Embed Size (px)
Citation preview
30257051 1
3 WATER
High level opportunities
Short-term (5 years) opportunities are greatest where adaptation and efficiency measures
overlap, e.g. water efficiency, reuse and recycling. This includes consultancy and service
provision such as modelling, risk assessment and monitoring systems;
In the medium term (5 years plus), opportunities will emerge in expanding pipeline and
sustainable drainage capacity, and upgrading and building new water collection supply and
treatment infrastructure.
Summary
Water supply and wastewater treatment has been selected as a priority sector requiring massive
capital investments and therefore there are large supply side opportunities for UK firms. Climate
change is forcing both water companies and the wider industry to adapt to new market conditions
arising from widespread climatic impacts and demand shifts. Adaptation presents opportunities
for UK firms to market goods and services domestically to water companies (for example through
the mega-scale London Tideway Tunnels project) and industrial clients and to also export
knowledge, technology and planning skills developed on the back of this. There is a strong UK
supply chain, large market, system efficiencies and robust regulatory framework which have led
to the UK being recognised as a world leader in global business adaptation to climate change in
the water sector1. In England and Wales, the 25-year Water Resources Management Plans
2
helps stimulate planning beyond the 5-year Asset Management Management (AMP) cycle.
1 Network for Business Sustainability, 2009
2 www.grdp.org/business/sectors/32425.aspx
30257051 2
Figure 3.1: Impacts and adaptation opportunities in water supply and wastewater treatment
The UK water sector has distinctive supply chain strengths, offering specialist technology
providers (e.g. in sustainable drainage) and world class capabilities in the supply of tailored and
integrated consultancy services. Modelling, risk assessment, environmental impact assessment
(EIA), engineering services, asset management and infrastructure rehabilitation are a forte of UK
consultancies and infrastructure providers.
Overseas, opportunities are shifting from technology to service provision as indigenous capacity
rapidly builds in developing countries. Consequently, in the medium to long term, UK competitive
advantage in global markets is likely to be greater in „softer‟ service elements such as consulting,
asset management, governance and economic advice, and institutional capacity building.
Physical impacts of climate change (UK)• Increasing risk to supply• Loading constraints on treatment facilities• Risk of higher pollution• Lower water quality• Increasing flood risk
Global demand shifts• Increasing rates of global water
consumption• Higher demand for clean drinking
water• Exacerbated water stress
UK resilience activities• High planning capacity• Sophisticated modelling capability• Low levels of investment• Low implementation of adaptive
measures
Current opportunities (5yr)• Reuse and recycling tech• Water efficiency measures,
leakage management and local treatment
• Service provision, whole life costing and carbon accounting
Barriers in UK• Innovative approaches slow to be
adopted in UK• Sophisticated modelling required
to understand UK impacts
Future opportunities (+5 yrs)• Upgrading networks and
infrastructure (e.g. SUDs)• Large opportunities at interface
with other industries• Management, modelling and
risk assessment
Interdependencies with other sectors
• Energy recovery from water treatment works
• Effluent reuse• Demand management• Water efficiency measures• Drainage/sewage systems
30257051 3
Figure 3.2: SWOC analysis of the UK water sector
Figure 3.3: UK has competitive advantage in several parts of the “water” value chain
Figure 3.4: Opportunities are widespread in water adaptation markets
Global market
US$400-500bn p.a. including wastewater services
UK companies involved in overseas water markets generate >£3bn p.a.
Largest export markets: China, Japan, SE Asia, Eastern Europe, Spain, Turkey & North America
Largest future opportunities likely to be in the Middle East and East Asia
UK market
Water & wastewater market ~£8bn p.a. Net capital expenditure £4bn in 2008 Many products reaching maturity Sector growth rate ~1.83% p.a. New build & maintenance of flood defence
will need to rise to ~£1bn by 2035 Some specialist adaptation sector growth -
e.g. rainwater harvesting worth ~£225m p.a.
Strengths
Strengthening supply chain and
expanding overseas
Integrated consultancy approaches,
e.g. linking risk with impacts
Whole life costing/carbon
accounting
Niche manufacturers, e.g. sensors,
sustainable urban drainage
Asset management capabilities
Leakage control
Appropriate local solutions
Opportunities
Whole system approach
(mitigation/adaptation/carbon
footprinting of projects)
Sustainable drainage systems
Water reuse & recycling
technologies, e.g. Australia, Arizona
More sophisticated risk assessment
Monitoring & system refinements
Upgrades to UK flood defences
Overseas flood defence planning
Weaknesses
Capacity building (e.g. management
procedures to increase resilience) are
main adaptation response in utilities
Historically low water prices reduced
take up of water saving technologies
in all but high usage sectors
Constraints
Innovative approaches slow to be
adopted in UK
More sophisticated modelling is
required to understand UK impacts
Competitive advantage Opportunities Barriers
Technology /
manufacturingMedium Medium
KeyDistinctive strengths
Construction Medium Medium Moderate strengths
Planning / consultancy High Low Limited strengths
Capital / financial
servicesHigh Low
WATER INDUSTRY
30257051 4
3.1 Physical impacts of climate change
Water utility companies supplying water face the challenge of drier summers and
reduced summer rainfall affecting supplies. All water companies will have to deal
with increased flood risk and more intense periods of heavy rainfall. Industrial
water users, including those who directly abstract from rivers, will need to
consider alternative ways to maintain a reliable water supply.
Physical impacts in the UK
Climate change will bring alterations to the hydrological cycle from changes in
temperature and precipitation patterns. Higher summer temperatures and reduced
summer rainfall will affect water supplies, particularly in the south east of England
where there is the biggest pressure on supplies due to population growth. Severe
weather events such as more intense rainfall also pose significant loading constraints
on drainage, treatment facilities and pipelines.
Water supply companies will need to maintain sufficient resources and high water
quality while protecting infrastructure and assets from weather related damage3. This
will create opportunities (see Table 3.1).
