Utility Week

Utility Week 10th January 2014

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Page 21 of 31

Operations & Assets In brief Renewables Scottish Power abandons Argyll offshore project Plans to build the world's largest offshore windfarm have been scrapped by Scottish Power Renewables (SPR). The company said that for technical and environmental reasons, it would not be developing the £4.5 billion Argyll Array offshore windfarm. SPR has been working on the project, which would have powered one million homes, since 2009. Electricity SSE pumped storage scheme A 600MW pumped storage hydro-electric scheme has been given planning permission by the Scottish Government. SSE's Coire Glas scheme will be built to the northwest of Loch Lochy in the Great Glen. The £800 million development will have a storage capacity of 30GWh and will be the first large pumped storage scheme to be developed in the UK for more than 30 years. The company said it did not expect the market to recover "in the foreseeable future". Renewables £450m east coast industrial park gets go-head The government has granted final planning permission for a £450 million industrial base for the offshore wind sector on the east coast of England. The Able Marine Energy Park, which covers nearly 800 acres of the south bank of the Humber, will supply components for offshore wind turbines, as well as providing an assembly and installation base for North Sea projects. 22 | 10th - 16th January 2014 | UTILITY WEEK Analysis Keeping the money flowing The rules have been changed to allow transitional spending from one AMP period to the next. Conor McGlone reports. O fwat's agreement last October to allow water companies to bring forward spending from AMP6 was hailed as a triumph by British Water. The trade body has been campaigning for an end to the "boom and bust" nature of spending, driven by the regulatory cycle, which leads to up to 40,000 job losses in the supply chain at the bottom of the cycle. It reckons companies will be eager to use the option of bringing forward transitional investment, and has predicted that hundreds of millions of pounds will be spent next year in what would traditionally be a massive trough for the sector as the next regulatory agreement is hammered out. But are water companies keen? Under the new rules, water companies are able to finance projects a year early, with this investment recognised in year one of the following AMP period. In the past, investment has declined significantly in the last and first years of the five-year regulatory period, while ramping up in the middle. According to a government report of 2012, the new rules could save the water industry £1.1 billion every five years. Severn Trent has so far committed the most to transitional expenditure, at £80 million, which it says will reduce the peak-totrough range by 24 per cent. Next is Anglian Water, which has set aside £58 million. Yorkshire Water has advanced £48 million and Wessex Water £6 million, putting the amount pledged so far by water and sewerage companies at £192 million. But that figure does not include some big names, including the biggest, Thames. Industry sources suggest that Thames' transition figure will be large. The company would not give a number, but its pioneering Eight2O alliance programme suggests it will be keen to make the most of investing early. In December it announced that it was already working on plans to deliver billions of pounds of investment over AMP6. British Water had expected companies to confirm the amount of transitional investment they would accelerate as part of their business plans submitted last month, but some companies are being cagey. Like Thames, United Utilities (the thirdbiggest water company) refused to reveal an amount. Welsh Water, Northumbrian Water, South West Water and Southern Water have all also declined to tell. Not all of these companies appear to be embracing the concept of transitional expenditure. United Utilities said there would be transitional investment, but it expected it to be "fairly modest in the context of the overall capital programme". One reason some companies might be reluctant to commit to a large chunk of transition expenditure could be because they already have work that spans AMP cycles. Wessex Water said the relatively small amount of £6 million it had committed as transitional expenditure was because it already had major work under way spanning AMP5 and 6, such as its £230 million water supply grid project. Similarly, South West Water said it was already investing £18 million in bathing water schemes ahead of the next period. As well as these companies, the final figure will be swelled by contributions from the smaller water-only companies. The rule change is described by Water UK as "good news all round", but without proper publicity its effectiveness will be dramatically diminished. According to Paul Mullord, a director of British Water, if suppliers are unaware of the room now allowed for water companies to invest early, there will be a "tendency for them to start laying people off as they have done in the past". "The idea is to get the message out there that it is going to be different this time. We have done our bit but the water companies need to back that up. The supply chain needs to hear it from either Ofwat or the water companies," he said. Mullord is optimistic that the remaining companies will unveil their grand designs soon and it is expected that Ofwat will announce the collective total transition amount by 16 January. Any further delay could put this long-awaited solution to an age-old problem in serious jeopardy.

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