Water trading between utilities could be a vital tool for building the UK’s supply resilience but there are still a number of barriers that need to be overcome before it can become a reality, industry experts have warned.
Upstream reform – including the facilitation of bulk water transfers between water companies – is one plank of Ofwat’s Water 2020 regulatory reforms, yet there remain several practical obstacles to it taking place, speakers said at the WWT Integrated Water Resource Management conference, held in Birmingham on Sep 14th and sponsored by Amec Foster Wheeler.
“There is still considerable scope for water trading to take place but many of the constraints to this that were identified 20 years ago are still around,” Tony Ballance, Director of Strategy and Regulation at Severn Trent, told the conference. “We have relatively poor connections between water companies and the funding and financing of the work to improve them is a complex issue.”
He told delegates that there are five main barriers to water trading: weak regulatory incentives; asymmetries in the information to be shared between companies; contractual complexities; an adequate pricing model; and the physical piping to interconnect water company areas. While the regulator and industry groups had made progress on negotiating the complexities of pricing and developing standard contracts and incentives, the poor connections between water companies were the biggest issue.
He said that the six most important connecting pipelines that would need to be built – with the most significant involving links between the Severn Trent, Thames Water and Anglian Water regions – would cost around £1.5BN. While this is a lot of money, it needs to be considered against the risk of severe drought impacts and when compared to other national infrastructure projects such as HS2 or the Olympics, should not be unaffordable. A direct procurement model and financing along the lines of the Thames Tideway Tunnel should be considered, he added.
A major Water UK report on building drought resilience was released the day before the conference. Jean Spencer, Regulation Director of Anglian Water and chair of the steering group for the report, said that the funding of major resilience projects – including those that facilitate water trading – illustrates a key dilemma. “Clearly water companies need to step up to balance today’s needs and the needs of tomorrow. But ‘who pays’ and how we balance affordability and resilience remains the key question. Customers may have a view of how much they are willing to pay for resilience, but if we get a situation where our water supply is threatened then that is a major policy question to consider,” she said.
This article first appeared on wwtonline