Table 3.1: Challenges for water suppliers from climate change to 2100
Challenge and impacts Timeline for
action Business
Opportunities
Overloading of sewage infrastructure may result from increased frequency and intensity of storms putting pressure on sewer capacity to deal with larger water volumes
Immediate Separating foul and
rainwater systems. Water reuse and recycling
Environmental impact of intermittent discharges resulting from increasing frequency of overflows adversely impacting water quality. Drier summers likely to exacerbate impacts whilst wetter winters may reduce impacts
Medium-to-long term
Localised storage and treatment solutions
Regulatory threat from pollution incidents as drier summers and more variable rainfall patterns in spring/autumn reduce dilution of discharged wastewaters, potentially resulting in tighter consents and risks to service levels
Short-term Increased treatment
capacity
Security of supply threats as drier summers and more seasonal variability in rainfall (e.g. wetter winters) increase the likelihood of disruptions to supply.
Short-term Catchment planning &
Increased winter storage capacity
Water quality impacts vary considerably from more frequent winter storms and increased run-off. Reduced dilution from lower summer runoff.
Medium-term
Lower runoff could reduce wastewater
treatment requirements
Increasing flood risk to sewers, wastewater treatment works and distribution by pluvial, fluvial and coastal floods as well as risk of dam burst.
Short-to-medium
term
New infrastructure (flood protection / resilience) to
minimise risks
Adapted from UKWIR, 20074
Flooding is a major hazard for water companies since they have widespread assets
ranging from pumping stations to sewage treatment plants. For example, the Carlisle
floods in 2005 highlighted the need to adapt the city sewage mains which led to United
3 Water UK, Consultation on the Adaptation Reporting Power in the Climate Change Act 2008 (DEFRA), September 2009
4 UKWIR facilitates collaborative research for UK water operators www.ukwir.org
30257051 5
Utilities leading a sewer expansion scheme in cooperation with the Environment
Agency and Carlisle City Council. Completed in November 2009, the project cost
£10m5 and attracted attention from other UK local authorities looking to adapt sewage
infrastructure.
More seasonal variability in rainfall coupled with drier periods is likely to lead to more
water pipe movements and hence more leakages to manage and repair. This added
disruption from streetworks (which already causes between £4-6bn of social costs in
the UK6) creates opportunities for smarter streetworks to find and fix buried assets – an
R&D area in which the UK leads internationally7.
Global physical impacts
Climate change impacts such as drought, floods and high temperatures will be
felt across all regions of the world, impacting on agriculture, water supplies and
water treatment, supply chains and property.
There is significant uncertainty in the projections used by the IPCC of the overall
effects of climate change on freshwater systems, but negative impacts are predicted to
outweigh the benefits8. Water supply infrastructure will be affected mainly by increases
in temperature, sea level rise and increased variation in rainfall9.
Water-dependent industrial sectors will seek adaptive solutions
Elsewhere, industrial-scale water efficiency schemes, reuse and recycling systems and
water saving technologies are now the smart option for water dependent sectors to
adapt to an increasingly water-constrained world. For example, the combined water
consumption of five food and drink corporations (Nestle, Unilever, Coca Cola,
Anheuser-Busch and Danone) is 575 billion litres a year10
. This is not sustainable in a
changing climate and these firms are investing in technologies and programmes to
minimise usage and improve their overall resilience (see under Agri-food chain
chapter).
Drought and water scarcity will impact greatly on agricultural lands
Economies dependent on large supplies of water are clearly vulnerable to adverse
effects. Agricultural-based economies could suffer the worst with major consequences
for the entire food supply chain (see Box 1).
However the problem is not limited to agriculture, even Barcelona had to order in huge
quantities of water, delivered by tanker, to serve its population and tourists after it was
caught short in 2008. Barcelona‟s strategy for future water security is to build a
desalination plant (fitting into the Spanish government‟s long-term strategy to have 24
desalination plants to solve the country‟s endemic water shortages).11
5 Water Briefing: http://www.waterbriefing.org/carlisle-10m-sewer-expansion-completed-on-schedule-2.html
6 Consultation with UKWIR
7 Consultation with UKWIR
8 Intergovernmental Panel on Climate Change, Climate Change 2007: The Physical Science Basis, 2007
9 Intergovernmental Panel on Climate Change, Climate Change 2007: The Physical Science Basis, 2007
10 The Economist, „Running dry‟, August 21
st 2008
11 www.guardian.co.uk/world/2008/may/14/spain.water
30257051 6
Box 1: Drought in Arizona and impacts on agriculture could create opportunities for
agricultural consultancy expertise to advise on soil moisture, alternative crops and pest
management
Reduced rainfall and higher temperatures, reducing flows in the Colorado river, are affecting
ranchers who are experiencing the worst drought in more than a century. Temperatures in the
American south-west have increased by 0.8°C from the 1960-79 average and are projected to
rise by up to 5.5°C by the end of the 21st century. Supplying the area with water is estimated to
cost £600bn a year by 2050, equivalent to nearly 1% of US GDP. Agricultural output has been
below average for successive years and could fall dramatically as the effects of continuing
drought build up. The changing climate is also bringing new pests such as the bark beetle which
strips tree bark, increasing forest mortality in a region where timber used to be a main industry.
Source: Financial Times, „Record drought takes its toll on Arizona‟, October 14th 2009
3.2 Demand shifts
Climate change impacts on water supplies are likely to exacerbate the economic
pressures from ageing infrastructure. In emerging economies, basic
infrastructural needs to meet growing populations and industry are further
pressured by water scarcity constraints and the need to plan for further
reduction in water availability.
“Climate change is of critical importance to the water industry. It is already affecting the water
industry from its source materials to its customer base and to its disposal routes. There is no
question that companies who do not plan for this issue now will have insufficient capacity to
continue to deliver their current levels of service.” Pamela Taylor, Chief Executive, Water UK
Demand shifts in the UK
In the UK, the direct effect of climate change on demand for water is relatively small
compared to the potential impacts of socio-economic changes like population growth,
household occupancy rates, land use changes and economic growth12
. The forecast
additional impacts of climate change on domestic and industrial demand are not great
– up to 1.8% for domestic users and 3.1% for industrial users by the 2020s13
. However,
coupled with reduced supply capacity caused by changing summer rainfall and
possibly increased risk of drought or heat waves, such increases could create supply-
demand imbalances which are likely to worsen in the long-term without adequate
investment in new water supply infrastructure and/or more resilient and innovative
water distribution, treatment and use assets which can also meet ever more stringent
discharge standards and regulations on reduced energy use.
