Treasury admits £16 billion ‘mistake’ in nuclear decommissioning costs

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  By Martin Kelly
 
The UK government has been accused of “failing to keep its word” after an official document revealed that the cost of decommissioning nuclear power plants had been underestimated to the tune of £16 billion.
 
According to a House of Commons Committee of Public Accounts report the Nuclear Decommissioning Authority’s estimated cost of civil nuclear decommissioning increased by around £16 billion to £53 billion between 2007 and 2011.

According to the report: “The Treasury acknowledged that not considering these costs when the power stations were built had been a mistake,”

In giving evidence to the committee, Sir Nicholas Macpherson who is Permanent Secretary to the UK Treasury said that the £16 billion would now have to be “factored in” to future “emerging deals”.

He added: “I don’t see why the taxpayer should be lumbered with an additional £60 billion cost down the track.”

Margaret Hodge, chair of the committee is quoted in the report describing the missing £16 billion as a “shocking, shocking story”. 

In a reference to a planned report on the Sellafield nuclear plant, the Labour MP also admitted that:

“…everyone is petrified – quite rightly – about the nuclear waste issue, so it seems a never-ending flow.  They don’t really have to justify their extra money that they spend on it; it just seems to flow upwards.

“If you took it forward from there, I think that we were more than £60 billion when we looked at it when we were up there, which is just over a month or two ago.  Every project, or almost every major project bar two or three, is over time, over budget and increasing.  And with the controls, nothing seems to be learnt from this.”

The actual cost of cleanup at Sellafield was reported last month to be £67 billion.

The UK government is currently planning to build a new nuclear power plant at Hinkley Point, Somerset, reactors had also been earmarked for Suffolk, Anglesey and Bristol.   Last month UK Energy Minister Ed Davey confirmed approval for the £14bn nuclear plant at Hinkley Point as part of an agreement with French energy giant EDF.

The deal means the UK Coalition is forced to commit £50bn, to come from household bills, in order to meet demands from the French contractor to ensure a guaranteed levy.  The deal led to claims that the UK coalition had broken its own pledge that there would be no public subsidy for new nuclear plants.

Responding to the admission that decommissioning costs had been underestimated, SNP Energy spokesperson Mike Weir MP said it was proof that “Westminster cannot be trusted”.

Mr Weir added: “The recent announcement of public funding for nuclear energy projects had already shattered Westminster’s no nuclear subsidy promise and demonstrated that the Westminster Government simply cannot keep its word.

“With a recent opinion poll showing that a majority of people in Scotland are opposed to new nuclear energy, there is no justification for Westminster to be wasting public money in this way.

“Nuclear energy simply cannot be delivered without eye-wateringly high cost.  In these difficult economic times, the last thing people need is to see their money wasted on nuclear white elephants that are significantly more expensive than renewable options.

“Scotland has massive renewable resources and as European Energy Commissioner Gunther Oettinger said just a few weeks and can be a renewable energy powerhouse of Europe.  Why on earth would anyone want to put all of that at risk by diverting money to pay for new nuclear white-elephants that are significantly more expensive than renewables?

“With the Westminster government breaking promise after promise, it is little wonder that people in Scotland want major decisions to be made by a Scottish Government directly accountable to people living here.

“Only a Yes vote will ensure that the decisions that matter to Scotland are made by a Scottish Parliament directly elected by people living in Scotland.”

News of hidden decommissioning costs followed a report two weeks ago in the Telegraph newspaper questioning whether the French company could afford to go ahead with the UK project.

Mycle Schneider, a former energy adviser to the French government, said: “EDF is in big trouble.  The whole of the nuclear power industry in France is in big trouble,”

Speaking to the Telegraph, Mr Schneider said that EDF with debts of €39bn (£33.3bn) might not have the cash to put into Hinkley and added: “It’s not certain it will go ahead.

“There are a long list of issues that need to be agreed, not only the strike price. Even if there is an agreement the financing package has to be put together.  It’s a very long-term investment of very uncertain levels of realisation.”

Prime Minister David Cameron was expected to raise the matter with French President Francios Hollande, but pulled out of the meeting after the death of Mrs Thatcher.

As reported by Newsnet Scotland last year, the French President is known to favour less investment in nuclear and more being targeted at renewables.  We revealed that speculation was high that the French Government would order EDF to divert billions of Euros, intended for new UK nuclear reactors, back into the French domestic sector.

France currently relies on nuclear power for 75% of its electricity, a figure Hollande wants to reduce to 50% by 2025 with a greater focus on renewables.  There has also been talk of phasing out France’s nuclear power altogether within 20 or 30 years.