Third Report - The future of the Advanced Gas-cooled Reactors

EDFE’s timetable for the closure of the stations will result in a significant reduction in the UK’s generating capacity until new capacity comes online. In 2020, nuclear power accounted for 16% of UK electricity generation. The closure of seven nuclear … Read more EDFE’s timetable for the closure of the stations will result in a significant reduction in the UK’s generating capacity until new capacity comes online. In 2020, nuclear power accounted for 16% of UK electricity generation. The closure of seven nuclear stations by 2028 will therefore have a significant impact. EDFE considers that the AGR stations will be reaching the technical limit of safe operations and so their use could not be extended while we wait for new generating capacity of come online. Only the existing PWR station at Sizewell B and the new station at Hinkley Point C are expected to be operating when the last of the AGR stations The future of the Advanced Gas-cooled Reactors 7 closes. While the Department 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 UK’s old nuclear station sites could be reused as locations for the development of new small modular reactors. Both NDA and EDFE told us they are in active discussions with parties interested in exploring these new opportunities. Recommendation: The Department working with the Office for Nuclear Regulation, EDFE, and Ofgem should urgently review whether it would be technically feasible, safe, and cost-effective to extend the lives of any of the remaining operating stations if needed and report back to the committee within 4 months. The Department and NDA should publish plans within 12 months setting out how they will make best use of NDA’s nuclear sites in future, including whether they are suitable for new nuclear infrastructure, such as modular reactors. In particular they should clarify how the transfer to the NDA from EDFE will allow for these Modular reactors. Show less

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Given the scale and complexity of decommissioning the AGR stations, we are concerned that the Department’s oversight of a complex set of governance arrangements is itself not subject to sufficient scrutiny and challenge. The Department is performing a variety of … Read more Given the scale and complexity of decommissioning the AGR stations, we are concerned that the Department’s oversight of a complex set of governance arrangements is itself not subject to sufficient scrutiny and challenge. The Department is performing a variety of roles with regard to the decommissioning of the AGRs: it negotiated the decommissioning agreements with EDFE and has an ingoing role in ensuring the agreements work in the interest of the taxpayer; it is the sponsoring department of the NDA but will need to ensure that both the NDA and EDFE work effectively, for example to ensure that a site licence is granted by the regulator to the NDA prior to the handover of each station; and it has existing relationships with EDFE in relation to new nuclear projects. However, the centre of government has yet to put in place arrangements that can provide assurance that the Department is discharging its various responsibilities appropriately and that the decommissioning programme is performing effectively. The Department told us there were no immediate plans to include the programme in the Government Major Projects Portfolio (GMPP), which provides independent assurance of government’s riskiest or costly projects, but it expects it to do so when the stations transfer to the NDA. In the meantime, the Department is developing metrics that would be akin to GMPP to provide assurance to HM Treasury and Cabinet Office. However, these metrics have not yet been developed. Recommendation: The Department should write to the Committee within the next six months setting out how it is assuring itself that it is discharging its oversight role effectively and detailing the current and future plans for reviewing the Department’s own performance. In addition, despite the Department’s assertions to the contrary, it should write to the Committee and explain why it shouldn’t place the programme on GMPP at an earlier stage in the transfer phase from EDFE to NDA so it can benefit from advice on Show less

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The terms of the 2009 sale of the nuclear stations agreed by the Department with EDFE placed a disproportionate amount of risk for meeting future decommissioning costs on the taxpayer. The negotiations surrounding the sale of the stations to EDFE in 2009 were focused on maintaining operations, with less attention …

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We are not convinced the Department has struck the right balance in incentivising the NDA and EDFE to deliver safe and efficient defueling of the AGR stations on time while reducing costs. The Department has introduced financial incentives to encourage cost-efficient defueling and station transfer with EDFE potentially earning or …

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Arrangements for transferring nuclear stations to NDA are worryingly under- developed, and there is a risk that transfer negotiations between EDFE and NDA could drag on and increase the costs to the taxpayer. The first of the stations could transfer to the NDA as early as 2026. The NDA and …

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On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business, Energy & Industrial Strategy (the Department), the Nuclear Decommissioning Authority (NDA) and EDF Energy (EDFE) on the decommissioning of the UK’s fleet of Advanced Gas-cooled Reactor (AGR) nuclear power stations.1

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The Committee has previously identified significant uncertainty regarding the estimation of decommissioning costs. We examined, for example, the NDA’s management arrangements for decommissioning the Magnox nuclear power stations in 2020 and identified significant difficulties estimating decommissioning costs. We concluded that the NDA did not have a full understanding of the …

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The estimated cost of decommissioning the AGR stations, plus the PWR at Sizewell B, increased from £12.6 billion in 2004–05 to £23.5 billion in 2020–21 in real terms. We asked the Department why the estimated cost of decommissioning the AGRs had increased to such an extent. The Department asserted that …

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There remain significant uncertainties which if managed poorly could increase decommissioning costs further. The estimated cost of defueling the seven stations, for example, ranges between £3.1 billion and £8 billion depending upon how quickly they can be defueled and how soon defueling starts once a station closes after stopping electricity …

