EPR reactors under its latest energy roadmap, reinforcing a position that could help France attract more data centre investment than many of its neighbours.

The backdrop is a surge in capital committed to data centres worldwide. Dealogic data show investors provided USD $58 billion of financing for 42 data centre transactions so far this year, up from USD $34 billion for 34 deals at the same point a year earlier.

Oxford Economics estimates that nearly 850 data centres are under construction globally, with a combined value of about USD $7 trillion. The US leads with 228 projects under way, while China has 98, underlining the scale of competition facing Europe.

Simon Stuttaford, Partner in the Project Development and Finance Group and Global Energy Industry Group at White & Case, linked the investment trend directly to electricity supply.

"As countries continue to compete for leadership in the AI race, data centres have become pivotal strategic assets. At the heart of this is access to affordable and reliable electricity, and investors are increasingly gravitating towards jurisdictions that can provide this. We can expect European governments to continue prioritising the expansion of nuclear generation capacity as it becomes a defining factor in determining which countries attract the next wave of AI investment," Stuttaford said.

His comments reflect a broader debate over whether Europe can scale AI infrastructure without first resolving longstanding questions around energy costs, grid capacity and security of supply. For policymakers, the challenge is no longer only how to support digital industries, but how to ensure the electricity system can support them at a competitive price.

For investors, the shift means data centre economics are now more closely tied to national energy policy. Markets with clearer plans for stable baseload generation may become more attractive destinations for finance, while those with higher prices or uncertain supply could struggle to keep pace.

Ximena Vásquez-Maignan, Counsel in the Project Development and Finance Group and Global Energy Industry Group at White & Case, said the renewed focus on nuclear energy is likely to influence financing and dealmaking.

"The AI boom is creating a compelling new investment case for nuclear energy. Nuclear power remains one of the few technologies capable of delivering the reliable, low-carbon baseload power needed to support large-scale AI infrastructure. As governments and investors recognise that energy availability could become a constraint on future AI growth, we expect to see increased investment, financing and M&A activity across the European nuclear value chain," Vásquez-Maignan said.