resilience annex b: option characterisation - defra,...

Strategic Water

Infrastructure &

Resilience

Final Report

April 2015

Prepared for: Environment Agency

Annex B:

Option Characterisation

UNITED KINGDOM

AECOM and URS have joined together as one company

Environment Agency — Strategic Water Infrastructure and Resilience

ANNEX B: OPTION CHARACTERISATION, FINAL REPORT

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REVISION SCHEDULE

Rev Date Details Prepared by Reviewed by Approved by

1 9 September 2014

Draft report for client comment

Jenny Rush, Senior Hydrogeologist

Joanna Bolding, Assistant Hydrologist

Tom Hargreaves, Associate, Groundwater and Water Resources

Julien Harou, Project Advisor

Tom Hargreaves, Associate, Groundwater and Water Resources

2 23 February 2015

2nd

Draft report for client comment

Stephen Cox, Principal Consultant, Groundwater and Water Resources

Jane Sladen, Technical Director, Groundwater and Water Resources


3 14 April 2015 Final report Stephen Cox, Principal Consultant, Groundwater and Water Resources



URS

Scott House

Alenҫon Link

Basingstoke

RG21 7PP



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Limitations

URS Infrastructure & Environment UK Limited (“URS”) has prepared this Report for the sole use of the Environment Agency (“Client”) in accordance with the Agreement under which our services were performed (EAAA-99CLHU6). No other warranty, expressed or implied, is made as to the professional advice included in this Report or any other services provided by URS.

The conclusions and recommendations contained in this Report are based upon information provided by others and upon the assumption that all relevant information has been provided by those parties from whom it has been requested and that such information is accurate. Information obtained by URS has not been independently verified by URS, unless otherwise stated in the Report.

The methodology adopted and the sources of information used by URS in providing its services are outlined in this Report. The work described in this Report was undertaken between February 2014 and March 2015 and is based on the conditions encountered and the information available during the said period of time. The scope of this Report and the services are accordingly factually limited by these circumstances.

Where assessments of works or costs identified in this Report are made, such assessments are based upon the information available at the time and where appropriate are subject to further investigations or information which may become available.

URS disclaim any undertaking or obligation to advise any person of any change in any matter affecting the Report, which may come or be brought to URS’s attention after the date of the Report.

Certain statements made in the Report that are not historical facts may constitute estimates, projections or other forward-looking statements and even though they are based on reasonable assumptions as of the date of the Report, such forward-looking statements by their nature involve risks and uncertainties that could cause actual results to differ materially from the results predicted. URS specifically does not guarantee or warrant any estimate or projections contained in this Report.



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TABLE OF CONTENTS GLOSSARY ......................................................................................... 1 1 INTRODUCTION ............................................................... 3

1.1 Context .............................................................................. 3

1.2 Project Aims and Objectives .......................................... 3

1.3 Exclusions and Limitations ............................................ 3

1.4 Project Governance ......................................................... 4

1.5 Wider Stakeholder Engagement ..................................... 4

1.6 The Definition of Resilience for the Project .................. 5

1.7 The Current Report .......................................................... 7

2 INFORMATION SOURCES ............................................... 9

2.1 Public Water Supply Water Resources Planning ......... 9

2.2 Drought Planning ........................................................... 10

2.3 Other Information Sources ........................................... 11

3 OPTION TYPES AND CHARACTERISTICS .................. 12

3.1 Introduction .................................................................... 12

3.2 Conventional Groundwater or River Abstraction ....... 12

3.3 Aquifer Recharge ........................................................... 16

3.4 Surface Water Reservoirs ............................................. 19

3.5 Water Transfers .............................................................. 23

3.6 Effluent Re-use ............................................................... 27

3.7 Desalination .................................................................... 29

3.8 Leakage Reduction ........................................................ 31

3.9 Metering .......................................................................... 33

3.10 Water Efficiency ............................................................. 35

3.11 Drought Plan Measures ................................................. 37

3.12 Size, Cost and Implementation Timescales of Potential Options ........................................................................... 38

3.13 Summary of Option Types and Characteristics ......... 48

4 OPTION STRATEGIES AND INDICATIVE COSTS ....... 54

4.1 Introduction .................................................................... 54

4.2 Water Availability Assessment Results and the need for Option Strategies ........................................................... 54

4.3 Estimated Cost of an Option Strategy ......................... 56

4.4 Real Options Appraisal Considerations for an Option Strategy ........................................................................... 60

5 CONCLUSIONS AND RECOMMENDATIONS ............... 64

5.1 Conclusions ................................................................... 64



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Report Tables Table 1-1 Project Steering Group ...................................................................................................................... 4 Table 1-2 List of Attendees for the PWS Workshop Event on 24 April 2014 .................................................... 4 Table 1-3 List of non-PWS Sector Interviews .................................................................................................... 4 Table 3-1 Potential Lead-in Times for Option Development ........................................................................... 47 Table 3-2 Option Types Considered and Resilience Characteristics .............................................................. 52 Report Figures Figure 1-1 Cabinet Office Components of Infrastructure Resilience ................................................................. 5 Figure 1-2 Key Focus of the Strategic Water Infrastructure and Resilience Project ......................................... 6 Figure 1-3 Relationship between the Project Technical Reports ...................................................................... 8 Figure 3-1 Water resource reliability: percentage of time water would be available for abstraction for new licences

9 ........................................................................................................................................................... 14

Figure 3-2 Spatial distribution of abstraction licenses for “spray irrigation – storage”, by EA CAMS, relative to (a) EA water resource availability and (b) irrigation abstraction ‘hotspots’

28 ................................................... 20

Figure 3-3 PWS Feasible Option Types in England and Summed Water Available for Use (July 2014) ...... 42 Figure 3-4 Average, Minimum and Maximum Size of Individual PWS Feasible Options (July 2014) ............. 42 Figure 3-5 Normalised Cost of Water Available for Use in England by PWS Feasible Options (July 2014) .. 42 Figure 3-6 Normalised Cost of Water Available for Use in England by PWS Feasible Options and by Component (July 2014) ................................................................................................................................... 43 Figure 3-7 Undiscounted and Normalised Cost of Water Available for Use in England by PWS Feasible Options (July 2014) .......................................................................................................................................... 43 Figure 3-8 Examples Demonstrating Potential Economy of Scale for CAPEX Costs ..................................... 43 Figure 3-9 Total capital costs for earthworks and lining of on farm reservoirs by storage capacity (m3) from 2012 survey ..................................................................................................................................................... 44 Figure 3-10 Estimated average annual costs (£2012/m3) per unit of water delivered, for different sized reservoirs (small, medium and large) either lined or unlined

28 ........................................................................ 45

Figure 4-1 Selected Water Availability Results for an Extreme Drought, with Environmental Protection but without Demand Restrictions ........................................................................................................................... 55 Figure 4-2 Core Water Availability Assessment Results and the Need for Long Term Options ..................... 58 Figure 4-3 Estimated Range of NPV Costs for an Option Strategy to Satisfy Deficits in the Core Water Availability Assessment Results ...................................................................................................................... 59 Figure 4-4 Environment Agency Pathways Approach ..................................................................................... 63

5.2 Recommendations ......................................................... 64

6 REFERENCES ................................................................ 66



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GLOSSARY

AIC Average Incremental Cost

AISC Average Incremental and Social Cost

ARR Artificial Recharge and Recovery

ARS Artificial Recharge Scheme

ASR Aquifer Storage and Recovery

CAMS Catchment Abstraction Management Strategy (Environment Agency)

CAPEX CAPEX includes non-recurring costs associated with the acquisitions or disposal of fixed assets, i.e. pipeline or land purchase.

Defra Department for Environment, Food and Rural Affairs

Deployable Output The output of a commissioned source, group of sources or bulk supply as may be constrained by: licence, treatment capacity, raw water mains and/or aqueducts, pumping plant and/or well aquifer properties, transfer constraints, water quality or environmental issues (UKWIR).

DYAA Dry Year Annual Average (water company planning scenario)

DYCP Dry Year Critical Period (water company planning scenario that may represent summer peak demands or a point in the year when water availability is lowest)

EFI Environmental Flow Indicator

MAR Managed Aquifer Recharge

NPV Net present value

OPEX OPEX costs include overheads, operation and maintenance costs and abstraction licence charges.



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Outage Temporary loss of deployable output due to planned or unplanned events (water company term)

PWS Public Water Supply

SELL Sustainable Economic Level of Leakage

UK United Kingdom

UKWIR United Kingdom Water Industry Research

WAFU Water Available For Use

WFD Water Framework Directive

WRMP Water Resource Management Plans (water company)

WRZ Water Resource Zone (water company planning unit)



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1 INTRODUCTION

1.1 Context

The drought of 2010-12 with its two dry winters highlighted the vulnerability of water supplies to drought and other water resource pressures. In England it was realised that the potential for serious water supply shortages is higher than previously imagined. Water supply failure would have impacts on the economy in terms of lost productivity. Similarly, the social and environmental impacts of water supply failure could be substantial if the shortage of supply extended beyond weeks and into months.

The Water White Paper1 set an action for the Department for the Environment, Food and

Rural Affairs (Defra) and the Environment Agency. This was to assess the options to increase future water supply resilience across all water-reliant sectors and to evaluate the social and economic impacts of enhanced levels of resilience to mitigate the effects of water supply shortage.

1.2 Project Aims and Objectives

The ‘Strategic Water Infrastructure and Resilience’ project is a response to questions raised about water resource and water supply resilience in the Water White Paper. The overall aim is to provide information for use by the Environment Agency to advise Defra and other government departments in relation to future guidance on water resource, water supply and environmental resilience in the face of hazards including extreme weather events.

The project has included a conceptual evaluation of the characteristics of the main types of options available to enhance the resilience of water supplies across the main water use sectors in England (both public water supply and non-public water supply). It also considers the current risks, evaluates costs of supplies failing, and looks at future scenarios as well as the impact on present-day economic activity. The needs of the environment are taken into account whilst encapsulating water supply resilience, sustainability and well-being.

The project is designed to provide an understanding of the order of magnitude of the socio-economic impacts of water supply shortages and the order of magnitude of the investment in options that might be implemented to provide resilience.

1.3 Exclusions and Limitations

It should be emphasised that the project, its scenarios, assumptions and data do not attempt to directly represent any current plans or policies of Defra, the Environment Agency, water companies, other water users or other stakeholders, nor do the drought scenarios that have been constructed represent any historical events. The project is exploring scenarios beyond current plans, planning assumptions and the commonly used historical records.

The project does not consider specific options and the scope of the project does not include offering definitive conclusions in respect of specific options or types of solutions, although it is hoped that the discussion of the resilience characteristics of option types is a useful step before further work takes place in this area.

The scope of the project excluded the exploration of ‘non-market valuation’ or ‘willingness to pay’ and a rigorous cost-benefit analysis of solutions to provide resilience. Therefore the project outputs should not be used to make a direct comparison between socio-economic impacts and the cost of solutions.



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1.4 Project Governance

The project sponsors are Lisa Oakes of Defra and Trevor Bishop of the Environment Agency, with Pauline Smith of the Environment Agency as Project Executive. The overall project manager is Nigel Hepworth of the Environment Agency, responsible for the coordination of inputs from the project steering group members listed in Table 1-1. A number of expert advisors have also contributed to the development of the project scope and the review of key deliverables.

Table 1-1 Project Steering Group

Name Organisation Trevor Bishop Environment Agency Pauline Smith Environment Agency Nigel Hepworth Environment Agency Mike Briers Environment Agency Jackie Sullens Defra Lisa Oakes Defra Ben Piper (Peer Review) Atkins

1.5 Wider Stakeholder Engagement

Engagement with wider stakeholders was an important mechanism for the development of the project methodology. The scoping phase of the project began in March 2014 and this included a workshop targeted at public water supply stakeholders during April 2014. A list of attendees is provided in Table 1-2 and notes from the workshop were provided in the final scoping report

2.

It was decided that the views of non-public water supply sectors would be obtained more readily on a one-to-one basis, given the varying degree to which water resources planning is undertaken within these sectors. A list of the non-public water supply sector organisations that were available for interview is provided in Table 1-3.

Table 1-2 List of Attendees for the PWS Workshop Event on 24 April 2014

Name Organisation Name Organisation Adrian Brookes Defra Meyrick Gough Southern Water Ben Piper Atkins Mike Briers Environment Agency Carl Pelling URS Mike Cook Anglian Water Catherine Colebrook URS Nigel Hepworth Environment Agency Chris Lambert Thames Water Pat Spain Severn Trent Water David McGrath Ofwat Patrick Deshpande URS David Mould Canal & River Trust Paul Sansby Portsmouth Water Glenis Pewsey South West Water Robin Smale Vivid Economics Jane Sladen URS Rory Brooke URS John Birkhead United Utilities Sarah Clark Affinity Water Julien Harou Manchester University Sarah Thomas CCW Karen Gibbs CCW Steve Cox URS Lee Dance South East Water Suzanne Dunne Yorkshire Water Lili Pechey URS Tom Hargreaves URS Lisa Oakes Defra Trevor Bishop Environment Agency William Robinson Essex and Suffolk Water

Table 1-3 List of non-PWS Sector Interviews

Name Organisation Date Andy Limbrick Energy UK 21/07/2014 Peter Andrews Food and Drink Federation 23/07/2014 Debbie Stringer Confederation of Paper Industries 23/07/2014 Paul Hammett National Farmers Union 30/07/2014



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URS is grateful to the project manager, the project steering group and the wider public water supply and non-public water supply stakeholders for their contributions to this project. It has been URS’ aspiration to recognise within the project deliverables the wide range of views that exist.

1.6 The Definition of Resilience for the Project

There is currently a significant focus on improving the ‘resilience’ of water supply sectors in England, although the definition of resilience can be broad and may continue to be debated, not least as Ofwat consults further on its new Resilience Duty in the summer of 2015.

The degree of resilience can be measured against one or more (many) hazards (or pressures). A high level definition of resilience was offered in the Cabinet Office approach for infrastructure

3:

Resilience is the ability of assets, networks and systems to anticipate, absorb, adapt to and/or rapidly recover from a disruptive event

The Cabinet Office approach identifies four components of infrastructure resilience, as shown in Figure 1-1. However, it is important to recognise that the definition of resilience is broad and many other terms (characteristics) can apply, such as ‘flexibility’ and ‘adaptability’.

Figure 1-1 Cabinet Office Components of Infrastructure Resilience

There are many examples of events that have disrupted water supplies in England in the past. These include:

waste fires, herbicide spills, oil spills, cryptosporidium, metaldehyde and other pollution risks to rivers and groundwater;

flood events impacting the water quality of raw abstractions, inundation of water treatment works and other infrastructure;

storms causing loss of power supplies and communications;

extreme winter weather causing failure of water mains and leakage;

extreme summer temperatures increasing the demand for water and leakage;

droughts that have caused a reduction in water available for abstraction;

dam, sluice, aqueduct and canal failures; and

other infrastructure failures.

A comprehensive list of potential hazards that can test the resilience of water supplies and associated infrastructure was developed within a recent UK Water Industry Research study

4.

This includes hazards that are familiar, but also those for which there is little or no experience



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in England. In addition to the causes of disruption or failure identified above, operational or support systems, wider power, supply chain, infrastructure or governance failure or breakdown could impose significant consequent disruption or failure of water supplies.

In moving towards a definition of resilience for the project, it was necessary to identify the hazard(s) that should be the focus of the project. Views were sought on this from the Executive Steering Group and during stakeholder consultations. URS’ interpretation of the consensus view was that the key emphasis should be on the resilience of water supplies to severe and extreme drought, whilst taking into account a number of other non-drought related pressures.

This approach acknowledges that while extreme events such as flooding can have a profound impact on certain water suppliers, the impacts tend to be highly localised and of short duration. Furthermore, resilience to flooding can be developed through the existing investment planning frameworks. In comparison, extreme droughts can last for a number of years and they have the potential to affect large swathes of England, potentially requiring strategic and shared options to develop resilience. Stakeholders also suggested that the socio-economic impacts of extreme droughts are likely to be transferable to other non-drought related extreme events that might also be widespread and longer duration (but have not yet been experienced).

Following a decision to focus the project on resilience of water supplies to severe and extreme drought, it was then necessary to define severe and extreme. The water resources management plans that are currently prepared by water companies in England are guided to demonstrate how supplies will be maintained through a repeat of the worst event on record, with encouragement to use data records that extend back to at least the 1920’s. The Environment Agency has found that the severity of the worst events that lie behind the water company supply forecasts may range from events of about a 1 in 20 year return period (fifth or sixth worst event on record used) to perhaps a 1 in 200 year return period; the majority of water company water resources management plans probably cover droughts with a severity of around a 1 in 50 year return period up to a 1 in 100 year return period. These indications of severity, whether direct from water companies or interpreted by the Environment Agency, are not precise. This notwithstanding, feedback from stakeholders was that the project should focus on drought events that are a little bit worse in severity (a ‘severe’ scenario and around a 1 in 100 year return period), to events that are much more severe than those for which planning currently occurs (an ‘extreme’ scenario and around a 1 in 500 year return period) (see Figure 1-2).