Although the UK has generally reliable rainfall patterns, the UK‟s high population
means that on a per capita basis the UK is actually not as „water rich‟ as some other
countries. This issue starts to become problematic in the south east of England since it
“has less water available per person than the Sudan and Syria”14
, and is already a
water stressed15
area and a large proportion of water is extracted from groundwater
aquifers. For example, 74% of public water is supplied by groundwater in the Southern
region, 37% in Anglian and 34% in the Thames region16
. Indeed, new infrastructure is
now being built to overcome forecast water shortages in the south east, such as
Thames Water‟s desalination plant at Beckton on the Thames estuary – the first such
plant to be built in Britain which will supply up to 150 million litres of water per day and
12
Defra Research Contract: Climate Change Impacts and Adaptation - Cross-regional Research Programme (Project C -
Water), HR Wallingford, June 2006 13
Downing et al., Climate Change & Demand for Water project, managed by HR Wallingford, 2006 14
www.waterwise.org.uk 15
See p.40 of the Walker Review (December 2009) for levels of water stress in England (http://www.defra.gov.uk/environment/quality/water/industry/walkerreview/documents/final-report.pdf) 16
The State of Groundwater in England and Wales, Environment Agency (http://publications.environment-
agency.gov.uk/pdf/GEHO0906BLDB-e-e.pdf)
30257051 7
it is also intended to be powered entirely by renewable energy17
. In order to guarantee
water supply to customers in Swindon, Oxfordshire and London, Thames Water is also
proposing to build a new reservoir in Oxfordshire by 202618
.
Global demand shifts
The global water market is shaped by trends in population growth, antiquated water
infrastructure, rising water quality standards and changes in the hydrological cycle due
to climate change19
. Goldman Sachs has forecast that world water consumption will
double every twenty years20
. In many countries, the effect of increased population,
urbanisation and reduced water availability is leading to faster exploitation of water
resources. Water scarcity is expected to become a widespread problem and even a
major source of conflict in the 21st century
21 as water availability declines. Climate
change alone is expected to account for one fifth of the global increase in water
scarcity22
which in turn will drive demand for water conservation and reuse
technologies. Figure 3.5 shows that many countries are now approaching their physical
limits for water availability or else are constrained economically in their exploitation of
these resources – factors that create long term opportunities for low cost water reuse,
recycling and treatment technologies and advanced water management planning.
Figure 3.5: Areas of physical and economic water scarcity (2007 data)23
Source: WBCSD, 2009
3.3 UK resilience to climate change
UK water supply companies are now starting to invest in adaptation measures
on top of current investments to maintain service levels. However, the scale of
investment needs to increase in the medium term. Investments in water saving
technologies by industry and business will also become more strategically
important.
17
www.thameswater.co.uk/cps/rde/xchg/corp/hs.xsl/4989.htm 18
www.thameswater.co.uk/cps/rde/xchg/corp/hs.xsl/9238.htm 19
Sustainable Asset Management (SAM), Water: a market of the future, December 2007 20
The Economist, „Running dry‟, August 21st 2008
21 UN Water, Coping with Water Scarcity - Challenge of the Twenty-first Century, 2007
22 UN-Water, 2007
23 Sourced from World Business Council on Sustainable Development, Water facts and trends v. 2, 2009. Originally
referenced in “Water for Food, Water for Life: A Comprehensive Assessment of Water Management in Agriculture”, 2007, London: Earthscan and International Water Management Institute
30257051 8
Water supply companies already face significant risks related to climate change and
the sector has started to integrate future climate change impacts into business plans
and long-term plans. Drawing on a high level of forecasting and planning expertise a
range of measures has already been implemented to increase water efficiency.
Examples include extending capacity by building reservoirs and constructing new
pipelines between watersheds to protect against drought and flooding24
as well as
protecting assets from flood damage and improving overall resilience (see Box 2).
Box 2: Anglian Water invests £95m in measures to protect assets and improve resilience
The East of England is the one of the driest regions in the UK and, with a long coastline and
large areas of low-lying land, is vulnerable to flooding. A climate risk assessment for Anglian
Water showed that much of the company‟s critical infrastructure is increasingly vulnerable to sea
level rise, increased intensity of storms and flooding. In response it has developed an adaptation
strategy with proposed actions that include flood protection investment of £36.8m across 27
water treatment works, 46 wastewater treatment plants and 81 pumping stations. It is also
investing £58.4m over the next 5 years to improve the resilience of water supplies.
Source: Tomorrow‟s Company, Can You Afford Not To? November 2009
Whilst the water industry has tended to focus more on capacity building (e.g. risk
management, emergency planning, organisational etc) than implementing adaptation
actions,25
the recent 2010-15 price review,26
Ofwat included £414m for improving
network and asset resilience. Utilities will have to protect more than 150 critical, „at risk‟
assets and initiate thirteen network resilience schemes. Furthermore, one hundred
catchment management schemes are included in the price limits compared to just two
in the last price review.
“Adaptation in the form of increased resilience featured strongly in companies‟ strategic direction
statements...The experience of the 2007 floods and a greater appreciation of the increased
potential for extreme weather events because of climate change led to a significant number of
proposals to increase resilience. These took the form of: network resilience projects, which
protect from a number of hazards; and asset-specific flood resilience measures.”
Ofwat Final Determinations of water and sewerage charges 2010-2015, November 2009
These resilience measures are expected to benefit 9.6m people by 2016 and create a
range of opportunities in environmental consultancy, infrastructure construction and
maintenance services. The price review also made provisions for further adaptation
investment as the final determinations were unable to take into consideration the latest
UKCP09 climate change projections. To this end, joint work is underway between the
Environment Agency, Defra, UKWIR and Ofwat to understand the implications of the
UKCP09 scenarios on water resource planning which will help water suppliers to take
appropriate measures27
.
