A powerful parliamentary committee has warned the UK is facing an energy crisis over what it sees as mistakes with its nuclear energy programme.

The Public Accounts Committee has issued a new report on the future of the Advanced Gas-cooled Reactors, which us says will require billions more taxpayers investment and create an energy crisis while replacement systems are created to meet the shortfall from decommissioned power plants.

The committee’s report said the costs of the agreement with private energy companies to seal and now decommission the seven reactors were set to spiral.

“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,” it warned. “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.”

It added: “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 report continued that 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.

The UK has eight second generation nuclear power stations accounting for around 16% of total UK electricity generation in 2020. These stations are owned by EDF Energy (EDFE) following its purchase of British Energy in 2009. The stations comprise seven Advanced Gas-cooled Reactor (AGR) stations, all of which are planned to stop generating electricity by 2028, plus the Pressurised Water Reactor (PWR) at Sizewell B.

In 1996, government established the Nuclear Liabilities Fund (the Fund) to meet the cost of decommissioning these eight stations. The aim of the Fund is to generate returns from investments that will meet the costs of decommissioning.

As at March 2021, the Fund’s assets were valued at £14.8 billion and the estimated decommissioning costs of these eight stations was £23.5 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.

The committee said the government’s investment strategy for the Fund “has delivered poor returns and has resulted in the taxpayer having to top-up the Fund with an additional £10.7 billion in just two years”.

It warned that the way I which the decommissioning was scheduled would leave the country exposed to new risks around its ability to generate the necessary power to meet the country’s needs.

“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,” it warned. “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 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.”

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