Figure 1-2 Key Focus of the Strategic Water Infrastructure and Resilience Project



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Taking into account this focus on severe and extreme drought events, a definition of resilience has been adopted for the Strategic Water Infrastructure and Resilience project as set out below:

‘Resilience’: The ability of the environment, economy and society across England to withstand and recover from water supply shortages, with a focus on shortages caused by drought events that are more severe than those currently planned for. Where:

– ‘more severe’ is with respect to drought event magnitude, duration and frequency, leading to failure of the water supply system (standpipes and rota cuts for PWS and substantial reductions in available abstraction for non-PWS including spray irrigation);

– ‘withstand’ and ‘recover’ refers primarily to the mitigation of unacceptable impacts on the environment, society and economy by (a) implementing strategic options such as new infrastructure and (b) improving the response and recovery measures within strategic plans as the risks and uncertainties in the environment are better understood; and

– ‘across England’ refers to a national, regional and city scale.

The key metric of resilience for this project is the social, environmental and economic impacts (in pound sterling) that occur during water supply shortages (when normal water supply and environmental demand for water cannot be met). These impacts can be mitigated by the implementation of strategic options (investment in pound sterling) that can help England ‘withstand’ and ‘recover’ from severe and extreme drought events. Therefore an important sub-metric is water availability in terms of the magnitude (in mega-litres per day, Ml/d) and duration of water supply shortages that might occur under severe and extreme drought in England.

The above definition and metrics were identified and agreed during the scoping stage of the project and remained the appropriate definition of resilience for the project. A wider definition of resilience was suggested more recently following the CIWEM conference on resilience held on 10th December 2014:

Resilience is the capacity to maintain essential services under a range of circumstances from normal to extreme. It is achieved through the ability of assets, networks, systems and management to anticipate, absorb and recover from disturbance, whilst ensuring the environment and ecosystems support that and can also recover to their original state. It requires adaptive capacity in respect of current and future risks and uncertainties as well as experience to date

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The definition will continue to evolve, for example, as Ofwat consults on its new resilience duty later in 2015.

1.7 The Current Report

The overall outputs of the Strategic Water Infrastructure and Resilience project comprise a summary report with three stand-alone technical annexes:

Annex A: Water Availability Assessment

Annex B: Option Characterisation

Annex C: The Socio-economic Impacts of Resilience of Water Resources and Water Supplies

The current report is technical Annex B and provides an overview of potential strategic options, including their resilience characteristics. The development of option strategies in this project is not a least cost optimisation exercise (as undertaken formally within PWS planning).



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Rather the focus is on providing high level information on costs and the resilience to severe and extreme events (drought in particular) that different options provide.

The options are sized to mitigate the deficits in water availability identified within Annex A and the associated socio-economic and environmental impacts identified in Annex C. The high level relationship between the three stand-alone technical reports is shown on Figure 1-3.

Figure 1-3 Relationship between the Project Technical Reports

Average % demand restriction over 1 or 3 year droughts

Quarterly % demand restriction over 1 or 3 year droughts

Regions where demand restrictions are most likely

Potential type, capacity, location and cost of long term strategic options to enhance resilience

Overview of scenario supply and demand needs across all main water use sectors

Social, environmental and economic impacts of maintaining supplies by drought measures and/ or permanent water infrastructure investment, for project scenarios

Areas that are potentially in need of long term strategic options

Impact of long term strategic options



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2 INFORMATION SOURCES

2.1 Public Water Supply Water Resources Planning

At the national scale, the Environment Agency (and its predecessor, the National Rivers Authority) has and continues to undertake a national and regional review of water resource needs based on all sector usage and sets out high level strategies for addressing forecasted deficits in supply and demand. These national water resources strategies set the policy direction for managing supply and demand into the future in response to uncertainties regarding increasing demand and impacts of climate change. They identify where demand management across abstraction sectors needs to be focused and identify what strategic scale new resources may need to be considered. Environment Agency water resources strategies have been referenced where appropriate within this report.

In conjunction with the direction of the national strategies, water resource planning has been undertaken by water companies in relation to PWS since privatisation. Water companies have a statutory duty to prepare, consult, publish and maintain a Water Resource Management Plan (WRMP) under new sections of the Water Industry Act 1991, brought in by the Water Act 2003. WRMPs include a review of feasible options to address supply and demand imbalances in relation to PWS needs over a 25 year planning horizon. The balance that is maintained is tied to a specific frequency of demand restrictions e.g. a water company might plan for a balance that leads to demand restrictions once every fifty years (on average).

The development of comprehensive WRMPs combined with the interconnectivity within and between water resource zones suggests that water companies generally have significant in-built resilience. WRMPs require the estimation of outage allowances, which are deducted from deployable output to calculate Water Available for Use (WAFU). The outage allowance provides resilience against short term hazards such as spikes in poor water quality (e.g. turbidity). WRMPs also calculate and assume a profile of headroom uncertainty, which takes into account uncertainties in the supply and demand balance e.g. gradual pollution, or uncertainty of impact of climate change on supply and demand. Water company WRMPs have been referenced throughout this report where appropriate. In particular, the report considers the long term options proposed by water companies for meeting the demand for PWS in a dry year (but not extreme drought); the Environment Agency collated data on options from draft WRMPs tables in June 2014

6 and the Environment Agency spreadsheet headings are as

follows:

Company Name e.g. Affinity Water

WRZ zone name e.g. East Suffolk

Planning Scenario e.g. DYAA & DYCP

Row ref e.g. 59.1a

Option Name e.g. Desalination and treated water transfer

Option reference no. e.g. SEW-CTR-RZ1-5190

Type of option e.g. reservoir enlargement

Preferred option (yes or no)

Earliest potential start date e.g. 2020-21

Costs based on capacity (utilisation or capacity)

WAFU on full implementation (Ml/d)

NPV of WAFU (Ml)



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CAPEX NPV (£000)

OPEX NPV (£000)

NPV of opex savings (£000)

NPV of carbon (£000)

Social & Env. NPV (£000)

TOTAL NPV (£000)

AIC (p/m3)

AISC (p/m3)

It is recognised that this data represents a snap-shot in time of the feasible and preferred options being considered by water companies i.e. it may not wholly reflect the selection of options within the more recent final WRMPs (although overall trends are expected to be similar).

Water resources planning within other water use sectors in England such as power generation and agriculture is less comprehensive. For this reason, a great deal of the evidence presented within this report is necessarily derived from PWS planning. However reference to non-PWS information is made where possible and it is appreciated that an integrated (multi-sector) approach to water resources planning has been gathering momentum in recent years.

2.2 Drought Planning

The Environment Agency, Canal & River Trust, water companies and other organisations operate drought management plans.

The Environment Agency produces national, regional and area ‘water situation reports’ on a monthly basis for rainfall, soil moisture deficit, river flows, groundwater levels and reservoir storage. Rainfall and river flow status is also reported on a weekly basis. These reports inform the timing of stakeholder engagement and implementation of activities/options to help manage the water supply and demand deficit under drought conditions (with respect to the environment, society and economy).

Water companies produce drought plans as a requirement of The Water Act 2003. A range of scenarios are explored, including single year droughts and prolonged three year droughts. The status of key drought indicators is monitored (often overlapping with those sites reported on within the Environment Agency water situation reports). Trigger levels are used to inform the timing of stakeholder engagement and implementation of short term activities/options including demand restrictions. Water companies have agreements with their customers regarding the return period (i.e. frequency) for demand restrictions.

Water company drought planning is comprehensive and for this reason, much of the evidence presented within this report is necessarily derived from PWS drought planning. In particular, the report considers drought options that are used by water companies for maintaining the supply and demand balance in a drought event; the Environment Agency collated drought management measures in water company drought plans for use within this project

7. The

Environment Agency spreadsheet headings are as follows:

Demand restrictions (% of distribution input)

Drought permits (abstraction) in Ml/d

Drought Orders (abstraction) in Ml/d

Emergency Drought Orders (abstraction) in Ml/d



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Emergency Drought Orders (environment) in Ml/d

Drought Schemes demand side in Ml/d

Drought Schemes supply side in Ml/d

Inter-company drought schemes – imports in Ml/d

Inter-company drought schemes – exports in Ml/d

Other

The demand restrictions data has also informed the development of typical demand restriction profiles for use within the Water Availability Assessment (Annex A of the project summary report) and the Socio-economic Impact Assessment (Annex C of the project summary report).

2.3 Other Information Sources

A full list of references is provided at the end of this report and some of these provide evidence of an increasing focus on an integrated (multi-sector) approach to water resources planning. Within the scope of this project it has only been possible to touch upon some of the points that are made within the wide range of available references. However it is anticipated that the list provides a useful starting point for further reading and the on-going consideration of option strategies to provide resilience in England.



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3 OPTION TYPES AND CHARACTERISTICS

3.1 Introduction

The water availability assessment for the project (Annex A to the summary report) has identified deficits in water availability under a number of drought related scenarios. There are numerous feasible options (or combinations of options) that could be proposed to address a deficit and improve resilience. In reality, the suitability and preference for options in that location is based on local, catchment specific issues such as hydrological or hydrogeological variance, ecological designations, planning constraints, infrastructure availability, and land availability amongst others. Because the spatial scale of the assessment for this project is national (i.e. across England), it is not possible for the project to consider all of the catchment specific issues that would make an option feasible, or preferable, in each of the spatial units identified. Instead, for strategic long term options, the focus is on developing options that can be applied and considered at a strategic scale based on defensible broad-scale assumptions.

This section of the report provides an overview of key potential strategic options including their resilience characteristics. The background information that is available for different option types varies considerably; in England, there is relatively little experience with certain option types (such as desalination), and in addition, much of the available information is in the context of PWS planning rather than non-PWS planning. This notwithstanding the current report attempts to provide a balanced view of the option types that are available.

It is recognised that the list of option types in this report is not exhaustive and that there can often be interdependencies (e.g. water transfers may rely upon other new options being developed to ensure they are effective). However, this approach is required to provide structure to the report. The characteristics of different option types are described in Section 3.2 onwards.

The identification of the need for options and the likely investment costs is provided in Section 4, with reference to the water availability assessment results identified in Annex A of the summary report (see Figure 1-3).

3.2 Conventional Groundwater or River Abstraction

3.2.1 Introduction to Option Type

This option type refers to the conventional use of aquifers and rivers in England, whereby the available resource represents effective rainfall that either recharges an aquifer (i.e. the resource is not augmented by artificial recharge) or runs-off into a river. Surface water options are often linked with other existing assets such as waste water treatment works or reservoirs and therefore may also be considered as in-direct effluent reuse or reservoir options; consequently the main focus in this report is on conventional groundwater abstraction.

Within this report new groundwater options refer to the drilling and development of abstraction boreholes at a new site for the purpose of increasing supply. Groundwater enhancement refers to works or investigations associated with an existing groundwater source (e.g. nitrate catchment management or the drilling and development of new abstraction boreholes) to enhance the existing supply.

These conventional groundwater and surface water sources are supply options that can increase raw water abstractions in England. They focus on maximising the sustainable abstraction (i.e. ensuring environmental protection) of natural groundwater recharge or flows in rivers.



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3.2.2 Location, Environmental and Social Constraints and Benefits

The development of new groundwater sources and the enhancement of existing groundwater sources is constrained by the existence of a suitable aquifer. In England the Environment Agency has classified underlying strata as either ‘Principal aquifer’ (capable of providing water supply at a strategic scale), ‘Secondary aquifer’ (capable of providing water supply at a local scale) or ‘unproductive strata’ (negligible water for supply).

Abstraction of groundwater and surface water is further limited to catchments where, according to the Environment Agency’s Catchment Abstraction Management Strategies (CAMS), water can be taken without impacting river or groundwater flow reserved for the environment; sufficient environmental flows are required to support good ecological status for water bodies under the Water Framework Directive (WFD). New groundwater abstraction also has the potential to cause saline intrusion in coastal areas or affect groundwater dependent terrestrial ecosystems e.g. a Sites of Special Scientific Interest (SSSI); these impacts are also relevant to the WFD.

Water companies will have assessed the availability of water prior to including schemes in their list of feasible resourcing options. Similarly, non-PWS sectors will also identify the feasibility of schemes through liaison with the Environment Agency under the licence application process.

Water availability in England (with respect to both groundwater and surface water) is shown in Figure 3-1, which demonstrates that even under non-drought conditions, there is limited water available for abstraction across much of England (because these resources have already been significantly developed). This means that traditional groundwater and surface water options are unlikely to provide a new and reliable source of water, particularly under drought conditions. In particular, there is little additional scope in the south east of England for new groundwater abstraction, which is already near, at, or above the maximum that can be allowed before there is significant environmental damage

8.

Non-environmental potential impacts of groundwater abstraction include subsidence, impacting built structures, or damage to buried cultural heritage where intersected by a cone of depression.

Despite the lack of potential for significant new groundwater or surface water abstraction, where development is possible, it may take the pressure off existing sources where over-abstraction is an issue; the Midlands, Anglian and North East areas of England probably have the most potential for further groundwater development; areas in the North East and the Midlands may have the most potential for new surface water abstractions.



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Figure 3-1 Water resource reliability: percentage of time water would be available for abstraction for new licences

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3.2.3 Current and Future Policy, Regulatory Considerations and Opportunities for Sharing

Groundwater and surface water abstraction is regulated by the Environment Agency under the Water Resources Act 1991 (with amendments introduced by the Water Act 2003) and authorisation is generally required to abstract over 20m

3/day; a number of abstractions are

currently exempt from licencing control. PWS and non-PWS sectors may apply for either a full, temporary or transfer licence by the Environment Agency, depending on the activity. Newer licences are time limited and reviewed on a regular basis in line with River Basin Management Planning (RBMP) cycles, although the pool of historic licences is not so easily adjusted. However the Environment Agency’s Restoring Sustainable Abstraction (RSA) programme is used to manage the impact of historic over-abstraction and to provide a solution, such as voluntary licence sustainability reductions.

The Environment Agency position statements10

for groundwater include:

N1 - Sustainable catchments: CAMS aim to ensure that the total authorised abstraction from any groundwater management unit does not exceed the long-term annual average available resource, after environmental needs have been accounted for. This will support achievement of the good groundwater quantitative status requirements of the WFD.

N2 - Reducing unsustainable abstractions: We will progress options to reduce licensed abstractions that are causing environmental problems; in excess of the available resource; threatening to cause environmental problems if fully utilised.

N3 - Time-limited licences and tests for renewal: All new abstraction licences and most variations will be time-limited. Time-limited licences will carry a presumption of renewal where licence holders can satisfy us that all of the following three tests are met: environmental sustainability is not in question; there is continued justification of need; the licence holder can demonstrate that water used as a resource is being used in an efficient manner.



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N4 - Water resource management arrangements: We will take steps to secure the proper management of water. Where appropriate, we will enter into water resources management arrangements with abstraction licence holders to protect or enhance the water environment or to secure the proper management of water resources.

N5 - Protecting groundwater resources: We will only authorise abstractions if it can be shown that: there will be no derogation of existing protected rights; there will be no unacceptable detriment to any groundwater-dependent environmental features such as rivers, lakes or wetlands; they can be managed so that they will not cause pollution; there will be no environmentally significant upward trends of pollutants through the intrusion of saline or polluted waters.

There are no known examples of the local infrastructure associated with groundwater or surface water abstractions being directly shared between PWS and non-PWS. However there is probably existing (and high potential for future) sharing of these resources via water transfers. In theory resource can also be shared by licence trading in addition to water transfers. For example, water companies invited proposals for trading of water from non-PWS licence holders as part of the development of their latest WRMP’s. Recently there has also been a greater emphasis on exploring potential multi-sector collaboration on water asset investment, including The Cambridge Natural Capital Leaders Platform that identifies various finance models

11.

In the future, it is anticipated that water trading will become more fluid under Defra’s Abstraction Reform proposals for implementation in the 2020s (these have arisen following publication of the Water White Paper

1); this will help to optimise groundwater and surface

water abstraction in England. Defra has also been exploring how abstraction reform options might perform under drought conditions within the complex hydro-economic models built for the Regulatory Impact Assessment.

3.2.4 Degree and Type of Resilience that Options Provide

The primary purpose of enhancing or developing new groundwater or surface water sources is to increase resources available to the PWS water supply network or to non-PWS sectors. However, the current low availability of groundwater and river flow for abstraction is such that large new sources are perceived to be unavailable for development in the future; this is necessary to maintain environmental resilience.

The above aside, groundwater abstractions are often considered to be more resilient to drought events than river abstractions because the storage capacity of aquifers means they are less susceptible to changes in rainfall patterns. However the rate at which abstraction can occur may still reduce in a drought, particularly for multi-year droughts as storage in aquifers becomes depleted. At the PWS stakeholder engagement event in April 2014, a consensus view was that groundwater development generally provides high resilience against shorter droughts (although this is still dependent on aquifer type), but it is less effective in longer duration droughts; they have only really been tested under two dry winter duration droughts. Conventional river abstractions have a low resilience to droughts because they are not associated with storage capacity, making them vulnerable to low river flows and levels.

The degree to which conventional groundwater abstractions are affected by flooding and temperature extremes can be dependent on the aquifer from which they abstract, whether those aquifers are confined or unconfined, and the position of the groundwater abstraction within the surface water catchment from a flood risk perspective. Some groundwater sources have been prone to disruption during flooding events, though improvements to bunding, treatment capability and back-up power can be implemented. Groundwater abstractions are generally less exposed to temperature extremes than many other option types because the water resource is stored underground. In many cases it may also be possible to increase abstractions temporarily to meet higher demand in a heat wave. Overall, conventional



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groundwater abstractions are perceived to have a high resilience to flood events and temperature extremes relative to other option types. Conventional surface water abstractions are perceived to have a low resilience to flood events (particularly fluvial flooding) and temperature extremes because they are situated on a river and the water resource is exposed.