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EDFE has recently brought forward the closure date for five out of the seven AGR stations. EDFE told us it expects the stations to stop operating at their current closure dates but acknowledged that early closure was always a risk. Dungeness B was due to close in 2028 but due …

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In 2015, the then Shareholder Executive, on behalf of the Department undertook a review of the arrangements with EDFE for decommissioning the AGR stations. It concluded that the existing agreements did not incentivise EDFE to look at more innovative or cost- effective ways to minimise decommissioning costs. Between late 2017 …

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A review commissioned by the Department during the negotiations suggested that the £100 million potential fee might not be enough incentive for EDFE to place greater focus on the AGR stations given the potential value of its other UK interests.20 We therefore queried whether the £100 million financial incentive was …

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The Department told us it did have other rights to direct EDFE, for example it has the power to change decommissioning plans. If the Department, for example, identified material cost saving opportunities of more than £5 million it told us it could instruct EDFE to do things in a different …

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The assets of the Fund have been created from the contributions made by the station operators, income from investments, capital injections from government and the proceeds from the sale of the Fund’s shares in British Energy. Despite EDFE extending the operating lives of all the AGR stations, its financial contributions …

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We asked why, given the amount of uncertainty surrounding the costs, and concerns about the adequacy of the Fund to cover this, the risks of decommissioning were being entirely borne by the taxpayer. The Department said that the £100 million agreed with EDFE was a meaningful financial incentive to manage, …

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The Department emphasised that it was applying significant learning from the experience of decommissioning the Magnox and AGR stations. For new nuclear stations a funded decommissioning plan has to be in place before construction begins. The Department told us that it was “building from the start with decommissioning in mind” …

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Nuclear power contributed around 16% of the UK’s electricity in 2020. As at January 2022, five of the seven AGR stations and the Pressurised Water Reactor at Sizewell B are the only nuclear power stations in the UK currently generating electricity; two of the AGRs, Dungeness B and Hunterston B, …

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The Department acknowledged there will be a production gap between existing nuclear stations closing and new ones coming online. However, it told us that it was not concerned about a lack of generating capacity during that period. It told us that the capacity market allowed electricity capacity to be bought …

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We asked whether there could be value in reusing the AGR sites, given the existing support in those communities for nuclear power. In particular, we asked the Department what work it was doing to give more clarity to the providers of small modular reactors about potential plans for these sites. …

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After the AGR stations are defueled EDFE will transfer the stations to NDA who will be responsible for completing the rest of the decommissioning process. The first 30 Qq 3, 7; C&AG’s Report para 1.2–1.3 31 Qq 3–5 32 Q 7 33 Qq 78–79, 82–83 The future of the Advanced …

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There are still some important aspects of transfer that are yet to be agreed. The NDA and EDFE recognise there are issues around transfer that will need to be agreed but believe they have sufficient time to sort out the remaining points.35 They established nine working groups in 2021 to …

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The Department’s business case estimates that the transfer of the stations will cost £300 million, but given the uncertainties the cost and liabilities could be as large as £1.8 billion. The uncertainties include a potential need to update IT systems, the condition and nature of assets, and the cost of …

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We were concerned by the number of issues still to be resolved in the time available. We enquired about progress regarding Hunterston B, the first station expected to transfer, especially as discussions around pension contributions can take time to sort out. The witnesses told us they were in discussion as …

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We wrote to the Department and HM Treasury number of times (see Annex 1) after our evidence session and asked it to clarify what it had agreed with EDFE in terms of the land and buildings that will be transferred to the NDA, and how it planned to resolve any …

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The long-term benefits of transferring the AGR stations into public ownership will depend on the ability of Magnox Ltd to deliver efficiencies from combining the stations with its existing portfolio of nuclear stations. The NDA told us it expected to deliver savings once the stations begin to transfer. The addition …

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Delivering the benefits intended from the new arrangements will require a clear long- term delivery strategy. The current EDFE approach for these stations involves putting reactor buildings into a state of care and maintenance lasting some decades to allow radioactivity levels to decay before starting deconstruction of the reactor. The …

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The AGR decommissioning programme is complex, and key organisations already have substantial portfolios of work. The NDA, for instance, already has a very heavy workload decommissioning the Magnox fleet and parts of the Sellafield site to which the AGRs will now be added. The NDA’s subsidiary, Magnox Ltd, is currently …

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The Department told us that following its experience of the Magnox contract, it had undertaken a full review to establish whether it had the right governance and it was now confident that this was the case. It also told us that the NDA has similarly taken “really important steps in …

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Decommissioning the AGR stations is an unusual programme compared with others in government as no single organisation has complete responsibility and authority for performance overall. The success of the programme will depend significantly on the ability of the Department, NDA and EDFE to work together effectively and resolve any problems …

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Given the centrality of its role we asked the Department whether its own role was subject to sufficient scrutiny and whether AGR decommissioning should be included in the Government Major Projects Portfolio. The Department told us that similar concerns had been raised by HM Treasury and Cabinet Office. However, the …

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