UK parliament committee reviews AGR decommissioning funding

The UK currently has eight second-generation nuclear power plants in operation, which generate about 15% of the UK's electricity. These plants are owned by EDF Energy following its purchase of British Energy in 2009. The stations comprise seven AGR plants, which are scheduled to be shut down by 2028, plus the pressurised water reactor at Sizewell B.

In 1996, the government established the Nuclear Liabilities Fund to meet the cost of decommissioning these eight plants. The aim of the fund is to generate returns from investments that will meet the costs of decommissioning. However, as of March 2021, the fund's assets were valued at GBP14.8 billion (USD18.6 billion) and the estimated decommissioning costs of these eight plants was GBP23.5 billion. The government has provided a guarantee to underwrite the fund in the event that its assets are insufficient to meet the total costs of decommissioning.

"There remains a significant risk that the costs could rise further putting strain on the fund," according to the PAC report. "In response, government has chosen to top up the fund with taxpayers' money, providing an injection of capital of GBP5.1 billion in 2020–21 with a further GBP5.6 billion expected in 2021–22."

In late 2017, the Department for Business, Energy and Industrial Strategy (BEIS) entered into negotiations with EDF Energy to revise the agreements for the seven AGR stations. In June 2021, the BEIS and EDF agreed improved arrangements to safely and efficiently decommission the AGRs. Under the agreement, EDF will aim to shorten the time it takes to safely remove the fuel from the power plants as they come offline, before working closely with the Nuclear Decommissioning Authority (NDA) to transfer ownership of the plants to the NDA.

The committee said the pace at which the plants can be defueled could have a big impact on the costs - between GBP3.1 and GBP8.0 billion. The committee said the handover agreement does not appear to sufficiently "incentivise cost efficiency and ensure a smooth transfer of defueled stations to the NDA".

It also said it was concerned about the NDA's capacity to take on the seven AGR plants in addition to its other responsibilities, including decommissioning the Magnox reactors, the treatment of radioactive material at Sellafield and the procurement of a geological repository.

The Public Accounts Committee recommends the UK government "should within 12 months review the investment approach and write to the committee setting out the expected performance of the fund based on the chosen investment strategy and the extent to which this will avoid further calls upon the taxpayer".

In addition, it said as proposals for constructing new nuclear plants are firmed up, BEIS "needs to learn lessons from AGR decommissioning for how the decommissioning of new nuclear stations will be funded, for example linking contributions more closely to reliable estimates of liabilities, and building in mechanisms for adjusting contributions from operators should estimates of liabilities increase".

The committee said the timetable for the closure of the seven AGR plants by 2028 would result in a significant reduction in the UK's generating capacity. While BEIS acknowledges there will be a gap in generating capacity, "it is not concerned with there being a shortage, owing to its confidence that electricity capacity could be bought from other sources ahead of time." The committee recommends that BEIS and EDF together should "double-check whether it would be technically feasible, safe and cost-effective to extend the lives of any of the remaining operating stations".

"Government must prioritise the deliverable, safe and efficient plan to decommission these facilities and sustainably replace energy production that we owe to future generations, to alleviate the impact of rising energy costs on the public and business and insulate the UK from disruptions to our energy supply," said deputy chairman of the committee, Sir Geoffrey Clifton-Brown. "The decommissioning dates of these power stations were clear decades ago. The government should have been commissioning this replacement at that time, so that by now they would be generating base load power into the grid. For these major projects with long lead times, effective forward planning by government is essential."

UK Nuclear Industry Association chief executive Tom Greatrex noted: "The current nuclear stations have been the most productive clean energy assets in British history, saving carbon worth GBP115 billion at today's prices. The gap identified amounts to about GBP4/MWh of electricity that the fleet has generated, which still makes these stations the cheapest source of power currently on the UK grid. We now need to move forward urgently with new nuclear capacity to replace the retiring stations, cut gas imports and cut consumer bills."