3.3 Aquifer Recharge


Aquifer or Artificial Recharge (AR), or Managed Aquifer Recharge (MAR), is the augmentation of groundwater resources for the purpose of storing water for future use. The source of this water could be surface water, runoff water, wastewater, groundwater or water for potable supply

12. Aquifer Storage and Recovery (ASR), also referred to as Artificial Recharge and

Recovery (ARR), is a form of AR which consists of the injection of either potable water, or raw water that could be used for potable purposes, into a confined aquifer to create a ‘bubble’ of fresh water than can be re-abstracted when required

13.

An example of MAR in England is the Thames Water North London Artificial Recharge Scheme (NLARS), which has been in operation since 1995. The NLARS is the only large-scale ARS scheme in the UK, consisting of 48 boreholes; it pumps excess water into the Chalk aquifer from the London Ring Main during periods of low demand and out again when demand peaks

14. There are a number of other smaller artificial (or aquifer) recharge schemes,

including ASR development in the Sherwood Sandstone aquifer on the eastern Vale of York15

and the Wandle AR scheme in the confined Chalk aquifer south of London

16.

Artificial recharge is a supply option that can increase raw water abstraction in England. It can optimise the available natural resource (store water in times of plenty for abstraction at a later date when there is a drought or other pressure on the water supply system).


ASR and AR have a small surface footprint and can be developed on a piecemeal basis in the UK, a borehole at a time as water demand grows. However no large-scale investment has taken place for some three decades and since privatisation of the public water supply sector

14. The applicability and success of aquifer recharge schemes is dependent on various

factors including:

Precipitation will often determine the quantities of water available for storage. An understanding of the water balance will help to identify the temporal and spatial availability of this water for storage;

Geology and hydrogeology will determine the storage space available and the ease with which water can be recharged and recovered; and

Water quality considerations are important. Artificial recharge could improve overall water quality in unconfined aquifers through replenishment of resources and dilution, or by providing a hydraulic barrier to saline intrusion. In confined aquifers, often containing brackish groundwater, the water recovered following injection by recharge well may have deteriorated through mixing and dissolution of minerals (but can also improve via nitrate removal and attenuation of organic compounds)

12.

While various UK water companies have explored the use of MAR and ASR, difficulty in identifying a successful combination of all of these factors has been cited as a key limiting constraint:

No suitable aquifers – Welsh Water17

;

Water quality issues, e.g. fluoride in Chalk ASR – Wessex Water17

;



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Perceived link to ground movement & infrastructure risk – Yorkshire Water17

;

Limited availability of injection water, risk of clogging due to fine sands, risk of changes to water quality, potential for recharge water loss, distance to the potential recharge source, and potential reactivation of spring lines resulting in flood risks – Anglian Water

18; and

Very few applicable sites identified due to constraints in terms of the appropriate confined aquifers (where unconfined, ASR schemes could affect surface water bodies or existing sources) and sources for providing the potable or raw water to be stored – Southern Water

13.

The geographical constraints of the option type mean that installations may sometimes be located far from where storage/ demand problems need to be addressed; in particular this is likely to be more of an issue for non-PWS where there is little existing infrastructure or investment in new infrastructure would be difficult. This notwithstanding, where aquifer recharge options can be developed (assessments of potential have been made

19) only a small

area of land is required to store relatively large quantities of water; this can make groundwater storage more favourable than surface water reservoir storage. ASR can also utilise aquifers that would otherwise be considered as marginal or useless

19. As previously stated there may

also be improvements to water quality in the aquifer through implementation of aquifer recharge

19.

With respect to the environment, if poorly managed there is potential for aquifer recharge options to adversely impact streams, wetlands or existing licensed abstractions where the target aquifer becomes unconfined; although in the long term the net abstraction can be negligible, impacts may occur locally and on a seasonal basis

19. Conversely they may also

have the potential to restore groundwater levels, low flow rivers and groundwater-fed wetland, reduction of subsidence and reduce/prevent saline intrusion

19.


All AR and ASR schemes require authorisation from the Environment Agency under the Water Resources Act, 1991 (as amended by the Water Act, 2003) and the Environmental Permitting Regulations, 2010

10. Authorisation consists of a licence to abstract water from an aquifer or

surface water source, or groundwater investigation consent, and an environmental permit or exemption to discharge water to surface or groundwater.

The Environmental Permitting Regulations 2010 (as amended) lists artificial recharge or augmentation of a body of groundwater for the purposes of groundwater management as an acceptable activity, so long as it does not compromise the groundwater objectives in Article 4 of the Water Framework Directive (WFD).

The Environment Agency position statements for aquifer recharge include10

:

P8-1 control of schemes: We will regulate all artificial recharge and subsequent re-abstraction over 20m

3/d to ensure effective development of water resources whilst at the

same time protecting the environment and other abstractors. In particular, schemes must be sustainable in terms of quantities recharged and re-abstracted.

P8-2 detailed investigation: We require developers to undertake appropriate investigation for ARR schemes. This will include a hydrogeological risk assessment at the pre-licence stage and method statements for their construction and operation, to avoid drilling through contaminated soil or ground, or creating undesirable links between discrete aquifer units.

P6-10 augmentation of groundwater resources: Providing there is no pollution or risk of groundwater flooding, we will encourage the augmentation of groundwater resources through techniques such as… artificial recharge, particularly where resources are scarce, or where such activities would reduce the flood risk from development.



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Challenges were raised in a Thames Water presentation on MAR, including is the current abstraction licensing framework fit for purpose?

17: Another potential issue may arise where

aquifer recharge schemes utilise part of an aquifer that is not wholly within a water company boundary (are contractual arrangements required)? These types of questions may need to be addressed if future development of aquifer recharge schemes is required.

With respect to sharing, there are no known examples of the infrastructure associated with this type of scheme being shared between PWS and non-PWS (at least not direct sharing). However as the principle of aquifer recharge, AR and MAR, is the augmentation of groundwater resources for the purposes of storing water for future use, there is an indirect but high opportunity for PWS and non-PWS to share augmented resources within a WRZ or catchment through water transfer and trading options.


The large scale North London Artificial Recharge Scheme (NLARS) was designed to enhance short-term supply capability during drought (i.e. a drought plan option) and operates with long periods of relatively small-scale recharge followed by shorter periods of large-scale abstraction

20. Despite this, the scheme is flexible and has non-drought related resilience

characteristics; in the past it has been used to offset local raw water supply problems such as algal blooms in surface water reservoirs, contamination of unconfined groundwater sources, and engineering activities (e.g. drain-down of surface water reservoirs)

21. The NLARS raw

water sources have also been considered for their potential to provide emergency supply using temporary treatment during times of major unexpected (drought or non-drought related) outages of treated water capacity

21. This commentary emphasises that artificial recharge

schemes have the potential to provide wider resilience.

With respect to potential future schemes and resilience characteristics these are cited as:

Providing dual resilience/resource benefits22

(i.e. in addition to providing supply in a drought they also provide greater flexibility if there are problems with other sources).

Providing extra water in summer and drought13

;

Balancing groundwater catchment resources and has potential to provide sufficient future resilience

23; and

Providing a contingency option and to facilitate a water transfer23

.

AR has the advantage over many other water storage options of reduced evaporative losses and a greater year-to-year storage capacity in some settings

24. Where recovery efficiency and

environmental acceptability are high, ASR can offer a way of developing and managing groundwater in a genuinely sustainable manner

25.

An Environment Agency view is that water storage, including Artificial Recharge and Recovery (ARR), is one of the ways to increase resilience to climate change

10. It is seen as an option

for increasing water availability (particularly in peak demand periods); redressing previously unsustainable water resources abstractions under the RSA Programme; and providing an alternative to small and medium sized surface water reservoirs.

At the PWS stakeholder engagement event in April 2014, some of the views were that ASR is the only real groundwater option in some parts of England. However the degree of resilience provided is largely unproven and the yields may be small. Risks to the provision of resilience include the possibility that future schemes might ‘leak’ to rivers or to the coast. The effectiveness of these schemes may also be impacted by increasing demand for water i.e. if demand rises, there may not be sufficient periods of time during which resources can be redirected towards the artificial recharge to provide a sufficient store of water for use at a later date.



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Overall, it is likely that current or planned aquifer recharge type schemes (similar to conventional groundwater abstractions) can provide high resilience against short sharp shocks such as droughts, peak demands, or the temporary loss of other more vulnerable sources from flood events or temperature extremes. However they are not intended to provide a longer term and continuous water supply and may not provide resilience against longer drought events. This option type is unlikely to be effective unless part of a well-managed conjunctive use system and the location related constraints are such that it is unlikely to be strategic in a national context.

3.4 Surface Water Reservoirs


Surface water reservoirs store excess water during times when supply is plentiful to provide a reliable water supply when there is a lack of resource. Typically this involves storing water during high rainfall/ high river flow periods in the winter to be used during low rainfall periods (including augmentation to low river flows). In many parts of England, water company (PWS) reservoir levels are monitored to assess the water resource situation and contribute to the trigger of drought plan related actions.

There are two main reservoir options available to water companies; building a new reservoir or enhancing an existing reservoir through enlargement (extending or raising). The options available for building new reservoirs are

26:

Bunded – man-made banks all round;

Bankside – partially bunded with natural topography; and

Impoundment – dam and natural topography.

Water company options tend to be medium to large scale reservoirs. Non-PWS reservoirs can also be significant, including those operated by the Canal & River Trust to help support demand for water to maintain navigation and provide other benefits. There are also numerous on-farm reservoirs that provide smaller scale storage for agriculture (e.g. spray irrigation).

Reservoir storage is a supply option that increases raw water availability in England and it optimises the naturally available resource by filling reservoirs in times of plenty for release at a later date (e.g. in response to a drought event).


The water industry in England and Wales currently operates 650 storage reservoirs for PWS27

. In theory, there are few physical geographical constraints on the location of a new reservoir. However proposals for large reservoirs (e.g. for PWS) are highly controversial and would gain the interest of a number of stakeholders. Some of the issues include:

The size of the potential reservoir, and therefore the space required to build it;

Communities impacted by the reservoir including visual intrusion, and with potential rehousing issues and inundation of infrastructure;

Loss of open countryside and farmland; and

Associated environmental impacts on the local area and wildlife, including loss of habitat and species, and changes to the geomorphological characteristics of watercourses upstream and downstream of the reservoir

26.

Despite the above issues, reservoirs can also introduce new recreational activities to an area and enhanced tourism

26; though during droughts or, even during normal operations, reservoir

draw-down may mean these benefits are lost or compromised. Although certain habitats are



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lost, new habitats are created and habitat connectivity can be improved. Operational rules can also be set to augment low river flows, and to help provide climate change adaption by storing excess winter flows

26.

Smaller reservoirs (e.g. for spray irrigation at one farm) are less controversial and are mostly constrained by the amount of land available for the development of a reservoir. Existing ‘spray irrigation – storage’ licences are concentrated in locations that have a high demand for irrigation

28, mainly in the East of England and in the West Midlands (see Figure 3-2). As of

2010, more than half of these licences were located in the Anglian Region, equating to 68% of the total volume licenced for storage

28.

Figure 3-2 Spatial distribution of abstraction licenses for “spray irrigation – storage”, by EA CAMS, relative to (a) EA water resource availability and (b) irrigation abstraction ‘hotspots’

28

Water availability may be a constraint on the location of on-farm storage reservoirs, although it is assumed that most new on-farm reservoirs would be transferring an existing spray irrigation (river) abstraction licence to a ‘spray irrigation – storage’ abstraction licence. Abstraction would also target higher river flows and therefore it is more likely that water will be available for abstraction.

On-farm storage reservoirs can provide fish farming opportunities, habitat for insects and pollinators, and can contribute towards maintaining summer river flows (thereby protecting in-stream fish habitat). The reservoirs can also increase water amenity in the farm area (e.g. angling, attractive walks)

28.

Potential constraints for on-farm storage include provision of habitat for pests and diseases associated with insects, which could cause crop losses. They also take-up productive land, and evaporative losses may also lead to an overall increase in abstraction, resulting in higher energy consumption and carbon emissions

28, 29.


Water abstraction (as with conventional groundwater and surface water abstraction) is regulated by the Environment Agency under the Water Resources Act 1991 (with

(a) Water resources availability (b) Irrigation abstraction ‘hotspots’



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amendments introduced by the Water Act 2003) and authorisation is required to abstract over 20m

3/day; the abstraction licence will specify under what conditions water can be abstracted

to fill a reservoir.

Reservoir schemes may be referred to as ‘winter storage’ reservoirs due to the assumption that there are greater flows in the winter than the summer (with abstraction only licensed in the winter months). However, the Environment Agency can issue licences that allow abstraction at any time of the year when there are sufficiently high flows. In the case of on-farm reservoirs, this allows a more reliable supply of water for irrigation

28.

Further reservoir specific regulatory conditions include The Reservoirs Act 1975 and the Flood and Water Management Act 2010. The Reservoirs Act 1975 ensures the safety of dams and embankments for all large raised reservoirs. All large raised reservoirs, defined as reservoirs with a capacity of 25,000m

3 or more and raised above ground level, need to be registered with

the Environment Agency. An independent panel engineer is required to supervise the design and construction of these reservoirs and conduct regular inspections, the details of which must be reported to the Environment Agency. The Act also requires any incidents of structure failure to be reported to the Environment agency.

The Reservoirs Act 1975 was amended by the Flood and Water Management Act 2010 to reduce the size of reservoir that needs to be registered to a capacity of 10,000m

3. All

registered reservoirs are to be assessed to determine whether it is classified as ‘high risk’. ‘High risk’ reservoirs are those that could endanger human life in the event of an uncontrolled release of water. If a reservoir is not classed as ‘high risk’, it will no longer be subject to full regulation under the Reservoirs Act 1975.

The Reservoir Risk Designation Guidance was produced by the Environment Agency in 2013, which explains the process of reservoir risk designation

30. The reservoir owner is required to

produce an on-site reservoir flood plan. This will set out plans to prevent the dam from failing in an emergency, and how the effects will be contained and reduced if a failure occurred.

Regarding on-farm storage, the Environment Agency and Cranfield University have produced guidance to planning, designing, constructing and commissioning a storage reservoir, called Thinking about an Irrigation Reservoir?

29. This document provides a guide to farmers for the

design and build of an on-farm reservoir, highlighting the policy and permissions that the reservoir construction and operation need to abide by. The Environment Agency has also produced The owner’s guide to reservoir safety, which identifies the maintenance procedures for small embankment reservoirs to prevent failure

31. At the PWS stakeholder engagement

event in April 2014, there were views that the Reservoirs Act 1975 will ‘put some farmers off’ the development of reservoirs (particularly as funding can also be an issue).

With respect to opportunities for sharing, a number of water companies (PWS) have expressed interest in building a large reservoir for shared (multi-sector) use, from which farmers could pay to re-abstract water on an annual contract, or contribute to the reservoir costs

28. The main issues associated with PWS and non-PWS sharing are that PWS reservoirs

require large time scales for planning and constructing and that the large capacity restricts potential locations, which could impact on the accessibility of the reservoir for farmers

28.

However the University of Cambridge has recently developed four potential financial models for multi-sector investment in shared water assets

11. The study uses the Wissey catchment in

the East of England as a case study with potential for a multi-sector reservoir, as it is one the pilot catchment’s for Defra’s catchment based approach, with low flow and high demand issues. The key stakeholders were identified as the water company, farmers, retailers, financial institutions, engineering consultants and real estate service providers. The four investment models are

11:

a) The Water Company provides full funding for the reservoir, 75% from through regulated channels and 25% from unregulated channels via shareholder equity;



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b) The Water Company finances and owns the regulated 75% of water storage and the farmers finance and own the 25% unregulated water storage;

c) The Water Company finances and owns the regulated 75% of water storage and the retailer finances and owns the 25% unregulated water storage; and

d) A third party investor finances the reservoir and the stakeholders would pay a water usage fee.

A small number of on-farm reservoir collaborations exist between farmers; however there is limited information on the schemes with respect to how they operate, their legal status and the approach to allocating water

28. The benefit of shared reservoirs is the reduction in risk for the

individual farmers, especially if they require the water at different times of the year; challenges include the need to work together, align business plans, and draw up legal agreements

28.

In addition to the catchment based sharing of reservoirs described above, there is also the potential for multi-sector and multi-water company sharing of a regional reservoir in future; this is a concept that has been explored in the Water Resources for the South East (WRSE) group.


The level of resilience provided by reservoirs is dependent on their capacity, their location within the UK and how they are operated. The medium to large water company PWS reservoir schemes can provide flexibility to manage resources in dry periods to improve PWS supply, environmental and climate change resilience

26. They offer a high potential for effective

seasonal management, as relatively large volumes of water can be abstracted during times of high river flow and stored, allowing flexibility to meet peak demands

13; the same will apply to

larger non-PWS reservoirs. Environmental resilience can be enhanced via abstraction during periods of high river flow and release of compensation flows in dry years (although these may be reduced via water company drought plan related permit or drought order applications).

