A new report, “The decommissioning of the AGR nuclear power stations” published by UK's National Audit Office (NAO) examines whether the government's arrangements for decommissioning AGR nuclear power stations will lead to better value for money. The NAO scrutinises public spending to help Parliament hold government to account and improve public services.
The 66-page report says the UK government has entered into new arrangements to decommission seven AGR nuclear power plants. While the arrangements could deliver savings, their success will ultimately depend on the relevant parties working collaboratively to overcome risks. The UK has eight second generation NPPs, which accounted for around 16% of the country's electricity generation in 2020. Seven are Advanced Gas-cooled Reactors (AGRs), which are due to stop generating electricity by 2028.
The Nuclear Liabilities Fund (the Fund) was established to meet the costs of decommissioning all eight stations, but significant additional taxpayer support has been required with more likely to be necessary. The UK government has provided a guarantee to underwrite the Fund in the event that its assets are insufficient to meet the total costs of decommissioning. In 2020, government contributed £5.1 billion ($6.8bn) to strengthen the Fund’s position and the Fund has recently requested a further £5.6 billion. The Fund’s assets were valued at £14.8 billion at the end of March 2021. The aim is that growth in the Fund’s investments will be sufficient to meet the long-term costs of decommissioning (£23.5 billion). However, cost estimates have doubled in real terms since 2004-05. If this upward trend is maintained and investment growth is not sufficient, there is a risk that the taxpayer will have to make further contributions.
Arrangements for decommissioning the AGR fleet
In June 2021, plant owner EDF Energy (EDFE) agreed to defuel each station in an arrangement that the UK Department for Business, Energy & Industrial Strategy (BEIS) estimates could save the taxpayer around £1 billion. After defuelling is completed, ownership of the stations will transfer to the Nuclear Decommissioning Authority (NDA) and its Magnox Ltd subsidiary will complete the decommissioning, which is likely to take several decades.
A 2015 government review had highlighted concerns about the ability of the existing arrangements with EDFE to incentivise efficient decommissioning of AGR stations. BEIS's revised agreement with EDFE in 2021 provides the company with greater clarity about its role, and a commercial incentive to accelerate defuelling and transfer stations to Magnox Ltd. EDFE could either earn up to £100 million, or potentially incur penalties up to £100 million depending on performance during defuelling.
NAO says the rate at which stations can be defuelled will impact overall costs. The estimated cost could be between £3.1 billion and £8 billion. Any bottleneck between EDFE removing fuel, and the NDA transporting it to storage at Sellafield, could have widespread repercussions. Costs to the fund therefore depend on how quickly defuelling begins following plant closure and the rate of defuelling. Early unexpected closures may increase costs.
BEIS, EDFE and NDA have taken steps to establish joint arrangements to plan and oversee defuelling, which NAO considers sensible. These arrangements will be tested once defuelling accelerates and all parties operate under the revised decommissioning agreements. After defuelling is complete, details will be agreed of exactly what EDFE will transfer to the NDA and Magnox Ltd, as well as when and how. NDA says there is a history of transfers in the nuclear sector taking longer than expected, and similar risks will need to be managed for the transfer of AGR stations.
The long-term benefits of taking the AGR stations back into public ownership will depend on the ability of Magnox Ltd to deliver efficiencies from combining the AGR stations with its existing portfolio of nuclear stations. There is potential for Magnox Ltd to realise some of these efficiencies from deconstruction work in the years immediately after transfer of the stations. NDA’s ability to deliver benefits from combining Magnox and AGR sites will depend on the quality of the plans developed in the years prior to transfer.
“By providing clarity over the future decommissioning of second-generation nuclear power stations, the government has created incentives to deliver a safe and efficient clean-up,” said Comptroller and Auditor General Gareth Davies. “However, many financial risks remain, and if poorly managed costs could escalate. Success will only be achieved if all parties work effectively together.” He added: “Government needs to maintain a clear view of how the nuclear decommissioning programme is performing as a whole, and given the large amounts of public money at stake it must act decisively should performance begin to lag.”
The seven AGR stations, designed and built between the 1960s and 1980s, are the UK’s second generation nuclear plants, after the 11 first generation Magnox reactors. Decommissioning of the AGR stations is envisaged to take just over 100 years under current plans. The agreement reached with EDFE does not include Sizewell B, a pressurised water reactor, which will continue operating until 2035.
More clarity, but substantial risks
The report concludes that the renegotiated commercial and delivery agreements, signed in June 2021, provide improved clarity about the future of the AGR stations. By providing EDFE with a financial incentive to complete defueling of the stations efficiently, the revised funding agreement offers the prospect of securing better value for money. However, the defuelling programme carries substantial risks which, if poorly managed, could result in costs increasing significantly.
Success will depend on how effectively EDFE and the NDA work together. In terms of preparing to transfer the stations, the Department is reliant on there being continuing goodwill between EDFE and the NDA to resolve potential differences. If it is to achieve value for money from the new agreements, BEIS will need a clear view of how the programme is performing as a whole and will need to act quickly and decisively should problems emerge, given the large sums of taxpayers’ money still at stake.
Initial ambitions that the existence of the Nuclear Liabilities Fund would help eliminate taxpayers’ exposure are being tested, with rapid increases in the estimates of decommissioning costs outstripping investment returns. The history of the AGR fleet provides lessons for other long-term programmes carrying significant end-of-life liabilities, including new nuclear energy programmes.
Photo: Dungeness B power station in Kent has already shut down (EDF Energy)