Adequate for now? David Nickols, Chair of the ICE’s water sector section discusses state of the nation;
infrastructure 2010
While a 20-year history of regulatory-driven investment means our water infrastructure is currently meeting expectations, the Institution of Civil Engineers (ICE) is concerned that without a fundamental shift in the regulatory model and efforts to reduce demand it will not be able to continue to meet consumer demands as well as meet environmental obligations in the future.
The past 20 years of regulatory investment since privatisation has seen over £85 billion pumped into the UK’s water infrastructure, with the positive result that it is largely serving its customer needs well and is mostly in good condition. The regulatory framework has worked well for these two decades. Water is one of the better functioning infrastructure sectors, whereas other key infrastructure systems including energy, local transport, waste and resource management, and flood risk management are all graded as ‘requires attention’ or ‘at risk’ in ICE’s recent State of the Nation: Infrastructure 2010 report.
Only two sectors, water and wastewater and strategic transport networks, achieved a B grade, described as ‘adequate for now’. No sectors achieved an A grade.
However, adequate for now is not the same as good enough for the future. We are facing a changing climate, changing societal demands and increased financial pressures in the future and our infrastructure networks – and their regulatory systems – must adapt urgently to meet this challenge. Not acknowledging and addressing this within the water sector will threaten the progress we have made in this crucial industry and, most importantly, our long-term water security.
One of the key concerns that arose from ICE’s independent assessment of the sector is that the water industry has hugely increased its carbon emissions since 1990, because of energy-intensive investments to comply with environmental quality standards, and there has been no regulatory requirement to reduce emissions.
The current regulatory framework places far too much emphasis on capital investments and short-term gains, at the cost of long-term sustainability. While the 2009 OfWat price review was accepted by all but one regulated water company – which indicates that the companies believe the prices set for 2010–2015 are adequate to cover the investment needed – the investment plans do not adequately take into account long-term population |98| ENVIRONMENT INDUSTRY MAGAZINE
growth and they do not meaningfully reduce demand. Demand reduction, based on ICE’s assessment, will be a major factor in addressing the impact of climate change. Additionally, anything that requires investment beyond the five year regulatory cycle is out of scope, further hampering the industry’s ability to invest for the long term.
The trend of rising carbon emissions is set to continue. It has been estimated that the industry must cut emissions by at least 60% by 2050, from 1990 levels, to meet Government targets. To achieve this level of reduction will require reducing demand, making carbon lifecycles of new infrastructure integral to decision making, and companies making genuine effort to minimise their footprint. Metering and low-use fixtures must be implemented widely and consumers must be educated about the value of water and how to use less. The new infrastructure we build must facilitate this change in attitudes and become integral to long-term plans. And we must look at ways of treating less wastewater, an energy intensive process, for example by keeping surface water drainage out of our foul sewers.
Of course, all of this must happen within the boundaries of public funding cuts and an increasingly risk averse private sector. While the regulation of the industry on the one hand ensures a steady stream of funding to the water companies, on the other hand there is very little leeway if there is any variation of the financial assumptions made in determining the plans.
ICE strongly believes that financial regulation must change so that it incentivises companies to act in support of Government environmental policy and reduce demand and carbon, in particular by shifting from rewarding capital expenditure to rewarding innovation and sustainable operational solutions for the problems of the future.
It will also be important to address the public’s perception of the value of water. Currently it appears to be cheap and plentiful - as its price reflects only the cost of its abstraction, treatment and transport – whereas in the future it will be a constrained resource if major changes in consumer attitude and in the design of our infrastructure cannot be achieved. The onus is on Government to provide the policies and framework to allow the water companies to make appropriate financial returns while driving demand and carbon down.
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