New reservoirs or enlarged PWS reservoir options can take the pressure off existing alternative sources of water e.g. allowing groundwater resources to rest and recharge providing water resource resilience

13. However, to provide resilience to drought (or other

hazards leading to supply shortages), reservoir schemes do need to be operated alongside other sources of water so that stored volumes are kept in reserve. Extending the seasonal effectiveness of reservoirs to cover longer periods, including drought, is dependent on conserving sufficient reservoir volume so that it is available across the extended period of need and lack of refill. This is difficult although operational control rules can be devised to guide use and conservation. To play a role through a severe or extreme drought it may be that the whole or a significant portion of the storage has to be conserved; this may rule out its use in more normal years.

Existing medium to large reservoir schemes are probably adequate for providing resource for abstractions and the environment through short term droughts (medium to high resilience), but may not address the need for resilience to longer term multi-year droughts (low to medium resilience). For example, Bristol Water has indicated that its customers are vulnerable to droughts that last for more than a year (illustrated by modelled projections of how water in storage would reduce)

32 . Medium to large reservoir schemes may also have a lower resilience

to temperature extremes than some of the other option types because the water resource is exposed; although it is recognised they could help to meet high demand for water caused by heat waves. It is possible that reservoirs could also provide (perhaps medium to high) resilience against downstream flood events that might disrupt supplies, although in practice such a use may compromise their ability to provide resilience to severe drought; to provide drought related resilience the reservoir would need to be kept full i.e. there would be limited



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available storage for flood events. The potential for structural failure of the reservoir may also introduce a different type of flood risk to society.

On-farm reservoirs (i.e. small scale reservoirs) enable farmers to plan their summer crop and product supply with greater certainty than when relying on direct surface water abstraction for irrigation

33. They can provide food security and flexibility for the use of water, as farmers can

abstract groundwater and river flows whilst levels are high and store it for use when levels are low. Despite this, on-farm reservoirs are often designed for one season and are vulnerable to long-term drought

11. Overall they are expected to provide low to medium resilience to a severe

one year drought and low resilience to longer multi-year droughts; this was also one of the views raised at the PWS stakeholder engagement event in April 2014. Similar to larger reservoirs they are expected to have a low resilience to temperature extremes. Whilst in theory they may attenuate peak flows to reduce flood risk

28, there are similar drawbacks to

those identified for larger reservoirs.

3.5 Water Transfers


Supplies of raw water in England are generally derived from rainfall dependent sources, including river abstraction, reservoirs filled by river abstraction or impoundment of river water, or groundwater abstraction. Non-PWS sectors are often constrained to a single source of supply e.g. river abstraction only. However the Water Resource Zones (WRZ) operated by water companies can often rely upon a combination of sources and these are often (but not always) used in formal ‘conjunctive use’ operational management schemes, such that the collective performance may exceed the sum of individual performance. Combinations of different types of sources may also provide complementary cover for each other, so that when a particular source of water fails (e.g. river flows in a drought), others can be used in its stead (e.g. groundwater). The local transfers that take place in WRZs are not the focus of this report (whilst recognising that they do contribute significant resilience to PWS, particularly dual mains); rather it is the strategic regional and national water transfer options that may occur between regions, water companies and non-PWS sectors. The natural variability of rainfall across England is such that these strategic transfers of water can often be an effective solution to meeting the demand for water.

The regional or national water transfers can be via pipelines, tunnels, aqueducts, canals or a combination of these with associated pumping stations, break pressure tanks and other facilities

34. Bulk supply agreements, typically between water companies, define the terms of

transfer both under normal operating conditions and in times of water shortage34

. Examples of existing non-PWS to PWS transfers include the Llangollen Canal (for United Utilities) and Bridgewater & Taunton Canal (for Wessex Water).

Water transfers do not increase or decrease the overall water availability in England. However, by moving water from areas of surplus to areas of deficit, they reduce the need to develop alternative local options.


Water transfers can be used to move water from an area of high water availability to an area of low water availability. In theory, there are no geographical constraints on the location of water transfers, although in reality there may be a number of issues to address. The feasibility of a water transfer by pipeline is often dictated by the distance over which the transfer must take place (the construction costs of a pipeline) and the topography of the transfer route (the operational costs of pumping the water).

Potential large scale transfers include moving water from the River Severn by pipeline and/or canal to the south east of England (either unsupported or supported via Craig Goch or



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redeployed Vyrnwy reservoir), or transfer of water from Kielder reservoir by a submarine pipeline to support the Anglian and South East Regions.

The idea of a national grid for water supply, similar to the gas and electricity grids, has also been raised over the years. The Pownall Grand Tour canal plan, initially mooted in 1942, would link the Scottish borders and the South East of England. A version of this plan was resurrected in 2011 and consists of simply supplying the canal network and/ or the River Trent to then serve other areas in the south and south-east through a “cascade” effect using numerous links between water authorities. The geographic reach of such as scheme would be national

35, and whilst the Canal & River Trust is committed to supporting the development of

new canals (and restorations)36

, it recognises that the Pownall Grand Tour canal plan (or variations of this) is ambitious; however the idea has not been discounted by the Canal & River Trust. In 2012, Water UK suggested, rather than a national grid, that the best solution, at least for the short to medium term, is to use the available infrastructure to move the water within local operational areas and to neighbouring water companies

37. In part, this is owing to

the potential redundancy of the infrastructure should the donor of the supply (a certain part of England) also experience a water shortage.

From an environmental perspective, transfers have the potential to improve water quality in receiving water courses (by diluting pollution inputs) or provide augmentation of low river flows to mitigate the loss of in-stream habitat in a drought

38. However, potential barriers include

large carbon costs (if pumped), negative changes to the water balance within donor and receiving catchments, transfer of alien species or diseases, reduction/ change in water quality and ecology of receiving watercourse, and hydromorphological change in the receiving water body

34, 38. The strengths, weaknesses, opportunities and threats of raw water and treated

water transfers were reviewed and summarised by Jacobs in a report to the Environment Agency

39 and is regarded as a useful summary.

At the PWS stakeholder engagement event in April 2014, some expressed the view that national transfers could lead to compatibility issues with respect to ecosystem impacts (both in the donating and receiving water courses). There may also be incompatibility of treatment processes (e.g. hard and soft water require different treatment). Regional transfers by canal may also present treatment issues and the canal community may be opposed to such a scheme; however there are also likely to be many supporters.


In 2010 Defra undertook an assessment of regulatory barriers and constraints to effective interconnectivity of water supplies

40. Defra’s 2011 publication Water for Life

1 states that

Government is particularly looking to water companies to increase connectivity and make greater use of water trading, as well as to set ambitious targets for reducing water consumption.

The subsequent Water Act 2014 introduced new measures to facilitate bulk water supplies between water suppliers. This includes giving Ofwat (The Water Services Regulation Authority) the power to require the entry into a bulk supply agreement on an application by a water supplier, where Ofwat considers this to be necessary for securing the efficient use of water resources. The Act also allows for Ofwat to introduce rules about charges under bulk supply agreements

41.

The Environment Agency also has regulatory powers to reallocate water between water companies, to promote bulk supplies between water companies and requiring abstractors to enter into operating agreements

42. The Environment Agency’s 2011 position statement was

fairly cautious with respect to large-scale water transfers (but does not rule them out) and states

43:



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The water resources planning process ensures that water companies consider all reasonable options available to maintain the balance of supply and demand in the process of developing their final water resources management plans (WRMP’s). In many cases, the options available include assessing both the use of short distance transfers and better sharing of resources between water companies, as well as the use of large-scale transfers.

Large-scale water transfers will only be progressed if they are demonstrated to be an economically and environmental viable option to meeting a forecast water supply deficit.

Our previous work… has not shown the need for new large-scale water transfers to meet these needs but we will continue to review future requirements and options to manage them sustainably.

Overall there is high potential for sharing water via transfers. However strategic inter-regional schemes may be under-developed in England because it is beyond the role (capability) or need of individual water companies to assess and promote them. Working groups of water companies and other stakeholders, formed on a regional basis, may provide a way forward for more strategic schemes. The Water Resources in the South East (WRSE) Group has existed for many years with a focus on sharing existing and future resource better, although to date its focus has tended to be more on intra-regional options rather than inter-regional; a Water Resources East Anglia Group has also been recently formed.

At the PWS stakeholder engagement event in April 2014, some expressed the view that regional and national transfers of water may prove difficult owing to planning time scales and the potential for local objection (although this could be overcome with central approval). The transfers would also require a process of arbitration in the event of extreme shortages if the supplier was also experiencing a shortage. For example, the canal system has the potential to provide a reliable supply for PWS under dry conditions, however it is unclear what might happen in an extreme drought; contractual agreements would need to be in place to guarantee the security of PWS and non-PWS abstractions.

Similar issues regarding the reliability of water transfers between water companies occur in a drought. For example, Thames Water agreements on how existing bulk supply arrangements would vary during times of drought range from “would be maintained within a drought, unless continuous supply was prevented by unusual drought” to “export will be reduced by 25%” or by “fair apportionment”

44. Agreements on how existing bulk supply arrangements would vary

during times of drought are generally based on the principle of “equitable pain share”45

.

The Environment Agency has indicated that, in addition to large-scale transfers, there may be opportunities to further develop linkages between existing water company systems and to share water resources, thereby gaining some of the same benefits expected of large-scale transfers

43; this might also include licence or water trading with non-PWS abstractors. Under

the Water Act 2003 the right to abstract water from rivers could be bought from an existing licence holder (potentially avoiding the need for physical transfer of water by pipeline). There are remarkably few examples of successful trading in England and Wales, with only 53 trades recorded from 2003 to 2011 out of 20,000 abstraction licences

46. However several water

companies have considered water or licence trading with non-PWS third party suppliers within their most recent WRMP’s; specific opportunities include:

Thames Water have identified an opportunity to make a commercial agreement with a local business (RWE N-Power) to use abstraction licence surplus created by the closure of Didcot A coal-fired power station – this was taken forward as a feasible option to deliver 17Ml/d in AMP6

23;

Anglian Water are working to identify opportunities to share resources with non-PWS third party suppliers through the Cambridge Programme for Sustainability Leadership (CPSL) project in the Wissey catchment, the Suffolk holistic water management project, and the



April 2015

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WREA (which is currently formed of PWS suppliers but is expected to expand to include representative from non-PWS sectors)

47.

It is anticipated that trading between PWS and non-PWS will increase in future under Defra’s Abstraction Reform proposals for the 2020s and beyond.


The resilience of a water transfer often depends on the difference between climate zones, whereby the areas at each end of transfers need to be at a sufficient distance apart to not be affected by similar extreme weather events; a link from the south-east of England to the extreme north-west of England and south-west of Scotland

48 could fulfil this criterion. However

even long distance transfers may not be that reliable under extreme drought. For example, with respect to potential transfers from Europe, most of the major droughts that have affected England and Wales over the last forty years have also affected northern Europe – most notably the 1988-1992 drought when by late 1990 over 3,000km of rivers had dried up in southern France

49.

Large scale transfers could also embody high dependence on particular infrastructure with potentially heightened consequences of failures, accidents or incidents; however this risk can also apply to other infrastructure dependent options. At the PWS stakeholder engagement event in April 2014 it was identified that regional and national transfers could still provide wider resilience where extreme events are local to England or parts of England (e.g. terrorist act, an operational failure of a major water source, or localised drought event). Therefore they can increase overall resilience to droughts and climate change if included as part of a wider strategy.

In England bulk supply transfers have been included in water resource strategies for England and Wales since the early 1970’s as a feasible option to increase resources in areas of deficit

50. With respect to PWS, the transfer of water, either between WRZ’s, regions or water

companies, is a key component of Southern Water’s current approach to providing security of water supplies

13. Many other water companies across England have also highlighted the

importance of water transfers.

Overall it is considered that regional or national transfers by pipeline may provide high resilience to water supplies in a short term drought and medium resilience in a longer duration and extreme drought; the resilience of the transfer will lower as the resource available from the source reduces e.g. depletion of storage at a supporting reservoir. In the future, the resilience of pipeline transfers could be more robust if connected to a more reliable source of water including desalination plants.

Regional or national transfers by other means (e.g. canal or river) arguably provide lower resilience to drought than pipelines because the resource is exposed. They probably have a lower resilience to flood and temperature extremes for the same reason; although the exposure of the resource may also provide other benefits including support environmental flows and therefore environmental (water quantity) resilience.

With respect to the resilience of canal transfers, the resilience of the canal network to climate change would benefit from a more detailed assessment and this may take place within the next Water Resources Strategy to be delivered by the Canal & River Trust. Any substantial transfer using the canal network will need to be fully assessed on its merits before it proceeds, and in particular needs a reliable source of water, method of transferring along the route, and needs to avoid serious issues such as spreading invasive species.



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3.6 Effluent Re-use


Water re-use is a way of recycling water resources. The concept of water re-use is not new51

; wastewater discharges have replenished river water resources since the introduction of community wastewater treatment works, either as part of planned schemes or as unplanned and unaccounted for discharges; the vast majority of reuse has arisen in an unplanned way. One third of London’s drinking water is estimated to be recycled wastewater

51, where large

amounts of treated wastewater are discharged into the Thames Basin catchment before being re-abstracted further downstream for re-treatment and supply.

Water re-use can be direct or indirect; direct re-use is where treated wastewater is transferred from a treatment works to the re-use site without intervening discharge into a natural body of water such as a river. Indirect re-use is where treated wastewater is discharged from a wastewater treatment works to a river, canal or reservoir prior to subsequent abstraction, treatment and reuse in supply.

Built in 2003, Essex and Suffolk Water’s Chelmer Recycling scheme at Langford is an example of a large scale planned indirect water re-use scheme. It treats effluent from Chelmsford Wastewater Treatment Works to a high standard, before discharging upstream into the River Chelmer, to augment the flow and to re-abstract to refill Hanningfield reservoir

52.

Water re-use is a supply option that increases raw or treated water availability in England. It has less reliance upon rainfall than other many other supply options owing to the recycling element.


Indirect wastewater re-use options may be available downstream of the point where treated effluent is discharged back into a waterbody (e.g. a river or stream). However with respect to PWS not all water companies are wastewater undertakers. This means, for example, that Affinity Water options for indirect (PWS) effluent re-use schemes are dependent on access to the effluent from the wastewater undertakers for each region it supplies water to

53. Similarly,

the availability of non-PWS sector abstractions may also be dependent on upstream discharges of treated effluent.

The points above on indirect water re-use indicate that direct wastewater re-use, unless applied close to an estuary, is likely to reduce the reliability of existing downstream indirect wastewater re-use that is inherent within the hydrological system. For example, a study by Cranfield University suggests that the potential for use of effluent from waste water treatment works for irrigation purposes is mostly limited to areas where the effluent is currently discharged to saline waters, where this water would otherwise be lost from the catchment

28,.

Direct effluent reuse is also restricted to those catchments where there are significant wastewater discharge volumes.

From an environmental perspective, indirect water re-use schemes can prevent potential environmental damage that might occur through the development of alternative sources of water. Both indirect PWS and non-PWS indirect effluent reuse have been perceived to provide a medium level of environmental enhancement (if designed and operated correctly); however direct effluent reuse has a low level of environmental enhancement, and neither direct nor in-direct reuse provide clear opportunities to create amenity and recreation relative to some other option types

54. Carbon and scheme costs may also be higher than some other option types

where reverse osmosis is used to treat water to a high level.

For businesses, benefits of wastewater reuse include enhanced corporate image, financial saving by recovering resource, reduced consumption of PWS to lower water bills and reduced



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need for abstraction from other sources55

. However the proximity of the waste water recycling plant to its intended use may determine the feasibility of the option

56.

A limitation for irrigation wastewater re-use is that water treated with tertiary disinfection is probably suitable to irrigate crops that are cooked before consumption

57, but not other crop

types. For example, this type of option would benefit potato crops, which have a high irrigation demand, but could not be used for salad crops without treatment to a very high quality.


Current UK legislation classifies the final effluent from a wastewater treatment works as a waste and a permit is required to discharge the effluent to the environment under the Environmental Permitting Regulations 2010 (EPR). The policy drivers associated with wastewater reuse include

51:

Urban Waste Water Treatment Directive;

The Water Framework Directive;

The Integrated Pollution Prevention and Control Directive; and

Local Catchment Abstraction Management Strategies.

The Environment Agency’s 2011 position statement on indirect effluent reuse for potable water supply states that it supports and encourages water companies to consider indirect effluent reuse as an option for increasing public water supply where a deficit in water supplies is forecast

58. However at present there is effectively a ‘presumption against’ direct effluent reuse

for potable supply, resulting from water industry and regulatory concerns and customer feedback. There is expected to be less reservation about using direct effluent reuse for non-potable supply, but there are few operative examples of these. A small grey/black water recycling plant was successfully constructed and is used for irrigation purposes on the 2012 London Olympic Park site. There are larger scale examples overseas including in Texas in the United States.

