Utility Week

UTILITY WEEK | 20TH - 26TH APRIL 2018 | 23 Operations & Assets Market view W ater is a difficult and expensive resource to move around. Planning of future water supplies is built from an analysis of potential local supply sources versus projected local demand. Dwr Cymru (Welsh Water) alone plans future sup- plies based on a split of its supply region into 24 supply zones with limited interconnec- tion between them. This does not look like a promising context for the development of a connected UK water market. However, a review of water resource man- agement plans (WRMP) from 2015, which were required to include consideration of inter-company trading, suggests that future supply across a wide swathe of the UK will be dependent on or influenced by a limited number of supply sources. A number of these supply sources are located physically close to each other and the potential supply routes from them to customers are shared or cross one another. These factors suggest that greater integra- tion between the upstream supply for vari- ous water companies could be possible and in fact could be organised to gain enhanced resilience. Mapping the physical relationships A non-exhaustive review of water resource management plans reveals several interest- ing elements for those looking to join the dots: • United Utilities shows spare water resource from Lake Vyrnwy, a reservoir in Wales developed to supply the Liverpool area. • Lake Vyrnwy is roughly 30 miles from the Elan Valley reservoirs. • Pipelines from the Elan Valley, which sup- ply Birmingham, cross the River Severn. • Severn Trent, which relies significantly on water from the Elan Valley reservoirs, needs additional supplies to compensate for environmentally driven reductions in abstraction from existing sources. • Llyn Brianne, a reservoir owned by Dwr Cymru and serving the Tywi Conjunctive Use System (TCUS), is approximately ten miles from the Elan Valley reservoirs and could be used by Dwr Cymru to supply spare water to other companies if links were created (spare capacity in TCUS is already intended to supply the Dwr Cymru Pembrokeshire water resource zone under the 2015 WRMP). Although the spare resource projected by Dwr Cymru in the 2015 WRMP was limited, this assumed limited water demand manage- ment and, being based on active water assets, did not take into account a num- ber of inactive reservoirs that exist within the Dwr Cymru area. • Dwr Cymru shares water resources with Severn Trent with allocated quantities from multiple shared sources. • Thames Water requires additional sup- plies to meet growing demand, and lower abstraction, in the South East. One of the options previously considered for addi- tional supply was from Lake Vyrnwy, delivered via the River Severn. • Thames Water is a key member of the southeast water co-ordination organisa- tion, which works to find the optimal means of maintaining ongoing supply security in the southeast region, while reducing environmentally damaging abstraction. In effect, water consumers from Pembroke- shire across to London and as far north as Liverpool could in future be receiving mar- ginal supplies from three reservoirs within 40 miles of each other. These reservoirs already have some poten- tial existing connections and the opportunity to add to these. With additional co-ordina- tion and linkages, this starts to look like a single catchment area that could be a basis for the trading of water rights among multi- ple companies. What happens next? There will be multiple physical and political issues to be addressed in determining what level of integration between upstream water resources is appropriate. This will have to include an assessment of the benefits of a more integrated supply system, at a granu- larity greater than the specific scenarios included in the current WRMP processes. It will also have to deal with the sharing of any benefits created, particularly if Dwr Cymru is to be involved, given the restriction that any water company "wholly or predomi- nantly based in Wales" cannot export water to the detriment of its own customers' supply security. However, there does appear to be a poten- tial opportunity to strengthen the operation of the sector by thinking beyond the current point-to-point additional supply options that have traditionally been included in the WRMP process. A more integrated upstream segment could also facilitate the develop- ment of upstream competition. Companies should be encouraged to look at opportuni- ties for wider integration as part of the forth- coming price review PR19 and update to the WRMPs. Neil Cornelius, managing director, Berkeley Research Group Towards a UK water market? Opportunities to enable greater upstream integration between water companies could lie in a limited number of supply sources located physically close to one another, says Neil Cornelius. Potential integration of upstream supply

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