Over the longer term, the challenge for water suppliers is to take a holistic view of both
water resources and changes in demand for water. They will need to plan strategically
to avoid the risk of deficits in supply and demand for water. The operational risks from
climate change should force water companies to adapt if they are to deliver safe,
reliable drinking water at an affordable price. A water industry better prepared to cope
with climate change adaptation will also ensure a competitive position28
.
The convergence of water infrastructure with the built environment and the need for
sustainable „city infrastructure‟ (comprising integrated waste water treatment resilience,
drainage and flood defence) is well illustrated by the vast London Tideway Tunnels
24
Water UK, „How the water industry is adapting to climate change‟, Briefing December 2008 25
Tyndall Centre for Climate Change Research, An Inventory of Adaptation to climate change, July 2009 26
www.ofwat.gov.uk/pricereview/pr09phase3/det_pr09_finalfull.pdf 27
Consultation with Mike Keil, Head of Climate Change Policy, Ofwat 28
Consultation with Mike Keil, Head of Climate Change Policy, Ofwat
30257051 9
project.29
This aims to provide a 21st century sewerage system to cope with London‟s
ever increasing population and the challenges of climate change including heavier
rainfall in London. Work is centred around a £600m Lee tunnel project to capture 39m
tonnes per annum of raw sewage overflows that would have entered the river
Thames30
and a 20 mile long Thames tunnel to capture flows from the 34 most
polluting combined sewer overflows that would otherwise discharge untreated water
into the Thames.31
The tunnel projects, for which expenditure has been approved by
Ofwat in their latest price review32
, provides an unprecedented scale of investment in
the water industry and provides an excellent opportunity for the UK water industry
supply chain to capitalise and take the knowledge learnt to other cities worldwide.
At a wider level, water is vital to the functioning of many industry sectors, including
agriculture and the power sector where it is a massive user, often derived from direct
abstraction33
. Given that the south east of England is likely to face increased water
stress, coupled with the region potentially having the greatest population growth in the
future, more water efficient techniques should be stimulated to counter the threats from
droughts or interruptions to supplies.
Table 3.2 provides a summary of resilience issues across the UK which impact on
water supply. Investments in water-saving technologies by industry and business have
also been helped by the UK‟s Enhanced Capital Allowances for water technologies.
The list which comprises a diverse array of equipment (e.g. leakage detection,
rainwater harvesting, vehicle wash reuse etc.) appears to be an important financial
instrument for accelerating adoption.34
Table 3.2: Summary of resilience for UK water supply and management
Impact Resilience
State of
prepared-
ness
General
changes in
hydrological
cycles
Modelling capability and understanding of impacts and
vulnerability high. Adaptation initiatives already initiated, e.g.
Water UK has developed a comprehensive framework for
adaptation options and established a Climate Change Focus
Group to enable information sharing among members and raise
the profile of the industry in the UK and EU.
High
Altered
resource
availability
Planning and resource management developed to high level, e.g.
through statutory water resource management. In England and
Wales, the 25-year Water Resources Management Plans35
stimulates planning beyond the 5-year AMP cycle. However,
there has been slow progress in adaptive actions and
infrastructure investment. Long term water resource security
issues will need to be considered in light of potential changes
from climate change, including direct water abstraction
Low -
Medium
Increased
flood risk
UK firms have extensive ability in mapping threats from tidal, river
and groundwater flooding. For example, the Indicative Flood Plain
Map provides in-depth information on the magnitude of flood risks
Medium
29
www.thameswater.co.uk/cps/rde/xchg/corp/hs.xsl/2833.htm 30
www.thameswater.co.uk/cps/rde/xchg/corp/hs.xsl/10113.htm 31
www.thameswater.co.uk/cps/rde/xchg/corp/hs.xsl/10115.htm 32
www.ofwat.gov.uk/pricereview/pr09phase3/det_pr09_finalfull.pdf 33
See NAO (2005) report on Environment Agency: Efficiency in water resource management (2005). The NAO concluded “To replace a supply of 1 million litres of water a day would typically cost about £2 million. The Agency‟s regulation of
abstraction [in England], therefore, protects resources worth some £72 billion to licence holders. Clearly, water use is of such importance that its value to the economy as a whole is incalculable.” 34
www.eca-water.gov.uk/product_search_landing.asp?section=66&itemTitle=Product+Search 35
www.grdp.org/business/sectors/32425.aspx
30257051 10
for different areas in England and Wales. But adaptive measures
to date do not match increasing long-term risks and many
localities remain in danger of severe flooding
Cross-cutting
threats to
infrastructure
Need for improved strategic planning, including adaptive actions
to improve infrastructure (for example, smarter streetworks to
find/fix buried assets which runs across utilities and highways
authorities) and establish more holistic management plans, to
avoid cascading effects of infrastructure failure. Areas threatened
by coastal erosion already require relocation of existing facilities.
Low
3.4 Current opportunities
There is an emerging market for water-related adaptation goods and services in
the UK and abroad. Water supply companies in England and Wales are
increasingly investing to become more resilient to climate impacts. Globally,
water price increases provide incentives for organisations to invest in water
saving devices.
UK market opportunities
In the UK in 2008, total turnover in the water collection, treatment, supply and sewage
sectors was around £13bn with net capital expenditure of just over £4bn36
. A report by
Innovas37
has estimated the market size of the UK water and wastewater for goods
and services38
in 2007/8 to be almost £8bn, constituting around 36% of the entire UK
environmental goods and services market. Although the UK market for water-related
goods and services is reaching maturity, growing at an average of less than 2% per
year and projected to reach £9bn by 2014/1539
, it remains a very large market and new
opportunities are likely to emerge. This is because, historically, comparatively cheap
water prices in the UK have meant that water usage has generally not impacted on the
company bottom line - compared to waste and energy costs which have rapidly risen in
recent years.
In the short term, measures creating win-win situations, coupling adaptation with
efficiency gains as well as environmental protection or emission reductions, are the
„low-hanging fruit‟ for water suppliers (as well as large industrial users of water). They
offer „no regrets‟ or „low regrets‟ outcomes for purchasers. They include water
efficiency measures (e.g. metering), leakage management and large-scale retrofit.