With respect to opportunities for sharing, direct reuse is a closed looped system and would provide limited opportunities for direct sharing between PWS and non-PWS, unless the water can be readily transferred by pipeline or other means. As previously discussed, existing PWS discharges from wastewater treatment works to rivers are often already utilised downstream by agricultural and industrial abstractions and so there is already sharing of indirect reuse between PWS and non-PWS sectors

28; direct reuse may compromise the ability to share

indirect reuse schemes. The legal ownership of effluent is a potential barrier for water only companies and non-PWS sectors that want to maintain existing indirect reuse schemes or develop new schemes. These issues need to be addressed via improved integration of water resources and waste water planning.

In the future there may be scope for sewerage companies to further explore potential non-potable use of treated effluents in the vicinity of their wastewater plants e.g. with the agricultural water use sector. In addition, if new ‘Garden cities’ are to be developed, perhaps dual supply systems should be considered.

A recent UKWIR report sets out existing frameworks for managing and mitigating risk, governance issues, and the factors that influence the energy and carbon demands of reuse systems

59. It has not been possible to review this report for the current study, although it is

assumed to be a key source of information for those considering effluent reuse schemes.


The Environment Agency has previously indicated that direct wastewater re-use has the potential to be highly resilient to climate change, while indirect wastewater reuse has the



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potential to be moderately resilient54

. CIWEM has also indicated that water reuse can be used to meet either base or peak demand and provides a relatively untapped way of providing water to meet long term needs of people and the environment, in the face of future uncertainties such as climate change

51.

From a PWS and water company perspective, it has been suggested that water reuse schemes are likely to score well when assessed against a drought resilient risk factor

26 and

are resilient to different types of drought event, due to the flexibility in implementation and operation of the schemes

13; however energy usage may be a concern.

At the PWS stakeholder engagement event in April 2014, some expressed the view that effluent reuse provides a high degree of resilience to drought and other extreme events (in line with the above references), although it would mostly be considered for use as a baseline supply option, rather than an additional source to ‘switch-on’ in a drought. It may also be quantity resilient, because as demand grows, effluent also increases (although this is dependent on the degree to which demand reduction schemes are implemented).

Overall, it is considered that direct water re-use provides higher water supply resilience to short and long duration drought events because of the closed-loop system (particularly if focused near to estuaries). Direct re-use probably does not provide resilience with respect to environmental flows owing to a reduction in discharges to water courses, but the lack of an exposed water resource means that it probably has a higher resilience to temperature extremes and flooding.

Indirect water re-use is likely to provide higher water supply resilience to short duration drought events, although because the resource is exposed the water supply resilience to longer duration events may be lower (medium resilience). The exposed resource also means that indirect reuse provides a degree of resilience with respect to drought and environmental flows. However this exposure also limits the resilience to temperature extremes and flooding.

3.7 Desalination


Desalination is a process that enhances water supplies by producing potable water from saline or brackish sources (e.g. estuarine water) by treating it to drinking water standards using filters and various desalination techniques. The most common method is reverse osmosis, where the saline water is forced through a semi-permeable membrane under high pressure to remove molecules and ions from the solution. A large amount of energy is required to produce the pressures needed for this process, however new technologies and energy recovery devices have enabled a reduction in the energy consumption in recent years. Before the purified water can be distributed into supply, it is re-mineralised to similar chemical properties of the local water supply and purified to sterilise pathogens.

The freshwater yield of the reverse osmosis has previously been quoted as typically 35% to 50% for seawater desalination and between 50% and 90% for brackish water desalination

60,

although as the technology improves the yields are also expected to increase. The remaining waste product is a highly concentrated brine solution, which is denser than seawater and requires safe disposal

61.

As of 2013, there are over 17,000 desalination plants operating worldwide and the desalination of saline water for drinking water is practised in 150 countries

62. Further

information is available on plants that exist overseas63

. However there is currently only one significant desalination plant in the UK, which is located at the Thames Gateway Water Treatment Works in Beckton and opened in 2010. It is operated by Thames Water Utilities Ltd, uses reverse osmosis for treating brackish water to potable standard, and is located in the tidal reach on the River Thames

64. The abstraction licence is for 200 Ml/d and the water



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30

treatment plant has a maximum output of 150 Ml/d44

. Therefore it is assumed that around 25% of the abstraction is lost during the treatment process.

Desalination is a supply option that increases water abstraction in England. However unlike many other supply options, it does not rely upon rainfall.


The location of a desalination plant is geographically constrained by the water source. Potential sources of saline water include coastal waters; tidal rivers; offshore waters; deep groundwater; and coastal aquifers. In England it is expected that treatment works would be limited to coastal and estuarine areas; therefore it may not be possible to reach some areas of water demand without the use of water transfers to cascade water up the catchments.

From an environmental perspective, the high energy consumption of desalination results in high carbon emissions. However new technologies in enhanced energy recycling and renewable energy sources help to reduce carbon emissions

13.

Water quality impacts from the brine discharges can impact species and habitats (and therefore WFD status). However at the PWS stakeholder engagement event in April 2014, there were views that potential environmental impacts of the intake and discharge can probably be mitigated (at cost) e.g. via dispersal systems for discharge.

Various water companies also report that desalination (and the supporting roads, power and pipeline infrastructure) may disrupt existing recreation and economic activity on the coast, have a visual impact on the landscape, and impact local biodiversity and habitat. The scale of the construction and operation impacts is highly dependent on the location of the individual plants and infrastructure; visual and environmental impacts could also be minimised by locating desalination plants within existing industrial development sites

13.

More positively, desalination can also benefit the environment, enhancing river flows by reducing the need for conventional groundwater and surface water abstraction. Treated abstraction could also be used to maintain river levels for fisheries and wetlands, leading to employment opportunities during operation (in addition to during construction).


There is currently no UK policy or regulatory measures specifically aimed at desalination schemes. However, this type of option would require an abstraction licence and a water discharge permit, both of which are regulated by the Environment Agency.

The Thames Water desalination plant is governed by an Operating Agreement as part of a Water Resource Management Agreement under Section 20 of the Water Resources Act 1991

44, which states the trigger level criteria required for the operation of the plant to meet

periods of peak demand.

There are no known examples of desalination schemes being shared between PWS and non-PWS in England and this is owing to the lack of desalination plants in England. This notwithstanding, there are significant potential future opportunities for water trading via desalination. The cost of desalination is relatively high, although a regional desalination plant would provide economies of scale, whilst providing a new source of water for a number of water companies and non-PWS sectors.


Desalination enhances water supplies by producing potable water from saline or brackish sources. Therefore in coastal areas it has the potential to provide a reliable source of water all year round

13 and is resilient to climate change

53.



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31

It is probably the most resilient supply option (with respect to multiple hazards) with the potential to supply a large amount of water for PWS and non-PWS without compromising other sources of water. The ‘ramping up’ time to implement the plant at full output currently takes between 4-6 weeks

44; whilst this is not ideal for hazards that result in short sharp shocks

to PWS and non-PWS water supplies, such as flooding, terrorism, or large pollution spills, it would be acceptable for the provision of resilience to water supplies in a drought.

With respect to environmental flow resilience, there were views at the PWS stakeholder engagement event in April 2014 that desalination plants would need to be ‘switched-on’ sufficiently early in a drought to protect natural groundwater and surface water levels and flows. In theory, in the future desalination could also be used as an emergency support to the river environment and downstream abstraction in the case of an unprecedented drought.

Overall it is considered that desalination can provide high water supply resilience across the range of potential drought events. It probably has the potential to provide high resilience to environmental flows and is expected to be resilient to temperature extremes and flood events (particularly if considered at the planning stage).

3.8 Leakage Reduction


Leakage is treated water that is lost from the distribution system, including water lost from water company PWS distribution networks and supply pipe losses from consumers’ pipes. Distribution losses are the responsibility of water companies and supply pipe losses are the responsibility of the householder; however generally water companies provide a free supply pipe repair service to contain this component of leakage

13. Water company options include

active leakage management, which generally comprises improved systems for leakage detection and/or mains replacement.

Information on total leakage is published each year by Ofwat and/or the Environment Agency. The objective has been to operate at the Sustainable Economic Level of Leakage (SELL); this compares the cost of reducing leakage with the cost of producing the water that is saved from another source (e.g. groundwater)

65. However there is currently a move to develop a longer

term view of leakage to facilitate further reductions and Ofwat may develop incentives for water companies to encourage further improvement in leakage reduction.

Leakage reduction is a demand management option and therefore reduces raw water abstraction in England.


Leakage reduction options are geographically constrained to areas where distribution pipes and networks exist. They can be very local and minor e.g. replacement of a short pipe between a river abstraction and its point of use on an adjacent industrial site, or by fixing of specific leaks within supply pipes for spray irrigation. However in the case of the PWS sector a scheme may impact much of a WRZ, with wider implications for network monitoring, maintenance and renewal.

Leakage reduction schemes have the potential to positively affect WFD status of water bodies in England by reducing the need to abstract raw water. There are few environmental constraints to implementing leakage reductions schemes, and once implemented they lower energy usage and carbon footprint.



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Historic leakage reduction initiatives in the UK have generally been introduced following periods of significant drought; the drought in the late 1980’s led to the establishment of the National Leakage Initiative and water shortages in the mid-1990s led to the1997 Water Summit and subsequent introduction of mandatory leakage targets.

With respect to PWS, leakage reduction is brought about through Ofwat targets that have moved water companies towards the SELL. However, there has been increased focus on leakage following the 2012 drought and a review of existing guidance on calculating SELL indicates that it does not fully reflect the long-term sustainability of the water environment and requires review

66. In addition the review suggests that the SELL mechanism does not promote

efficiency or innovation within leakage reduction schemes. Discussion at the annual leakage conference on 16

th October 2014 included recommendations to more fully implement the 47

recommendations for improvements in the next round of WRMPs.

The Environment Agency and Water UK convened a strategic leakage workshop with attendance by water companies and regulators on 1

st October 2014. UKWIR convened a

similar representation to a workshop later that month to discuss how to achieve zero leakage by 2050. Both workshops considered the barriers to more effective leakage management and lower leakage, and gathered thoughts on potential solutions; improving motivation (incentive); encouragement for the supply-chain (drive for long term opportunities); and strengthening the role for customers and information sharing. The UKWIR forum aims to identify priorities for further research. Some of the policy and regulatory issues were identified as follows:

Short term thinking - focus on immediate tactical solutions versus long term strategic solutions and planning timeframes

The March date for the annual report does not provide enough opportunity to catch-up after the winter. October or December might be appropriate

There is a lack of Research and Development and the regulators’ perspective is too short

Motivation must be long term versus short term production efficiency

Aligning motivation with risk and rewards/penalties

Leakage penalties can now be traded against other outcomes

SELL being a disincentive (not going below)

Current incentives are not conducive

Developing demand side incentives

Driver in non-water stressed areas

Fear of failing targets stifling ambition

Role of different players in leakage

Need collaboration of regulators, water companies, supply chain and academia to move forward

Planning and Operations still need better communications;

Taking a long term and holistic view (to SELL) is seen as important and includes identifying pressure management costs and benefits, strategic leakage options and appraisal and a greater degree of leakage optioneering (range of type and scale).

With respect to sharing of this option type, future significant leakage reduction schemes are largely specific to the PWS sector, consisting of the upgrade and maintenance of companies’



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distribution networks and consumers’ supply pipes. Despite a lack of clear opportunities for sharing, it is possible there could be a future market based option for sharing leakage reduction, where third parties (non-PWS sectors) fund PWS leakage reduction to free up water resources for others to use.


The recent Environment Agency with Water UK and UKWIR workshops provided clear messages that both leakage and the cost of leakage management needs to reduce, including for sustainability reasons.

The level of leakage is a function of climatic conditions; prolonged hot weather (e.g. in a drought) can result in damage by repeated cycles of pressurisation and depressurisation, and prolonged freezing conditions can result in ground movement and pipe bursts. Therefore at present, distribution networks are not particularly resilient to temperature extremes and active leakage management is required to mitigate this. Ofwat takes into account the vulnerability of PWS distribution systems to temperature extremes by setting targets as an average over a three year period rather than over a one year period

13.

Short term reactive measures such as enhancing the response to visible leaks in a drought may actually compromise the ability of water companies to fix larger non-visible leaks. However it is believed that longer term leakage reduction strategies do enhance the resilience of PWS to droughts and other extreme events; if demand reduces, less raw water is abstracted from rivers and groundwater in a drought, leaving more for the environment and non-PWS abstraction. If a longer term view of desirable leakage reductions is taken and a programme of research and implementation is put in place based on ideas raised within workshops, future significant reductions of leakage may be achieved economically and robustly.

Leakage reduction options are also assumed to have a medium resilience to temperature extremes by enhancing the resilience of the existing distribution networks. In some settings they are also expected to improve the resilience of environmental flows in a drought event by allowing an overall reduction of groundwater and surface water abstraction.

3.9 Metering


Metering refers to the installation of water meters at properties or businesses to measure water usage and charge customers accordingly. The overall effect of metering is approximately a 10-15% reduction in water consumption based on UKWIR studies

67. This can

help to control prices for all customers by reducing the need to invest in new water supply infrastructure

1. Metering can also facilitate the use of tariffs, which can further contribute to the

reduction in demand for water. Based on WRMPs, over 50% of household customers will have a water meter in 2015

1.

Metering is a demand management option and therefore reduces raw water abstraction in England.


Metering schemes for PWS can be applied anywhere in England, although they are mostly encouraged in water stressed areas. The Environment Agency and Natural Resources Wales undertook an assessment to identify water stressed areas in England and Wales

68. The water

company areas with a serious water stress classification across all five scenarios (and therefore serious water stress classification overall) were in the South East of England and East Anglia; Affinity Water, Anglian Water, Essex & Suffolk Water, South East Water,



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Southern Water, Sutton & East Surrey Water, and Thames Water. Other water company areas had a moderate water stress category overall.

The Environment Agency advised the Secretary of State that the areas classified as ‘Serious’ should be designated as ‘Areas of serious water stress’ for the purposes of Regulation 4 of the Water Industry (Prescribed Condition) Regulation 1999 (as amended). The classification was designed to support decisions about metering.

There are low level environmental constraints on the implementation of metering and this option is commonly perceived to have a low carbon footprint. In encourages customers to reduce waste and can also complement leakage reduction schemes by helping to detect leakage on customer supply pipes. However, unlike some of the other option types, metering is perceived to have a low level of direct environmental enhancement and does not create amenity and recreation.


The Water Industry Act 1999 introduced the right to free meter installation for households, removing one of the significant barriers to the growth of metering

54. To minimise the

environmental impact of water abstraction and use in areas of serious water stress, the Water Industry (Prescribed Conditions) Regulations 1999 and the Water Resources Planning Regulations 2007 also direct companies to consider compulsory metering

47. The more recent

Water Resources Management Plan Direction 2012 empowers water companies within these water stressed areas to carry out compulsory meter fitting to help manage demand where it can be economically justified

69.

Ofwat established a group to advise on the costs and benefits of intelligent metering and to explore the business case for smart metering. Government is interested in the potential of smart water meters to improve water company network management and encourage more sustainable water use by consumers

1.

Smart metering would help to facilitate variable tariffs. However at the PWS stakeholder engagement event in April 2014, there were views that variable tariffs linked to seasonal deficits would be difficult to achieve given the difficulties in predicting drought events; Rising block tariffs may be deemed more reasonable to the public, although there are still residual issues.

With respect to sharing of options, metering schemes are largely specific to the PWS sector, consisting of the installation of meters at customer’s properties or businesses by the water company. However, similar to leakage reduction, it is possible there could be a future market based option for sharing the cost of metering, where third parties fund PWS metering penetration to free up water resources for others to use.


With respect to the water company view, it has been identified that additional metering has the potential to contribute significantly to reducing the potential for extreme peak summer demand in the future

70 (i.e. provides resilience against temperature extremes). If applied with a long

term view and with other option types it can mitigate the need for drought permits, drought orders and emergency restrictions on demand in a drought

, although short term enhancement

of metering when in a drought event is not regarded as effective, efficient or flexible44

.

The enhanced use of metering through the introduction of variable tariffs was discussed at the PWS stakeholder engagement event in April 2014. It was suggested that the use of tariffs overseas has provided evidence that higher charges can provide dramatic reductions in demand. However there were concerns that the success of drought plan demand restrictions



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would be compromised and that adoption of variable tariffs for metered properties would provide limited resilience to drought events.

Overall, metering does not increase the amount of resource available in a drought (or other short sharp shock to the supply system). However it reduces the need for raw water abstraction in a drought and helps to preserve the stored sources of water (e.g. reservoirs). Therefore it is considered to provide a medium level of water supply resilience to drought events. The degree to which metering enhances the resilience of the environment in a drought is probably limited; whilst reducing raw water abstraction, it also reduces the amount of treated waste water that is discharged back into rivers.

3.10 Water Efficiency


Water efficiency measures are used to reduce water wastage, which leads to a reduction in demand for water. They include providing PWS customers with cistern displacement devices, water butts, retro fitting shower regulators, rainwater harvesting, grey water recycling as well as improving customer awareness and education, household water audits and commercial water audits. Ofwat, the water industry regulator, has previously required that all water companies reduce domestic water use each year by 1 litre per property per day.

Water efficiency options are also applicable to non-PWS sectors. For example, wastage of water in the farming and irrigation sector occurs through evaporation and over watering crops. The amount of water lost to evaporation can be reduced by using trickle or drip irrigation which applies the water directly to the roots. Water efficiency can also be achieved through irrigation scheduling, which requires a precise knowledge and understanding of how much water crops require throughout the year; sub-surface moisture sensors can be used to monitor the amount of water required by the crops

71.

