The cost of decommissioning Dounreay is set to rise by more than £500m and there could be further increases on the way, it was revealed yesterday.

Much of the increase is due to uncertainty over the fate of radioactive fuel and nuclear waste on the Caithness site The increase came to light as the Nuclear Decommissioning Authority (NDA) approved the latest long-range plan for the site's closure.

But it also emerged that the government had advised the NDA to use discounted figures for estimating the cost of decommissioning Dounreay.

For a number of years the official estimate was £2.9bn. That had been scaled back to £2.1bn but has now been increased again to £2.7bn. Using real-term estimates, the cost will effectively rise to more than £3.6bn.

Environmentalists said it did not matter which set of figures was used, they proved the public could not believe a word the nuclear industry said about costs.

A spokesman for the UK Atomic Energy Authority at Dounreay said: "Much of the increase is due to gaps identified in our previous decommissioning plans by the NDA. The most significant of these is the addition of a store for nuclear fuel at Dounreay.

"Previously it had been assumed that plutonium and uranium stocks would transfer from Dounreay to a national store, probably at Sellafield, sometime in the 2020s. There have been years of discussion but there was no formal agreement in place. We needed to remove that risk from the plan, so provision has now been included for a fuel store to be built at Dounreay."

In addition, there had been a 10-year delay in the proposed removal of the most hazardous wastes from the site to national disposal facilities, adding a decade of storage costs at Dounreay to the bill.

It is also understood that Dounreay officials have been considering the costs of building a spur railway line to the station from the Thurso to Inverness line in case the fuel and waste eventually have to be moved south.

The financial position could be even more complicated with Scottish ministers arguing that Scottish waste should stay in Scotland. Nobody has costed such a policy.

A spokesperson said the Scottish Government was in discussion with the NDA and others to consider the implications of its statement in June that ministers support "near surface, near site storage facilities for higher activity radioactive wastes. This work is ongoing and we are not yet in a position to advise on the implications for Scottish sites."

Ian Roxburgh, NDA chief executive, said: "For the first time we are now able to take a UK-wide, long term look at what needs to be done, and when. This means that the majority of funds over the next three years will be focused on Sellafield and Dounreay."

The NDA said that the government told it to use Treasury discounted rates of 2.2% per year when estimating future costs of decommissioning the 20 civil nuclear sites under its control.

Industry sources said this means that the total estimated decommissioning bill is calculated as though a cheque was being signed today, rather than costs being met over the next 25 years.

Duncan McLaren, Friends of the Earth Scotland's chief executive, said: "What is clear is that this represents a major increase in the final clean-up costs at Dounreay."