Carbon accounting and carbon life cycle assessments are already widespread tools for
achieving this (as required by Ofwat) and consultants like Black & Veatch are already
capitalising on this opportunity across UK water suppliers.
Another important dimension to adaptation opportunities are the interdependencies
arising where investments in water infrastructure interface and help improve resilience
to climate change in other parts of the economy. An obvious example is investment in
on-site renewable energy from water treatment works. This reduces reliance on power
plants which may themselves be constrained by demand shifts. Consideration of new
water storage infrastructure should be closely linked to demand management and
water efficiency measures and potential effluent reuse for consumers (e.g. for those
customers who do not require potable water), so that overall resilience is built up.
Increasing pressures on water resources and the potential impacts of climate change
on availability will mean that efficiency measures become increasingly cost-effective,
creating a raft of opportunities for suppliers across the water utility value chain (see
Figure 3.6) as well as in industry (e.g. on improved processes and packaged plant).
36
ONS, Annual Business Enquiry 2008, Nov 2009 37
Innovas, Low Carbon and Environmental Goods and Services: an industry analysis, 2009 38
Comprising Water Treatment and Distribution, Technology, R&D, Engineering and Consulting, Education & Training 39
Innovas, Low Carbon and Environmental Goods and Services: an industry analysis, 2009
30257051 11
Opportunities will be greatest in specialist areas including those where the UK has
some latent capability. One example is rainwater harvesting products, worth £225m in
200540
, as well services and technologies that improve demand side efficiencies.
Figure 3.6: Water utility industry value chain41
Source: World Bank, 2009
Global market opportunities
Global water supply and wastewater services markets are worth US$400-500bn42
. The
UK supply side has strong exports with UKTI estimating annual overseas sector
revenues (which include adaptation measures) of over £3bn43
with key markets in Asia,
Europe and North America. The largest future opportunities for UK companies are
likely to be in the Middle East and East Asia.44
However, global water markets are
changing rapidly. Whilst there are still opportunities to supply technologies into
countries with immature supply chains (e.g. Hydro International is responding to
immediate issues, such as urban flooding triggered by annual monsoons in developing
economies, to provide sustainable drainage solutions in India), intellectual capacity is
building fast in overseas markets with local expertise developing to international
standards and indigenous technology providers now prevalent offering competitive
products.
Overseas opportunities are therefore shifting from technology to service provision (e.g.
consulting, asset management, institutional capacity building) - areas where UK
companies can offer expertise gathered under a long-standing regulatory regime. UK
consultancies are using greater service offers to improve competitive advantage over
foreign competitors. Biwater and Scott Wilson, for example, already sell carbon
management and carbon life cycle assessment services to overseas clients45
.
UK water engineers are also exporting their knowledge, advising on the necessary
refinements that are now having to be made as infrastructure design parameters
change to accommodate greater variation in physical impacts. The ongoing work to
improve UK resilience in this area will clearly help UK engineering firms to refine their
service offer to overseas clients.
Figure 3.7 provides a comprehensive overview of adaptation opportunities across
different aspects of the global water industry and through the supply chain.
40
UK CEED, Emerging Markets in the Environmental Industries Sector, Nov 2006 41
www.odi.org.uk/events/2009/11/05/2104-presentation-7-revels-world-bank-water-sector.pdf 42
Sustainable Asset Management, Water: a market of the future, 2007 (market value dependent on definitions used) 43
UKTI, Growing your business overseas – Environment and Water, May 2009 44
UKTI 45
Consultations with Biwater, Scott Wilson and UKTI
30257051 12
Figure 3.7: Summary of opportunities for adaptation goods and services across the water industry and through the supply chain
Catchment Reservoirs
Water
treatment Network Usage
Waste water
treatment/network Waste
Indicative
market size:
Globala
Management: $20bn
Desalination:
$12.2bn
Purification: $129bn
Plant & equipment:
$54.5
Treatment
technologies: $2.7bn
Pipework: $33bn
Renovation: $10bn
Industrial waste
water treatment:
$24bn
Domestic
installations: $10bn
Water meters $2.4bn
Sewage: $153bn
Treatment equipment: $12bn
Membrane systems: $4.2bn
Wastewater reuse
installations: $1.3bn
Indicative
market size: UK
Value of water and wastewater goods and services market ~£8bnb
Net capital expenditure in the water utility industry: £4bn in 2008c
Consultancy
and planning
Impact modelling and integrating climate change into decision-making and asset planning
Implementing long-term R&D programme to fill climate change knowledge gaps across the sector
Integrated Resource Planning, risk assessment and climate proofing at risk assets
Improving operation and management regime
Catchment modelling
tools for investment &
strategy options
Researching
impacts on water
resource assets – all
structures
Research & piloting
of alternative water
treatment
technologies
Water network flow &
quality modelling
Demand
management
Drainage, run-off &
flood modelling
Modelling impacts
on waste stream
Topographic mapping
Water quantity and
quality modelling
tools
Water treatment
process modelling
Analysing/mapping
impacts on network
Education/ raising
awareness
Implementing Sustainable
Urban Drainage Systems
Developing potential
for using biogas
Multi-functional
upstream land use/
catchment
management
Monitoring /
analysing asset
trends
Developing water
treatment processes
for higher operating
temperatures
Real time systems
monitoring
Public access to
smart sensor data
Research & piloting of new
wastewater treatment systems
Modelling changing
agricultural outlets
Hydrological analysis
Increasing leakage
management Real time sewer monitoring Phased disposal
Design Expanding capacity of new assets and infrastructure to cope with future climate change impacts
30257051 13
Technology
Developing technological solutions for increased stress on assets and infrastructure due to climate change
Improving and developing alternative treatment technologies
Developing sensors and monitoring technologies
Construction
Building protective structures to cope with extreme weather, flooding and sea level rise
Building groundwater
recharge structures
Building new
reservoirs/
desalination facilities
Building new /
retrofitting treatment
facilities
Extending water
network assets and
infrastructure
On-site treatment &
re-use facilities
Building new / retrofitting
waste water assets
Building
new/retrofitting
sludge assets –
Expanding storm water tank
capacity
Building integrated
water & agriculture
biogas production
Services
Silt removal
Mobile treatment
facilities for
emergency supply
Expanding storage
capacity
Rainwater
harvesting,
greywater &
sewage recycling
Installing equipment to remove
sediment from rainwater flows Reusing effluent
Mitigating
overtopping &
slippage
Developing
distributed treatment
systems
Improving leakage/
infiltration
performance
Water efficiency
measures –
technological and
behavioural solutions
Upgrading & increasing
pumping facilities –
In-reservoir &
dam inspections
Increasing use of
pressure
management
Installing new water
technologies
Upstream chlorination of waste
water
Separating of combined
sewerage systems
Implementation
of Infrastructure
Developing methodology to evaluate vulnerability to climate change
Adapting investment decisions to take account of increased uncertainty due to climate change
Developing new insurance products to deal with new and amplified climate change risks
Source: Water UK (2007), UKWIR (2008), Caffoor (2009)
a: Sustainable Asset Management (SAM), 2007
b: Innovas, 2009
c: ONS, 2009
30257051 14
3.5 Future opportunities
Upgrading UK water assets to provide smart and resilient networks coupled with
demand side management approaches will create diverse opportunities. The
continued requirement for basic but climate resilient water infrastructure in
developing economies will offer openings for UK goods and service providers.
