The future of the Advanced Gas-cooled Reactors – Report Summary

Summary

Despite government already having had to provide additional funding of £10.7 billion, there remains a strong likelihood that more taxpayers’ money will be required to meet the costs of decommissioning the seven Advanced Gas-cooled Reactor nuclear power stations. The Nuclear Liabilities Fund, which was set up to meet the decommissioning costs of these stations, has not kept up with the increased costs of decommissioning or met its investment targets. In response, government has chosen to top up the Fund with taxpayers’ money, providing an injection of capital of £5.1 billion in 2020–21 with a further £5.6 billion expected in 2021–22. HM Treasury and the Department for Business, Energy & Industrial Strategy have opted to maintain an investment strategy for the Fund whereby around 80% of its assets are invested in the National Loans Fund currently earning minimal returns. Estimated decommissioning costs on the other hand have almost doubled since March 2004, estimated at £23.5 billion in March 2021, and there remains a significant risk that the costs could rise further putting strain on the Fund.

The Department has recently reached agreement with EDF Energy (EDFE) that after EDFE defuels the AGR stations the ownership of the stations will be transferred from the company to the Nuclear Decommissioning Authority (NDA) to complete decommissioning. As part of the agreement the Department has introduced financial incentives to encourage cost-efficient defueling and station transfer: with EDFE potentially earning or paying out up to £100 million depending on its performance. The pace at which the stations can be defueled could have a big impact on the costs borne by the Fund, with the cost estimated to be between £3.1 billion and £8.0 billion depending on the time taken. However, the incentive on EDFE to potentially earn or lose £100 million does not appear sufficiently strong to fully incentivise cost efficiency and ensure a smooth transfer of defueled stations to the NDA. The NDA has a substantial amount of work to do in advance of taking ownership of the stations. We have previously commented on the scale of existing activities the NDA is undertaking, and are concerned about the organisation’s workload now that it is being asked to take on the seven AGR stations in addition to the decommissioning of the Magnox reactors, the treatment of radioactive material at Sellafield and the procurement of a deep underground nuclear storage facility. The Department will need to pay close attention to the NDA’s performance across the full span of its wide responsibilities to ensure it has the capacity and capability in place to deliver in the best interests of the taxpayer.