Water efficiency is a demand management option that reduces the need for raw water abstractions in England.


Water efficiency measures can be applied to all PWS and non-PWS related households and businesses in some form and therefore no geographical constraints exist as such. However different measures would be more beneficial for some water users than others.

Environmental benefits of water efficiency include a reduction in the need to abstract water from other sources of water, leaving more water for the environment. Importantly, water efficiency also reduces carbon emissions owing to the reduced need for abstraction and treatment of water. This is in agreement with discussions at the PWS stakeholder engagement event in April 2014, where there were views that more efficient irrigation and industrial water-use management could also benefit the environment.


The Government established the Water Saving Group (WSG) in October 2005, which brought together key water sector organisations to develop a range of measures to reduce per capita consumption in households in England

72. Waterwise, an independent organisation, was also

established in 2005 by water companies to develop a water efficiency framework for the UK; it is a leading authority on water efficiency in the UK and its aims are set out in the Waterwise Strategy 2010-2020

73.

The Government’s 2009 Water Strategy for England72

set out its vision for 2030, which aims to achieve the following:



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Consumers using water wisely, appreciating its value and the consequences of wasting it

A sustainable supply-demand balance across England, with no seriously water stressed areas

Reduced per capita consumption of water through cost effective measures, to an average of 130 litres per person per day by 2030, or possibly even 120 litres per person per day depending on new technological developments and innovation

Water companies actively encouraging demand management to protect customer and environmental needs

Low levels of leakage, with targets set and met at the optimum balance of economic, environmental and other costs

Water efficiency playing a prominent role in achieving a sustainable supply demand balance, with high standards of water efficiency in new homes, and water-efficient products and technologies in existing buildings

Pro-active industrial and commercial sectors leading by example, through initiatives such as voluntary agreements

Water efficiency is currently addressed under the Government’s policy Maintaining secure water supplies, high standards of drinking water and effective sewerage services on the Gov.UK website, which sets out simple steps to increase domestic water efficiency. It identifies the Enhanced Capital Allowance (ECA) scheme for water that can be used by businesses to invest in water-efficient plant and machinery and write the cost off against tax.

Ofwat has identified three different approaches to encouraging customers to use water more wisely

74; push factors (setting standards for water using devices, for both retrofitting and new

homes); pull factors (rewarding customers for using water wisely); and, Nudge factors (understanding consumer behaviour and using it to promote change).

At the PWS stakeholder engagement event in April 2014, there were views that large scale introduction of lower water use requirements for all new build household and non-household properties (and also retrofitting) would need to be a government / public sector led strategic policy development option (e.g. dual-supply). There would also need to be a change in building standards and enforcement of installation of systems in new properties. However there were questions over who would enforce the regulations and who would set the standards. Similar questions were raised with respect to installation of community or property level rainwater harvesting and grey water recycling in all new development for household developments over 20 properties and non-household development over an agreed floor space.

With respect to non-PWS sectors, the UK Food and Drink industry, the WRAP and Food & Drink Federation have set up the Federation House Commitment (FHC). The FHC is a voluntary agreement which aims to reduce water usage across industry by 20% by 2020. Cranfield University and Natural England have also produced guidance on irrigation water auditing for farmers, called Save water and money – irrigate efficiently

75. At the PWS

stakeholder engagement event in April 2014 it was considered that little policy change is required for more efficient irrigation and industrial water-use management, however regulation or incentives could speed up innovation in processes and reduce water waste.

The opportunities for direct sharing of water efficiency options are probably limited. However the reduced demand benefits both PWS and non-PWS sectors by increasing overall water availability in England.



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Once water efficiency measures have been implemented in a household, they can be used all year round to reduce overall demand for water. The impact of water efficiency measure is cumulative, and the more measures that are introduced, the more water demand will reduce. However the long term water savings are likely to reduce over time due to the life expectancy of the device (general wear and tear), customers removing retrofit devices and replacing with more efficient fittings

22.

At the PWS stakeholder engagement event in April 2014, there were views that the introduction of lower water use requirements for all new build household and non-household properties could provide resilience to drought by reducing demand, although it does not address the issue of legacy stock of houses. It was also considered that installation of community or property level rainwater harvesting and grey water recycling would only provide limited resilience to drought as these measures are dependent on rainfall; however there are wider environmental benefits and it could help to reduce flood risk by reducing rainfall runoff.

Non-PWS water efficiency savings were also discussed at the stakeholder engagement event. It was considered that more efficient irrigation could benefit PWS and other non-PWS by abstracting less raw water; however in an extreme drought event the Environment Agency would stop irrigation anyway. With respect to industrial water use management, efficiency savings were deemed to reduce longer term demand, but it only offers limited resilience in a drought event.

It is considered that water efficiency measures are important for sustainability and improving the overall resilience of PWS and non-PWS to drought and temperature extremes. However water efficiency measures alone provide limited (medium) resilience to longer and more extreme drought events and they are expected to provide low resilience to environmental flows because they are likely to result in reduced discharges of treated waste water.

3.11 Drought Plan Measures

The Environment Agency and water companies monitor the status of water resources across England and in the case of drought, trigger levels (including antecedent rainfall, surface water flows, groundwater levels and reservoir levels) are used to implement measures in a tiered fashion as part of a drought plan.

The Environment Agency may limit the amount of water used for spray irrigation (Section 57 restrictions of the Water Resources Act 1991) and navigation by boaters along major navigation routes may also be restricted. With respect to PWS, water companies may introduce a number of supply or demand side measures. Both the Environment Agency and water companies may decide to act together for political reasons rather than strictly follow drought trigger levels; this can provide enhanced communication that the region is heading into severe drought.

Demand side PWS measures include the encouragement to reduce water use through enhanced efficiency campaigns. If the drought continues, the use of water for certain activities may be temporarily banned; the Floods and Water Management Act 2010 introduced a wider range of Temporary Use Bans that water companies can implement in a drought without needing approval from Government. Under prolonged severe drought conditions these demand restrictions can escalate, and could eventually result in the implementation of emergency rota cuts or stand pipes; these do require Government approval (drought orders) as dictated in the Drought Direction 2011. At present most water company drought plans seek to avoid implementation of rota cuts and standpipes, but some acknowledge that their use cannot be ruled out completely. Historic application of demand restrictions is discussed in the water availability assessment for this project (Annex A to the summary report).



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With respect to supply side PWS drought plan measures, licence conditions that would normally require water companies to reduce PWS abstraction may be relaxed. Water companies may also change the way they operate sources; reinstate disused sources; cut bulk supplies to a neighbouring companies or to major industrial customers; increase bulk supplies from a neighbouring company; or develop a new source of water, such as temporary desalination or a new bulk supply.

In extreme drought a water company may need to resort to the tankering of water (either by ocean or road/rail), or the provision of bottled water. At the PWS stakeholder engagement event in April 2014, there were views that these drought plan options are complex to implement as there is no storage/infrastructure in place, and transport hubs including ports are often not near demand centres (leading to high transport costs and carbon footprint). In addition there were concerns regarding the water quality owing to Regulation 15, which requires an understanding of the source of the water, and the need for approval by the Drinking Water Inspectorate (DWI). However the measures could provide short term PWS resilience to severe drought events.

Drought plan measures include both demand management options and supply options. Certain measures can also be considered as an extension to the long term strategic options discussed in the previous sections of this report. For example, the deployment of temporary desalination plants, or enhanced response to visible leakage from water mains.

Future guidelines for PWS water resources and drought planning will need to consider events with a greater severity than are current planned for. An improved understanding of the resilience that different options can provide is also necessary (whether drought plan related or long term). There are on-going efforts by water companies and regulators in the UK to improve guidance for the next rounds of water resource management planning (PR19 and PR24); for example, in Northern Ireland the latest published guidance envisages a Water Resources and Supply Resilience plan that integrates water resources, drought and resilience planning aspects. In addition, the potential impact of the Defra proposed Abstraction Reform on PWS planning (including resilience) must continue to be explored, and the approach to Strategic Environmental Assessment of plans reviewed.

Unlike PWS in England, many non-PWS sectors are currently exempt from drought plan related demand restrictions and the amount of planning (water resources, drought or resilience) is often limited. However their water supplies may still be vulnerable to low river flows or groundwater levels in a drought. The non-PWS sector consultations undertaken as part of the socio-economic impact assessment (Annex C to the summary report) indicated that most non-PWS sectors would adapt to a water shortage in an extreme drought by switching to PWS (there are exceptions, including the Canal & River Trust). It is uncertain if non-PWS sectors have considered their vulnerability to PWS related demand restrictions if they were to implement this switch.

3.12 Size, Cost and Implementation Timescales of Potential Options

3.12.1 Introduction

The amount of water that can be delivered by various option types is often dictated by local constraints. Nonetheless, information on the potential size and cost of PWS related options in England is discussed in Section 3.12.2. Information on the size and cost of non-PWS related options, whilst sparse, is discussed in Section 3.12.3. It is recognised that the size and cost of larger PWS options could also be representative of future shared (PWS and non-PWS) options, such as a regional reservoir or desalination plant.

It is recognised that some of the estimated yields and costs are theoretical where there is little experience with an option type and the actual yields and costs (should the scheme be implemented) may be considerably different e.g. in the case of ASR or desalination schemes.



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Should these option types become more common in future it is assumed that the uncertainty around yields, costs and timescales for implementation will reduce.

3.12.2 Size and Cost of PWS Options

The analysis of PWS feasible options (not just ‘preferred’ options) based on data provided by the Environment Agency

6 is presented in Figure 3-3 to Figure 3-8. The option categories are

numerous but they generally form sub-categories of the main option types that have been discussed within this report.

The summed Water Available for Use (WAFU) of all feasible options in England is of the order of 16,000 Ml/d (see Figure 3-3). However this rate includes options that are variants of one another, such that only one of a set of options could be implemented. This rate is also largely based on the capacity approach used by water companies when detailing feasible options; when presenting a smaller and preferred set of options at a later stage within the process, water companies have quoted rates based the utilisation approach (this can be lower than the rates from the capacity approach).

The Integrated Demand Management category comprises numerous Thames Water Utilities Ltd options representing a combination of leakage reduction (through mains replacement), metering and water efficiency. The categories of Bulk Supply (i.e. water transfers), New Reservoirs, Effluent Reuse, SW New (surface water sources) and Desalination also account for many of the options considered.

With respect to the size of individual options, none is greater than 300 Ml/d and most are below 50 Ml/d (see Figure 3-4). The average size of the Integrated Demand Management options is around 150 Ml/d and that for New Reservoirs is approximately 100 Ml/d.

Many of the feasible options are restricted with respect to their size. For example, when considered cumulatively as part of an efficiency programme, measures such as education and customer awareness, retrofitted devices (dual flush toilet, water efficient showerheads and water butts), and water efficiency promotion can effectively reduce domestic water demand by up to 34 litres per property per day (l/p/d)

76 . However once these options are implemented it

becomes more difficult to make additional water efficiency savings (at least without further innovation).

Other feasible options are less restricted with respect to their size. An obvious example is desalination, where plants can be built to the capacity required for each location with the potential for future expansion in order to increase capacity

77.

The normalised cost of the PWS options is shown on Figure 3-5 to provide an indication of the relative cost of different option types. It is the summed capital, operational, carbon, operational savings and social and environmental net present value costs (in pound sterling) divided by the WAFU upon full implementation to estimate pound sterling per mega litre per day (£/Ml/d). The normalised cost is also provided on Figure 3-5 based on capital and operational costs only, and Figure 3-6 provides a breakdown by component.

The normalised cost of options associated with mains repair or replacement are very expensive (see Figure 3-5). This is because the works will not significantly increase WAFU as the existing infrastructure is already delivering water. Most of the feasible options that have the potential to provide significant WAFU in England (including Integrated Demand Management) are between £2 million and £5 million per Ml/d. Desalination options are around £7 million per Ml/d.

The net present values on Figure 3-5 were estimated by water companies and they include discounting, which means that options with a later implementation date (e.g. 2029/30) will appear less expensive than those with an earlier implementation date (e.g. 2015/16).



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A basic methodology has been used to estimate the un-discounted capital and operational costs and the results are shown on Figure 3-7. The method assumes that costs are discounted to 2014; the construction period of all schemes is 4 years and that capital cost is equally distributed across these years; the operation period of all schemes is 60 years for all option types, except for desalination which is 20 years; the discount rate is 4.5%; the first year of availability of a scheme is the year of the scheme’s implementation; and the net present value does not include replacement costs. In some cases the data suggests there may be economies of scale for certain option types, including decreasing CAPEX unit costs (capital costs) for larger desalination plants and increasing CAPEX unit costs for larger integrated demand management schemes (see Figure 3-8).



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Figure 3-3 PWS Feasible Option Types in England and Summed Water Available for Use (July 2014)

Figure 3-4 Average, Minimum and Maximum Size of Individual PWS Feasible Options (July 2014)

Figure 3-5 Normalised Cost of Water Available for Use in England by PWS Feasible Options (July 2014)

These summed rates include options that are variants of one another i.e. the total WAFU that could be gained would be considerably less than the totals in the graph below.



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Figure 3-6 Normalised Cost of Water Available for Use in England by PWS Feasible Options and by Component (July 2014)

Figure 3-7 Undiscounted and Normalised Cost of Water Available for Use in England by PWS Feasible Options (July 2014)

Figure 3-8 Examples Demonstrating Potential Economy of Scale for CAPEX Costs



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3.12.3 Size and Cost of Non-PWS Options

On-Farm Surface Water Reservoirs

Information on non-PWS options is fairly sparse. However with respect to the agriculture there has been a significant focus on the use of on-farm reservoirs.

The main limitation to the size of an on-farm reservoir is the amount of land that would be required to develop this option. This would be land no longer in production; therefore the development would require a balance between the costs associated with a more resilient water supply for producing crops and the cost of a reduction in land available to produce crops.

With respect to the construction costs, the main cost is for earthworks and lining28

. A study conducted in 2012 reviewed the earthworks and lining costs for 73 reservoirs installed between 1996 and 2012, of which 52 were lined with an artificial membrane and 21 were lined with clay

28. The linear relationship between the total cost of each

type of reservoir and their total storage capacity is shown on Figure 3-9. From these relationships predictions can be made for the total capital cost of an on farm reservoir depending on their size, e.g. a lined reservoir with a capacity of 300,000m

3 would cost

approximately £500,000 compared to £250,000 for a clay (unlined) reservoir of the same capacity

28. Therefore it can be assumed that the construction costs for plastic

lined reservoirs are approximately 2-3 times more expensive than clay lined reservoirs

29.

Figure 3-9 Total capital costs for earthworks and lining of on farm reservoirs by storage capacity (m3) from 2012 survey

Other costs associated with on-farm reservoir development include inlet and outlet works, pumps, underground pipes, access roads, landscaping, fencing, drainage

29.

Electricity installations and mains distribution may already be in place if there is an existing river abstraction

29. In addition to infrastructure, the following costs are

associated with reservoir development28

:

Feasibility studies;

Site investigation, Design and Supervision fees can be up to 15% of the total construction costs for a clay reservoir

29;

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

0 100000 200000 300000 400000 500000

Co

st (£

)

Storage capacity (m3)

Construction costs (£) vs. storage capacity (m3)

Plastic lined clay lined



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Planning and permitting applications, including abstraction licences;

Environment Impact Assessments; and

Verification of design.

The Environment Agency guidance to building irrigation reservoirs29

identifies the following operational costs for on-farm reservoirs:

Annual repair and maintenance costs. For a clay reservoir this will equate to approximately 1% of the total CAPEX cost of the reservoir. Synthetic liners do not need to be repaired as often, however they last for 20-25 years and are expensive to replace;

Inspection fees cost up to £5,000 over a 10-year period for reservoirs under the 1975 Reservoirs Act; and

Increased energy costs due to pumping water into the reservoir and pumping it out for use.

The modelled annual operating costs per unit of water for unlined and lined reservoirs of different sizes are compared in Figure 3-10. It is assumed that:

a small reservoir has a usable storage capacity of 37,500m3 and irrigates an area

of 15 hectares;

a medium reservoir has a usable storage capacity of 75,000m3 and irrigates an

area of 30 hectares; and

A large reservoir has a usable storage capacity of 125,000m3 and irrigates an area

of 50 hectares.

The operating costs are more expensive per unit of water for smaller reservoirs than for larger reservoirs as shown on Figure 3-10.

Figure 3-10 Estimated average annual costs (£2012/m3) per unit of water delivered, for different sized reservoirs (small, medium and large) either lined or unlined

28

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

Unlined Lined Unlined Lined Unlined Lined

small medium large

reservoir only Incremental pumps and civils

Estim

ate

d a

ve

rag

e a

nn

ual co

sts

(£

201

2/m

3)

pe

r u

nit o

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r d

eliv

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Desalination Plants for Agriculture

Evidence on the use of desalination plants for non-PWS in England has not been found. However in Spain, 22.4% of the total desalinated water is used for irrigation and agriculture

60. Most of the desalination plants for agriculture in Spain are small to

medium-sized, with a capacity of less than 1 Ml/d, and only treat brackish water rather than seawater

60.