The need for rehabilitation of existing assets and building new water infrastructure (e.g.
reservoirs, sewers, sustainable urban drainage, flood defences where appropriate),
both in the UK and abroad, will continue to create market opportunities. In the UK
water supply network, integrating modern measurement and control systems to create
smart networks could provide new opportunities. However, a lack of adequate and
accurate flow and pressure measurements means that significant upgrades are
required for automating controls for optimised performance before smart systems are
possible.
Public awareness, communication strategies and demand reduction tools are growth
areas that translate into consultancy and technology opportunities. Denmark is a good
example of where water demand has been reduced significantly (i.e. consumption
reduced from 360 million m3 to 266 million m
3, i.e. about 26% from 1989 to 1998)
46
through an innovative tax on water supply and reductions in income tax, stimulating
greater investment in water saving technologies. For example:
45% of Danish households had installed water saving taps;
39% of households invested in low-flush toilets (3- and 6-litre flush versus former
10-litre flush);
53% have a modern water saving washing machine.
Long-term opportunities outside the regulated water industry are apparent, particularly
for industries directly abstracting from rivers, estuaries etc. and for those businesses
that could replace current potable water with non-potable water. These may also
interface with other sectors such as agriculture, manufacturing and the built
environment. Table 3.4 provides an overview of future opportunities including an
assessment of current UK capacity and capability and the potential uptake.
Table 3.4: Summary of future opportunities in water adaptation markets
Adaptation Current UK capacity Potential uptake Opportunity
(Waste)water
treatment and
reuse
Wastewater technology
mature but only a few water
recovery systems in
operation
Effluent energy recovery
systems, e.g. anaerobic
digestion, developed to
commercial standards
Integrating water usage and
local treatment growing area
in urban design. Still gaps in
knowledge and innovation
Use of treated waste-water
in agricultural and industrial
applications could be scaled
up drastically
Effluent reuse could earn
developing countries double
dividends as part of Clean
Development Mechanism
Localised water treatment
has large potential in
conjunction with
infrastructure renovation
Large potential
in UK and
overseas
markets
Effluent reuse
larger potential
in developing
economies
Australia
leading
market. Major
UK opportunity
Upgrading
UK water
infrastructure
Fragmentation of sector
makes large upgrade, e.g.
separating rainwater and foul
Major growth opportunities
for planning, development
and construction in pipeline
With assumed
life of 1000
years,
rethinking
46
http://ec.europa.eu/environment/enveco/taxation/pdf/ch6water_abstraction.pdf
30257051 15
water, difficult
Smart network technology
mature but ageing
infrastructure an obstacle
Flood prevention &
protection measures
developed are sophisticated
but costly and innovative
approaches required
rehabilitation and new build
Need for renovation - UK
networks currently replaced
at a rate of 0.1% a year
Decision to build flood
protection rests with local
authorities
current
approaches to
networks is
necessary
Water supply
and demand
management
Catchment modelling and
planning highly developed
Management measures such
as rewetting of peatlands,
improving livestock
techniques and soil
management developed
UK water-saving
technologies and services
mature.
100 UK catchment schemes
expected to be developed
over the next five years
Wide range of projects that
will test and enhance UK
capabilities in managing
environments for adaptation
Water efficiency market
expected to grow in UK and
abroad in next decades
Possibility for
product supply
abroad built on
UK experience
Large export
opportunity for
water
efficiency
services
Consultancy
services
Market leading expertise in
environmental consultancy
High capability in modelling,
interpreting and integrating
climate change impacts into
design, structures and
management.
Vulnerability mapping, flood
risk modelling, impact and
risk assessment for new
coastal defences and flood
protection measures likely
to continue to be a growth
market in UK and abroad
Infrastructure
projects carry
on driving
global markets
Figure 3.8 presents a complete register of opportunities for the main components of the
UK water supply chain constructed on the basis of the literature review, consultations
with industry experts and market analysis.
3.6 Constraints in undertaking adaptation
Progress in adaptation by water companies will be enhanced by the recent price
review although issues still remain around long term forecasting of impacts and
introducing innovative measures where there is little incentive to do so. Other
water users may also need to plan for strategic changes to ensure resilience.
Overseas, project finance has yet to be attracted in large scale for adaptation
projects but fulfilment of the Copenhagen Accord might kick-start the market.
Constraints in the UK
Despite the UK water industry spending nearly £80 billion in the 20 years since
privatisation, water infrastructure is ageing and run down in many parts of the UK47
such as London‟s largely Victorian water infrastructure. Water suppliers by necessity
have to focus on managing and maintaining these assets and maintaining existing
levels of service - which impacts on available money for new technologies and
infrastructure - rather than improving service and investing in technical innovation.
Maintaining services in the UK at their current levels has been estimated to require an
increase in spending of around 20%.48
A key finding from our consultations regarding adaptation across the regulated water
suppliers was the challenge of rapidly deploying both pilot-scale and fully-commercial
47
A view expressed by several study consultees 48
World Business Council for Sustainable Development, Water Facts and Trends, (v2) 2009
30257051 16
innovative adaptation approaches. This reflects the Cave Review (published in 2009)
which called for greater levels of innovation within the regulated water industry. The
government‟s Committee for Science and Technology, which investigated the need to
invest in new technologies to meet the needs of the 21st Century, also noted in their
March 2009 report that “The water industry‟s performance in terms of investment in
technology and application of innovative solutions is highly variable between
companies in both clean water delivery and in waste water and sewage treatment.
There is an urgent need for a step-change.”49
While the regulated water industry comprises very different companies and strategic
approaches, as one consultee noted “some are leaders across certain disciplines and
some more open to innovation than others, but we only need to take the leaders with
us in the development of innovation and Ofwat will ensure that the others follow
through their benchmarked competitive model.” An Innovation Platform for the water
industry, being currently considered by the TSB in collaboration with other stakeholders
such as UKWIR and Ofwat, could be one mechanism for tackling innovation barriers.50
Constraints on growth in developing markets
In developing economies adaptation is often funded by the major international financial
institutions such as the World Bank and project finance has yet to be attracted in large
scales for adaptation projects, so the market opportunity has yet to emerge. Whilst an
Adaptation Fund was established under the Kyoto Protocol, for example, it had
secured just $25m by November 2009. However, the Copenhagen Accord agreed to
commit $30bn for 2010-2012, with adaptation prioritised for the poorest countries, and
a goal to achieve $100bn by 2020, covering adaptation, mitigation, technology transfer
and capacity building. Fulfilment of this pledge by donor countries would significantly
stimulate the market for water related adaptation measures.
3.7 UK competitive advantage
The UK has competitive strengths and comparative advantages in a number of
core water technology and service areas, many of which have been developed
on the back of the UK’s regulatory regime. Sales in adaptation markets are likely
to be developed on the back of world class consulting expertise, asset
management and advice on regulatory frameworks.
Findings in this section were derived from the literature review, consultations with
industry experts and the preceding market analysis with a view to capturing UK
competitive strengths in traditionally strong areas as well as those areas where new
opportunities have been identified.
The UK has a fragmented technology supply side industry with no specific dominant
technology strength - ONS identify over 1,081 UK enterprises operating in water
supply, treatment and sewerage51
. The UK also has a legacy of old infrastructure, low
replacement rates and a network that is tied into old and energy intensive water and
wastewater treatment infrastructure - a framework that does not lend itself to the
testing and roll out of leading edge, low carbon technologies.
However, it is clear from consultations that as a consequence of outsourcing by the
regulated water industry, the supply chain has expanded and strengthened. The
supply chain is also the conduit to overseas markets and therefore an important future
source of building competitive advantage. Furthermore, the structure of the supply
chain allows some flexibility to integrate with other industries and to export services
49
Improving innovation in the water industry: 21st century challenges and opportunities, CST, March 2009 - www.cst.gov.uk/reports/index.shtml#Water 50
http://www.ofwat.gov.uk/sustainability/sustainabledev/min_wrk_innovationmins200209.pdfa 51
ONS, Annual Business Enquiry 2008
30257051 17
abroad52
. Infrastructure companies such as Balfour Beatty, Biwater and Laing
O‟Rourke draw on experience from UK infrastructure projects to provide similar
services globally. The strength of the UK consultancy and engineering sector will also
help in marketing adaptation innovations that are developed and deployed in the
domestic market. It is these „softer‟ service elements that could help differentiate UK
firms in the short to medium term.
The UK Research Councils are playing an important role in strengthening UK water
research capabilities53
(e.g. through research programmes such as the „Changing
Water Cycle), and including through the greater alignment of key elements of their
research programmes such as the 10 year Living with Environmental Change
programme which covers adaptation54
.
Innovation and R&D for many water technologies is focused on improving energy
efficiency, for example variable speed pumps made by Grundfos and others, as a
means of strengthening market position. One industry expert said that the UK is
perceived to have no specialist technological expertise compared to other developed
countries and benefiting at best from “second mover advantage”55
Australia, Germany
and Japan for example provide leading edge technologies in grey and blackwater
recycling56
while the Dutch are regarded as “five years ahead”57
on technologies and,
on flood prevention, probably have the leading edge at all scales, although the UK
does some good capability58
. Singapore has also now developed a water R&D
technology cluster that is attracting substantial investment from global companies and
has real scale. Overall, the UK needs to continue to build a critical mass of research to
feed innovation in several adaptation areas if it is to compete with other nations that
are also investing heavily in water research (e.g. Netherlands, Singapore59
).
With respect to adaptation, the UK water sector has recently been identified by the
Network for Business Sustainability (2009) as a world leader in a review of business
adaptation to climate change. Advantages include its institutions, strong supply chain,
system efficiencies, together with strengths in management, consulting and planning.
Overall the UK continues to have strong research capabilities, for example through the
Thames Valley (e.g. WRc, HR Wallingford). The UK Climate Change Act, and the
statutory reporting requirements for water suppliers and infrastructure companies
contained within it, could also help to provide first mover advantage to UK firms60
.
Table 3.5 provides a summary of the main UK competitive strengths in the water
industry supply side while Figure 3.3 (in the Chapter summary) provides an
assessment of UK competitive strengths across the supply chain.
Table 3.5: UK competitive advantage across the water supply side
Technology /
service area Product offers UK strengths
Technology /
manufacturing
Low energy waste water
treatment
Chemical free water treatment
UK water and wastewater advanced
treatment technologies considered leading
edge. Strong supply chain capabilities.
Large export potential.
52
UK CEED, 2006 53
Consultation with Martin Griffiths, TSB 54
www.nerc.ac.uk/research/programmes/lwec/aims.asp 55
Consultation with Gerald Jones, Corinium Innovation 56
Consultation with Keith Simons, innovation consultant 57
Consultation with Gerald Jones, Corinium Innovation 58
Consultation with Jeremy Goad, UKTI 59
See country case studies in www.cst.gov.uk/reports/files/water-report.pdf (March 2009) 60
Consultation with Matthew Sheldon, CBI
30257051 18
Construction
Sustainable urban drainage
Source controls
Large infrastructure projects
(integrated with consultancy
services)
Strong experience in rehabilitating
infrastructure including finding and fixing
buried assets. Good capability for
undertaking Build Own Transfer (BOT)
infrastructure projects (e.g. treatment works,
dams). Excellent links to financial
institutions.