In 2006, the Food and Agriculture Organisation of the United Nations produced a report discussing water desalination for agricultural purposes. It suggested that, depending on the crop, water required for irrigation does not need to meet the strict water quality standards that are applied to drinking water, therefore desalinated water could be mixed with lower quality water, reducing the cost of production

60.

Water Efficiency

Smaller scale wastewater reuse schemes can be implemented in industry for processes such as heating, cooling, quenching and cleaning. A number of industrial water reuse schemes exist in the UK, including Wyke Farms

78, Peterborough Power

Station and Kronospan’s fibreboard production facility55

.

Wyke Farms produce 14,000 tonnes of cheese a year and approximately 1 litre of water is required for every litre of milk used in its products

78. To ensure water

resilience to the business, Wyke Farms commissioned the construction of a wastewater recovery plant, which opened in 2014 and cost £1.3millon. It uses a series of processes, including membrane technology to allow recovery of up to 95% of its wastewater from the cheese factory. The membrane filters have a life expectancy of 10 years; therefore their replacement will incur a further cost

78.

Large-Scale Non-PWS and PWS Shared Schemes

The idea of a large-scale transfer between the north of England or Wales and the South East has been debated for the last few decades. This transfer could take the form of a river/ pipeline transfer between the River Severn and the River Thames, a pipeline transfer from Wales, a canal transfer from Birmingham or an onshore or offshore pipeline transfer from the Kielder Reservoir. An indication of the cost and size of this type of scheme can be estimated from the categories of Bulk Supply and Inter-company / Regional Transfer on Figure 3-3 to Figure 3-7. The normalised net present value is estimated to be approximately £5million/Ml/d and therefore relatively expensive compared to other options. The larger PWS schemes are of the order of 100 to 200Ml/d and therefore the total net present value is estimated to be around £0.5 to £1billion.

A larger canal based option has also been proposed that would provide storage in addition to flow. This could be fed by reservoirs in the north of England (Kielder and the Lake District) and then transport water to Birmingham and London. This type of scheme has recently been promoted by AECOM and the cost has been estimated to be of the order of £10 to £20billion.

In addition to large-scale water transfers it is possible that regional reservoirs or desalination plants, for example, could be used as a shared source of water. The cost of such a scheme can be scaled up from those proposed for PWS.

3.12.4 Option Implementation Timescales

Information on implementation time scales for different option types has been estimated previously by the Environment Agency

54. These are indicative only, as many of the

estimates are derived from the historic 2001 Environment Agency strategy. In addition, time scales will vary on an option by option basis owing to local constraints.



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Nonetheless a summary of potential lead-in times is provided in Table 3-1, which helps to provide an understanding that options can take a significant amount of time to implement.

Table 3-1 Potential Lead-in Times for Option Development

PWS Option Type

Time to Implement (years)

54

Comments

New PWS reservoir 15 to 20 The last PWS reservoir constructed was Seven Trent’s Carsington reservoir in Derbyshire in 1992, which took 12 years to build

79.

Tariffs for measured charges 10 +

Domestic metering scheme 10 It is noted that the pace and depth of metering has increased in recent years and that 10 years is probably an upper limit.

Pipeline transfer scheme 6 to 10 Major pipelines for water transfers have long lead times; potentially well over a decade before they can become operational.

Aquifer artificial recharge and recovery scheme

5 to 10 -

Enlarging or raising an existing PWS reservoir

5 to 10 -

Wastewater reuse (direct or indirect)

3 to 5 However, at the PWS stakeholder engagement event in April 2014, there were also opinions that effluent re-use schemes can take 5 to 10 years to implement. Particularly owing to issues associated with public perception.

Canal or river transfer scheme 3 to 5 This is representative of a relatively small scheme. A major national canal is expected to have an implementation time scale of 10+ years and regional schemes may also have longer implementation time scales owing to environmental concerns including species transfer.

Desalination 2 to 5 Southern Water estimates 6 to 12 months for obtaining planning permissions, consents, and conducting environmental assessments for an emergency desalination plant. It would then take a further 6 to 9 months to implement the scheme

80. Larger

desalination plants may require over 5 years owing to timescales for the feasibility and promotional phases.

New groundwater abstraction or enhancement scheme

1 to 3 -

Leakage reduction 1 to 5 ‘Find and Fix’ can be enhanced during the course of a drought.

Water efficiency (rainwater / grey water use)

1 to 3 -

Non-PWS Option Type Lead-in Time

54,29

On-farm irrigation reservoir 1 to 2

(single farm)

3 to 5

(consortium)

Submit pre-planning applications and collect flow data through the winter/spring to support a new abstraction licence application (Year 1). Apply for the abstraction licence, local authority planning permission and designing the reservoir (Year 2). Construction in the summer of the second or third year

29.

Wastewater reuse (direct or indirect)

3 to 5 The non-PWS Wyke Farm wastewater recovery plant opened in July 2014 and took 12 months to construct

78.

Water efficiency (waste minimisation of industrial / commercial)

1 Southern Water has assumed that the feasible water efficiency options would be gradually introduced over a 5 year programme

13.



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3.13 Summary of Option Types and Characteristics

A summary of the option types and characteristics is provided in Table 3-2. This represents an interpretation of the average characteristics of options types. However it is recognised that the interpretation may differ from those with knowledge of specific schemes or knowledge of local water supply issues.

It is considered that desalination and direct water re-use options would deliver the greatest enhancement to the resilience of water supplies to severe and extreme drought events. Desalination involves the abstraction and treatment of saline (coastal) or brackish (estuarine) water to drinking water standards and, in theory, it can provide unlimited supplies of new water. Direct water re-use is where the output from a waste water treatment works is treated to drinking water standards and put back into supply instead of discharging the water to ground, into a river or to a reservoir (from where it might be re-abstracted, retreated so as to be re-supplied indirectly). Both of these option types have potential drawbacks and the characteristics of these options are described further below.

Desalination

At present there is only one desalination plant operative in England, recently constructed by Thames Water in the Thames estuary. Therefore there is little operational experience or direct information on impacts and benefits in England. However, worldwide, there are many existing plants and significant further growth is expected.

It could be argued that desalination does not significantly enhance the resilience of the environment to drought. However when plants are switched on sufficiently early in a drought, as part of a drought plan, they can indirectly help the environment by allowing a reduction in conventional groundwater and surface water abstraction and by supplementing water stored in reservoirs. In the future, if the barriers to the use of desalination as a continuous source of supply can be removed, it might be possible for desalination to provide relatively unlimited support to environmental flows in a severe drought.

Currently desalination plant operation is high in energy consumption and can result in high carbon emissions and higher costs. The plants may also currently be quite difficult to operate compared with other sources of water that require little intervention to provide a continuous supply. However, through innovation these barriers may be removed e.g. offsetting high power use by using renewable energy sources, or the development of improved treatment processes. In the future these developments may facilitate a move towards the use of desalination as a more economic, continuous and flexible source of water, rather than a source only used as a last resort compared to other resources.

Direct reuse

At present there is effectively a ‘presumption against’ direct effluent reuse in the UK in respect of potable supplies. It is believed there is less reservation about using effluent directly for non-potable requirements but there are not many operative examples of this or, it is difficult to obtain information on them. A small grey/black water recycling plant was successfully constructed and is used for irrigation purposes on the 2012 London Olympic Park site. There are larger scale examples overseas including in Texas in the United States.

It is assumed that in the future, direct reuse might be possible on a larger scale and for both potable and non-potable supply. It is recognised that potable use is highly speculative at this time and may need legislative or regulation changes, as well as



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significant change in public perceptions and acceptance. Non-potable applications may remain the most likely of any take-up. There may, for example, be scope for sewerage companies to further explore potential non-potable use of treated effluents in the vicinity of their wastewater plants e.g. with the agricultural water use sector. In addition, if new ‘Garden cities’ are to be developed, perhaps dual supply systems should be considered.

Natural river flows can be severely depleted in a drought and a significant proportion of the flow may be derived from discharges from waste water treatment works; these provide indirect water re-use schemes (whether planned or not) that enhance river flows for the environment and downstream non-public or public water supply abstractions. Although the discharges from indirect water re-use may sometimes be considered as a pressure on the water quality of rivers, the pressures on the environment caused by the lack of flow in a drought or from water quality in flood events are believed to be relatively greater. Future innovation may enhance the treatment of these discharges, for example through increased phosphate stripping.

If direct effluent reuse were to be developed it could mean that less effluent will be discharged to rivers and so, where this currently provides support to river flows and specific downstream abstractions, flows may decrease. This could be detrimental to local and downstream environmental and water supply resilience unless the direct re-use is developed in coastal areas. It is concluded that direct effluent reuse should not be expected to improve the resilience of river flows for the environment under drought scenarios and it may decrease the level of resilience.

Both desalination and direct water re-use are also expected to be resilient to flood events and temperature extremes when compared with other option types; especially if these hazards are considered at the planning and design stages.

Other Options

From the review of existing water resource management and drought plans, it is clear that they suggest a mixture of option types is likely to be the best solution for wider resilience. Despite being less resilient to severe drought than direct water re-use or desalination, it is recognised that most of the option types have useful characteristics that will complement one another when used conjunctively. Furthermore combinations of options will almost certainly provide greatest flexibility and adaptability relative to unfolding needs, uncertainties and risks.

Conventional groundwater sources abstracting from main aquifers have, arguably, been the best performers relative to historical droughts albeit they have only really been tested under two dry winter duration droughts. Groundwater sources are also least vulnerable to temperature extremes, whilst having a relatively low power consumption (and carbon footprint). Some groundwater sources have been prone to disruption during flooding events, though improvements to bunding, treatment capability and back-up power can be implemented. Unfortunately conventional groundwater abstraction has already been implemented to the point where in many catchments across England the emphasis is on reducing this type of abstraction to protect the environment, not increasing it.

Aquifer recharge and aquifer storage and recovery options provide enhanced benefits to conventional groundwater abstraction. They artificially store water in times of plenty to support abstraction for use when there are pressures on water supplies. At present there is limited confidence in these options (e.g. water quality issues and the potential to ‘leak’ water to the coast or into rivers) and the location of suitable groundwater aquifers can be a constraining factor. It is an area where more commitment to exploration could produce some beneficial schemes but it is unlikely to be strategic in a national context.



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Existing reservoirs might be vulnerable to longer term droughts, although in shorter term droughts (two years or less) they can provide resilient water supplies and enhance environmental resilience through the controlled release of water to rivers. Reservoirs have the potential to offer recreational benefits and may also provide resilience against downstream flood events, although in practice such a use may compromise their ability to provide resilience to severe drought. Regional reservoirs in particular might also play a significant role in water trading under Defra’s Abstraction Reform proposals for the 2020s and allow improved sharing of resources between water use sectors.

It is also considered that water transfers will have a fundamental role in enhancing the resilience of water supplies, whether this is via improved regional connectivity between water company networks, or from a national canal or pipeline transfer scheme focussed on overall national, inter-regional or regional needs.

The options described above are supply side options; they increase the water that is available for non-public and public water supplies (and in some cases the water that is available to the environment). There are also many demand side options that can reduce demand for water, including leakage reduction, metering and water efficiency; these being relevant to both public water and non-public water supply. Whilst these may not be able to provide the degree of resilience provided by desalination and direct effluent re-use options, they are very important for sustainability objectives, including the lowering of carbon footprint. Leakage reduction options are expected to reduce the requirement for conventional abstraction of groundwater and surface water, helping to preserve river flows in a drought and therefore enhancing resilience. Conversely, water efficiency and metering options may have the potential to reduce the amount of water available to the environment in a severe drought by reducing discharges from waste water treatment works (which could also impact downstream abstractions for water supply).



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Table 3-2 Option Types Considered and Resilience Characteristics

Name Type Availability (Potential Size)

Opportunity for Sharing (Multi-Sector)

Resilience to Short One Year Drought

Resilience to Longer Multi-Year Drought Resilience to

Flood Events

Resilience to Temperature Extremes Environmental

(Water Quantity) Social & Economy

Environmental (Water Quantity)

Social & economy

Conventional River Abstraction

L H L L L L L L

Conventional Groundwater Abstraction

L H M H M M H H

Aquifer Recharge (artificial)

L H M H L M H H

Surface Water Reservoirs (small to medium scale)

M M M M L L M? L

Surface Water Reservoirs (large including regional scale)

M H H H M M H? L

National or Regional Water Transfers (pipeline)

M H L H L M M M

National or Regional Water Transfers (other e.g. canal or river)

M H H M M M L L

Water Re-use (Direct)

H M L H L H H H

Water Re-use (In-direct)

M H H M M M M M

Desalination

H H H? H H? H H H

Leakage Reduction

M L M M M M M M

Metering

M L L M L M H H

Water Efficiency

M L L M L M H M

Note: This is the opinion of the project consultants and may differ from others that have knowledge of specific schemes or knowledge of local water supply issues.

Supply option Demand reduction option Greater reliance upon rainfall

Storage option Recycling option

Includes a transfer element

L Low M Medium H High



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4 OPTION STRATEGIES AND INDICATIVE COSTS

4.1 Introduction

The previous report section has provided background information on different option types, including their potential to provide resilience against drought events. The current section outlines the results of the water availability assessment (Annex A to the summary report), identifies the likely cost of options to satisfy deficits in water availability, and provides high level discussion around potential option strategies in the context of Real Options Appraisal.

4.2 Water Availability Assessment Results and the need for Option Strategies

The water availability assessment methodology and the full results for the water availability scenarios, including sensitivity testing, are presented in Annex A to the main summary report. The results were presented at the level of twenty three aggregated Catchment Abstraction Management Strategy (CAMS) areas and also at the national level. Selected outputs are provided in Figure 4-1 and Figure 4-2.

The future scenarios in Figure 4-1 assume an ‘uncontrolled demand’ socio-economic scenario from the Environment Agency’s Case for Change work. In total there were four scenarios within the Case for Change analysis and they are based on different assumptions about the nature of government priorities, and the propensity of firm and households to contribute

9:

Innovation: sustainable behaviour is ‘designed in’ to urban and social life via large-scale investment in sustainable technologies;

Uncontrolled demand: public and political systems are dominated by the wealthy, with the less affluent being squeezed as resource shortage intensifies inequalities;

Local resilience: the UK economy is increasingly inward-facing, and regions solve their own resource problems; and

Sustainable behaviour: consumers choose to be green, nudged by stronger regulation, which means prices more closely reflect the social and environmental costs of resource consumption.

The uncontrolled demand scenario projects the highest growth in water demand on average and the sustainable behaviour scenario predicts an overall reduction in water demand on average. However no one scenario offers the highest (or lowest) demand growth across all sectors.

The key conclusions of the water availability assessment were as follows:

Water transfers may form an important part of an option strategy for the numerous scenarios where there is an overall surplus of water availability in England (see positive numbers on Figure 4-2). However for many of the scenarios with environmental protection and / or the assumption of uncontrolled future (2050s) demand, it is clear that other types of strategic option would be required (see negative numbers on Figure 4-2b and d).

The water availability results for the River Thames catchment (and containing London) highlight the significant impact of high PWS demand, and the deficits result in a noticeable influence on the aggregated water availability for England i.e. the majority of the deficits shown on Figure 4-2 are associated with this area.

Sensitivity testing indicates there is significant potential for demand reduction options to positively impact the water availability assessment results.



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Sensitivity testing has demonstrated the importance of the environmental protection assumption and the need to continue improving our understanding of how much water the environment requires at a local catchment scale (see the step change in water availability between Figure 4-2a and b for the baseline and Figure 4-2c and d for the 2050s).

Sensitivity testing has shown that the influence of the climate change assumption (‘baseline’ versus ‘future’ with medium emissions) and drought severity assumption (extreme versus severe) is relatively minor compared to the influence of other assumptions.

Sensitivity testing indicates that should reservoir resources become widely depleted (e.g. in a three year or longer drought), additional parts of England (including the north and northwest) would require demand restrictions.

The water availability results highlight the importance of managing discharges in England (with respect to both reservoir releases and waste water planning). Many catchments are obviously net importers or exporters of water, and this significantly influences the amount of water that is available in a drought.

The areas with surplus and deficits are shown in Figure 4-1. These assume a consistent drought condition across England to allow the comparison (of resilience to drought) of one area to another. Most future droughts would only be expected to impact a region of England, however the approach helps to understand the potential reliability of water supplies in an area (and therefore the potential for transfers of water).

The future scenarios in Figure 4-1 assume there is no further adaptation (i.e. no development of options between now and the 2050s) and they also assume an ‘uncontrolled demand’ socio-economic scenario. Therefore, as adaptation is planned to take place (e.g. as indicated in water company WRMPs), this is a worst case scenario.

Figure 4-1 Selected Water Availability Results for an Extreme Drought, with Environmental Protection but without Demand Restrictions

B A

S E

L I

N E

F U

T U

R E

O N E Y E A R

T H R E E Y E A R

T H I R T Y D A Y S

Scenario Number



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4.3 Estimated Cost of an Option Strategy

The estimated cost of an option strategy is based on the normalised water company data for options presented on Figure 3-5 and the water availability assessment results; the costs are discounted to Net Present Value (NPV) by the water companies.

An attempt to undiscount the option costs was undertaken to remove some of the bias in the costs (e.g. introduced by differing implementation dates) and to identify economies of scale; the outputs are shown on Figure 3-7. However there were concerns raised by the PSG regarding the broad-brush assumptions that needed to be applied and it was concluded that the undiscounting results should not be relied upon.

A likely range of cost for an option strategy based on the discounted costs in Figure 3-5 is £3 million NPV per Ml/d to £7 million NPV per Ml/d, taking £5 million Ml/d as the mid-value. To provide an understanding of the range of the total cost required to meet the water availability deficits across England, the deficits under the various water availability scenarios have been multiplied by these option costs and the results are shown on Figure 4-3. Key points are as follows.

Baseline without Environmental Protection (Figure 4-3a): The results indicate under baseline conditions and assuming there is no environmental protection (i.e. flows in rivers are not reserved for the environment and supply side drought plan measures are deployed), investment of between £6 and £17 billion NPV is required to meet potential water shortages within the 30 day period of an extreme drought when river flows are at their lowest. This would lower to between £3 and £9 billion NPV assuming that drought plan related demand restrictions can also be applied (although this would subsequently incur socio-economic impacts). Minimal investment (if any) would be required to meet average water supply deficits over the one or three year drought events.

Baseline with Moderate Environmental Protection (Figure 4-3b): The results indicate under baseline conditions and moderate environmental protection (i.e. flows in rivers are reserved to meet the Environmental Flow Indicator (EFI) used towards WFD assessment in England), investment of between £15 and £36 billion NPV is required to meet potential water shortages within the 30 day period of an extreme drought when river flows are at their lowest. This would lower to between £10 and £24 billion NPV assuming that drought plan related demand restrictions can also be applied (although this would subsequently incur socio-economic impacts). The level of investment to meet average water supply deficits over the one or three year drought events is also significant (£6 billion NPV at minimum).

Future (2050s Uncontrolled Demand with Medium Emissions Climate Change) without Environmental Protection (Figure 4-3c): The results indicate under future conditions and without environmental protection, investment of between £16 and £41 billion NPV is required to meet potential water shortages within the 30 day period of an extreme drought when river flows are at their lowest. This would lower to between £9 and £24 billion NPV assuming that drought plan related demand restrictions can also be applied. The level of investment to meet average water supply deficits over the one or three year drought events is also significant under certain scenarios.

Future (2050s Uncontrolled Demand with Medium Emissions Climate Change) with Environmental Protection (Figure 4-3d): The results indicate under future conditions and with environmental protection, investment of between £28 and £66 billion NPV is required to meet potential water shortages within the 30 day period of an extreme drought when river flows are at their lowest. This would lower to between £19 and £45 billion NPV assuming that drought plan related demand restrictions can also be applied. The level of investment to meet average water supply deficits over the one or three year drought events is also significant (at least £14 billion NPV).



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The cost of the option strategies to meet the future drought scenarios is particularly high relative to that for the baseline drought scenarios (in the order of double the cost). However it is important to recognise that the future drought scenarios assume that no adaptation has taken place.

Water company preferred plans at July 20146 indicated that investment of the order of

£5billion NPV in new options is planned for PWS over the next 25 years. With respect to non-PWS, investment in water supplies is also expected to occur. However it is worth noting that many of the non-PWS sector representatives consulted by the socio-economic impact assessment team indicated that in a drought, a key adaptation measure would be to switch to PWS; this adaptation measure is not expected to significantly impact the amount of overall water available in England.

The potential investment required for scenarios where the environment is protected is significantly greater than scenarios without protection. This demonstrates the importance of the environmental protection assumption that is applied. The estimated investment costs are worst case for the following key reasons:

A scenario was tested that uses natural river flows, abstractions and discharges representative of typical summer conditions (i.e. non-drought). This implies that summed deficits are in the order of 3,000 mega litres per day for England, associated with reserving 80% of natural flows for the environment. Investment solutions to close this deficit might cost between £9 billion and £21 billion if using the same methodology as applied to the drought scenarios. Compared to the peak deficits in the extreme drought scenario with environmental protection (£15 to £36 billion), it suggests that around 60% of the drought solution costs may relate to solving deficits that arise under non-drought conditions. In the recent River Basin Management Plans consultation, the economic assessment indicates that implementing all technically feasible measures to reach good ecological status in England may be in the order of £26 billion (technical infeasibility and natural conditions mean that almost 20% of water bodies would still not attain good status)

81; this cost includes measures beyond the protection of river flows.

It is important to recognise that under the Water Framework Directive river flows can drop below the environmental flow indicator and still support good ecological status because there is uncertainty in the precise relationship between flow changes and ecological status. UKTAG continues to recommend that, in a river in which the flow standards for Good are breached, supporting evidence of adverse ecological impacts is needed to have high confidence that the river is in a worse than Good status

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Taking into account the above points, a more likely range of investment for providing environmental resilience to an extreme drought in the immediate future is £6 to £15 billion. This is close to the estimated range of investment for a 2010s drought scenario without environmental protection (i.e. investment focussed on water supply resilience), perhaps indicating that no further investment is required to provide environmental resilience. However whilst there is some overlap, it is important to remember that not all strategic options for water supply resilience will deliver environmental resilience, and vice versa. The estimated likely additional investment required to deliver sufficient resilience to extreme drought (outside of existing water resources planning mechanisms) with respect to the environment, society and the economy (avoiding enhanced demand restrictions) is £5 billion to £20 billion net present value.



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Figure 4-2 Core Water Availability Assessment Results and the Need for Long Term Options

(a)

(b)

(c)

(d)



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Figure 4-3 Estimated Range of NPV Costs for an Option Strategy to Satisfy Deficits in the Core Water Availability Assessment Results



(a)

(b)

(c)

(d)



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4.4 Real Options Appraisal Considerations for an Option Strategy

4.4.1 Definition of ‘Real Options’

With respect to potential long term strategic options and a solution for deficits for water availability, it is possible to consider the application of Real Option Appraisal (ROA) thinking at a high level. A key reference is Water Resources Management Planning - Real Options Analysis undertaken by Nera for the Environment Agency

83; Bill Baker of

Nera provided input on ROA thinking at the scoping stage of this project2.

Real Option (RO) approaches include applications of any technique from the whole field of stochastic optimisation, where the analyst is trying to find the best strategy or tree of actions from which a sequence of actions will unfold over time. This is in contrast to deterministic optimisation where the analyst seeks the best plan or single sequence of actions over time. The RO approaches include decision trees, dynamic programming, and stochastic control modelling. The RO approaches all have in common that they anticipate later branching of decisions, depending on how uncertainties have resolved in the meantime, whereas deterministic approaches do not anticipate branching.

4.4.2 Usefulness of Real Options

For RO approaches to be more useful than deterministic approaches, it is necessary that there is uncertainty, that the uncertainty will reduce over time via learning, and that there is some flexibility in the options available.

For formal application of RO techniques it must be the case that the critical uncertainties are relatively well understood, or expert judgements can be used to define ranges and probability distributions over potential outcomes. An example of such an uncertainty is a water company anticipating sustainability reductions where the Environment Agency has already communicated potential sustainability reductions; the possible range of outcome is known and expert judgement could be used to put a probability distribution around the eventual sustainability reduction implementations.

4.4.3 Approach to Address Uncertainty in Current Water Resource Management Plans

The discussion of the treatment of uncertainty in current WRMPs would benefit from some elaboration. Sensitivity analysis and scenario analysis are widely used to test candidate deterministic optima. Some Monte-Carlo analysis is used to form headroom to enter the deterministic optimisation, and to test plans. However these techniques for addressing uncertainty do not make the step from having a plan to having a strategy; neither does the repetition of the deterministic optimisation exercise, with possible large revisions of the plan, every few years. In the water resources literature and among UK water companies the first simple applications of RO thinking to WRMP are beginning to be made. It is not yet clear whether there are many decision-situations where there is enough uncertainty, learning and flexibility for the RO approach to provide substantial extra insight.

4.4.4 Learning and Flexibility in Current WRMPs

The extent to which learning is present follows from the uncertainties faced and whether they will be resolved either by passage of time or by deliberate implementation of options for research or trials and pilots. In contrast, the extent to which flexibility is present follows from the granularity of the options available, and from the extent and irreversibility of the commitments necessary to implement options under WRMP and AMP investment processes and their cycles.



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4.4.5 Partial Application of Real Option Analysis in WRMPs

Given the relative unfamiliarity of RO for WRMP it is not surprising that ‘partial’ approaches are being suggested, for example a two-step process where a set of ideal schemes is first identified and then their scheduling is considered. However many partial approaches will not be good approximate versions of RO, for example those where apparently sensible criteria used in the first stage screening (i.e. robust, cost-effective, resilient) screen out schemes that are not cost-beneficial from a deterministic planning point of view, but that form part of the optimum strategy under RO because they allow more flexibility to adapt to future outcomes. For instance, a small abstraction scheme that only operates for five years might never seem cost-effective or robust on its own, but could be optimal if it buys five more years’ worth of time before having to commit to a large scheme of either type A or type B, where the best type depends on resolution of some uncertainty. There has not yet been much work on how best to apply approximate versions of RO.

4.4.6 Application of Real Option Analysis within the Project

The work undertaken within this project allows for uncertainty by exploring a range of candidate option strategies for each of a set of drought scenarios, and which allows for flexibility by discussion and consideration of the worth of building resilience and being able to delay investments.

Attempting a fully quantified RO modelling exercise is inappropriate for this strategic level project. However, before applying option strategies, the following questions can be explored with respect to different option types:

In the context of very long term water supply and demand planning, what are the most important uncertainties? (e.g. population, industry/agriculture, climate change);

How are the uncertainties expected to resolve over time (to what degree will they be narrowed down by the 2050s)? Are there options that could be implemented to narrow the uncertainty?

For each option type available, is a large irreversible commitment required? Does its cost or its benefits differ substantially depending on how the uncertainties resolve? Do early steps need to be taken to make it available much later?

Does there seem to be much potential for regret? Or much merit in delaying?

The characteristics of option types has been explored within the previous sections of this report, including the degree/type of resilience provided, the size of options (water supply rates), geographic reach, opportunities for PWS and non-PWS sharing, policy considerations, engineering and operational costs/issues . This information, along with the results of the Water Availability Assessment (Annex A of the project summary report) assists in answering the bullet point questions above.

In the context of very long term water supply and demand planning, what are the most important uncertainties?

The water availability assessment under the project has demonstrated that, in the context of severe and extreme drought, the most important uncertainties are the socio-economic scenario (the potential demand for water in the future) and assumptions around the environmental demand for water.

The impact of climate change is small in terms of the deficits in water supply during a severe or extreme drought. This is because natural river flows are low within these droughts and water availability is driven by the amount of storage (e.g. surface water reservoirs) that has been developed and the discharges that take place (e.g. from



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waste water treatment works); this could be a function of the focus on river flows as a drought metric (it may underestimate the sensitivity of groundwater resources to prolonged and more severe droughts).

The above notwithstanding, it is recognised that uncertainties in climate change impacts (due to limitations of existing climate models including stationary versus non-stationary climate) mean that (i) frequency of extreme drought events in the future is uncertain and (ii) the potential for longer term droughts of three years or more is uncertain. These are important uncertainties.

How are the uncertainties expected to resolve over time (to what degree will they be narrowed down by the 2050s)? Are there options that could be implemented to narrow the uncertainty?

The uncertainties associated with the socio-economic scenarios (for the 2050s) will resolve as time passes. However there is potential for Government to implement regulation and policy to reduce uncertainty in the socio-economic future.

The uncertainties around the environmental demand for water are also expected to narrow as catchment investigations continue across England. There is already a significant focus on how best to apply Environmental Flow Indicators to rivers in England with respect to the requirements of aquatic ecology. Not least because of Defra’s proposals for Abstraction Reform. The range of results (the water availability deficits and potential investment levels) for the current project provides further emphasis on the need to identify the level of environmental protection that is to be applied under severe drought.

Continued investment in the improvement of climate models is also required to resolve the uncertainties around the potential for droughts that continue for three years or longer and their frequency.

For each option type available, is a large irreversible commitment required? Does its cost or its benefits differ substantially depending on how the uncertainties resolve? Do early steps need to be taken to make it available much later?

Large irreversible commitments are often associated with the development of large supply options, including regional desalination plants, surface water reservoirs or the idea of a north-south canal transfer. In addition, early steps would need to be taken to design and secure planning permission to ensure these options become available.

The costs and benefits of reservoirs or a large canal transfer may not differ substantially depending on how the uncertainties resolve; these types of schemes can be utilised for non-drought related purposes, including the facilitation of water trading, and providing environmental and social enhancements. However the benefits of regional desalination options may differ substantially depending on how the uncertainties resolve because they are currently unlikely to be operated outside of drought events.

Does there seem to be much potential for regret? Or much merit in delaying?

Through the consideration of uncertainties such as those described above planners can begin to develop the best tree of actions that will limit the potential for regret. For example, there is potential for regret (excess investment; vulnerability to rising energy costs) when considering the implementation of large scale use of desalination plants. At present the uncertainties around our future demand for water and the environmental demand for water, combined with the existing barriers to the continuous use of desalination, mean there is merit in delaying the widespread implementation of this option until some of the uncertainties are resolved. However it would be sensible to



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investigate the potential location, size and options for sharing of desalination plants, and to progress planning related documentation. This will allow desalination options to be implemented rapidly in the case of a severe drought, with the flexibility to scale up the output of the plants as required. It should also facilitate implementation of desalination options should greater confidence be established in containing energy costs.

Other larger supply options such as a north-south canal transfer or regional surface water reservoirs also have potential for regret, because of the scale of the infrastructure required. Yet unlike existing desalination options there are a greater number of non-drought related benefits that have already been proved, such as enhanced amenity use and, in some circumstances, support to downstream river flows. There are also significant opportunities for the sharing of these options across different water use sectors with respect to cost and water resources, including within the context of Defra’s Abstraction Reform proposals. This would depend on a range of sectors being motivated and accessing the finance to co-fund multi-sector resource developments.

There is little potential for regret when considering demand reduction options and leakage reduction in particular. These options are perceived to be sensible sustainability measures and there is a strong case for the continued advancement of policy and regulation in this area.

Overall, it seems that a detailed Real Options Appraisal approach would be sensible to explore different pathways, similar to that presented by the Environment Agency at the CIWEM Water Act – Resilience in practice conference in December 2014 (see Figure 4-4). New tools may be required to facilitate this, such as a national level water resource management tool that includes key demand centres (large towns, cities and non-PWS aspects) and existing strategic infrastructure.

Figure 4-4 Environment Agency Pathways Approach



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5 CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusions

The following conclusions are drawn:

Hazards to water supply and the definition of resilience were discussed at the PWS workshop in April 2014. An interpretation of the consensus view from the workshop was that the Strategic Water Infrastructure and Resilience project should focus on resilience to severe and extreme drought, whilst taking into account key non-drought related pressures.

It is considered that desalination and direct water re-use options would deliver the greatest enhancement to the resilience of water supplies to severe and extreme drought events. Desalination involves the abstraction and treatment of saline (coastal) or brackish (estuarine) water to drinking water standards and, in theory, it can provide unlimited supplies of new water. Direct water re-use is where the output from a waste water treatment works is treated to drinking water standards and put back into supply instead of discharging the water to ground, into a river or to a reservoir (from where it might be re-abstracted, retreated so as to be re-supplied indirectly). Both of these option types have potential drawbacks.

From the review of existing water resource management and drought plans, it is clear that they suggest a mixture of option types is likely to be the best solution for wider resilience. Despite being less resilient to severe drought than direct water re-use or desalination, it is recognised that most of the option types have useful characteristics that will complement one another when used conjunctively. Furthermore combinations of options will almost certainly provide greatest flexibility and adaptability relative to unfolding needs, uncertainties and risks.

The estimated likely additional investment required to deliver sufficient resilience to extreme drought (outside of existing water resources planning mechanisms) with respect to the environment, society and the economy (avoiding enhanced demand restrictions) is £5 billion to £20 billion Net Present Value.

Overall, it seems that a detailed Real Options Appraisal approach would be sensible to explore different pathways and option strategies for England.

5.2 Recommendations

The following recommendations are made:

Environmental protection: It is recommended that investigations and identification of the environmental demand for water are continued to reduce the degree of uncertainty regarding this key component of water demand.

New policy and regulation: It is recommended that new policy and regulation is considered that further strengthens the move towards a sustainable approach to water supply (demand reduction options and leakage reduction in particular). This will reduce the uncertainty associated with a 2050s ‘uncontrolled demand’ scenario.

Climate change: It is recommended that investment in improving climate change models is continued so that uncertainty can be reduced regarding the risk of longer term droughts (3 years and over) and the frequency of extreme events.

Investment in options: It is recommended that a strategic study is undertaken to identify the potential size and location of shared desalination plants in England and the opportunities for sharing between water use sectors. However, there is merit in delaying the construction of desalination plants until the carbon footprint can be



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mitigated sufficiently and the option becomes viable as a more flexible and continuous source of water.

Investment in options: It is recommended that the integration of public water supply water resource and public waste water investment planning is improved, including with clarification of the legal ownership of waste water. These actions will facilitate more strategic development of effluent reuse approaches.

Investment in options: Whilst the review of the resilience characteristic of options in this report has been useful, it is recommended that further work is undertaken in the near future as part of larger project that also considers a detailed pathways approach (including timelines) and wider resilience issues. Additional option types might be considered in more depth, including for example the more innovative options that may only be feasible with significant policy change or development.



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