Planning /
consultancy
Asset management
Modelling
Forecasting
Risk assessment
Integrated mapping using
Earth observation technologies
(GIS)
Integrated solutions (e.g. land
management)
Traditionally strong service capabilities
around planning, EIA and community
engagement seen as complementary.
Extensive experience in risk assessment
which is expected to grow as large water
infrastructure projects increase. UK will have
a small first mover advantage.
Expertise in modelling processes and asset
management is world class.
Advice on and developing regulatory
frameworks for national and regional
governments, based on UK experiences.
Capital /
financial
services
Advisory services
Management
Financial products
Insurance
Advice on infrastructure financing and
implementation methods and developing
these through to procurement stage.
Access to financial institutions and insurers
is a major advantage and could be a driver
for UK businesses if connected better.
Management contracts and “affirmage”
(lease) contracts are popular in many
countries and several UK firms manage
such contracts for water infrastructure.
3.8 Suggestions for further interventions
As the chapter has demonstrated, there are various ways in which water suppliers,
industry and business could enhance their resilience to climate change, improving their
bottom line at the same time as creating business opportunities for UK suppliers.
Building resilience in the UK will also have spin-off benefits for the supply chain in
terms of acquisition of skills, knowledge and capabilities that are helpful in exploiting
global markets. To stimulate a greater demand for goods and services and overall
resilience measures, suggestions are directed at the following:
The Environment Agency could communicate the adaptation efforts and
schemes that it is undertaking to enhance resilience to water scarcity, flood risk
and extreme events (e.g. Carlisle remedial works following the severe floods in
2005). Wherever possible the quantification of the cost benefits from such
actions could also be communicated to encourage the private sector (e.g.
farmers, landowners) to invest in measures.
Defra could work closely with the TSB and other stakeholders to ensure
that any Innovation Platform that is developed for the water industry gives
prominence to the need for innovative adaptation technologies and approaches
which can be translated into commercially successful goods and services.
30257051 19
Water companies in England and Wales could work in partnership with,
developers, the Environment Agency and local planning authorities on
sites at varying scales in areas already undergoing water stress (e.g. South East
of England) and should investigate the use of large-scale (low carbon) water
reuse schemes that go beyond existing guidelines. Similar demonstrator sites to
develop integrated and innovative drainage schemes, including Sustainable
Urban Drainage (SUDS) solutions should be encouraged. Examples of new build
and retrofit should be considered. This could also provide valuable proof of
concept and experimental sites for UK technology suppliers as well as innovative
Build Own Operate schemes.
Technology suppliers and service providers operating in the UK water
industry supply chain (as well as those currently outside the sector such as ICT
providers) could benefit from both joining innovation partnerships and engaging
in more development work which will help give them an edge both in the UK and
internationally.
The Environmental Sustainability KTN, TSB and UK Research Councils
could work to build the right partnerships between universities, water suppliers
(including UKWIR), consultants and technology developers to feed innovation
and research priorities into R&D programmes to solve and commercialise new
opportunities.
30257051 20
Figure 3.8: Assessment of market opportunities in the water sector
Climate change adaptation response Supply side opportunities
Category Opportunities Technology /
manufacturing Construction
Planning /
consultancy / management
Capital /
finance
Households
Increased use of / demand for
household water management devices
Small scale water storage devices to reduce need for treated water
Installation of water meters and
upgrade existing meters to reduce consumer use of water
Flood protection (sump pumps, raise
door thresholds, repaint external brick work, apply waterproof membranes to external walls)
Maintain
supply of water resources
Require installation of residential water meters
More holistic water catchment
management programmes to improve water quality
Retrofit systems to reduce water leakage & pressure management
Increase capacity / new construction
Development of new / more water
treatment capacity to meet increased demand from population (human) migration
Localised treatment of water and wastewater
Build new large scale urban water retention and recycling schemes
New water reservoirs
Elevate buildings (e.g. Japan)
Floating constructions (e.g. Netherlands)
River levees / sea walls
Retrofit
existing facilities
Adapting water infrastructure to incorporate desalination technology
Improvements to water supply infrastructure
Install energy recovery systems (e.g. effluent reuse / anaerobic digestion)
Separating foul water and rainwater drainage system
Resilience
Development of infrastructure to
reduce water runoff (domestic and municipal)
Retrofit systems to use reclaimed water to recharge aquifers
Retrofit water transmission system &
water treatment works to be more resilient to flooding
Impose / increase water use restrictions for industrial usage
Resource Water storage on farms (e.g.
30257051 21
Climate change adaptation response Supply side opportunities
Category Opportunities Technology /
manufacturing Construction
Planning /
consultancy / management
Capital / finance
management
Scotland)
Basement water storage (e.g. NL)
Agri-environment schemes to
maintain water quality for human consumption
Increased water efficiency measures to offset the increasing cost of water
Watershed management schemes to maintain water availability
Minimise usage of potable water for non-potable purposes
Adapt recycling plants to use less water / be supplied with grey water
Install real time monitoring systems
Increased use of pressure management
Demand management (e.g. using smart sensors data)
Services
Maintenance and repair
Risk management and vulnerability assessment
Modelling and scenario building
Topographic mapping / hydrological analysis
Life cycle analysis / carbon accounting
Research and development
Insurance products that compensate
for adverse effects of climate change and incentivise installation of adaptation measures
Consultees
Issy Caffoor, Knowledge Transfer Manager (Water), Environmental Sustainability KTN Martin Cave, Director, Centre for Management under Regulation, Warwick Business School Ian Pallett, Technical Director, British Water Bruce Horton, Water UK Jeremy Goad, Environment and Water Team, UKTI Martin Griffiths, Lead Technologist - Water, Technology Strategy Board Mike Farrimond, Director, UK Water Industry Research (UKWIR) Kerry Thomas, Associate Director for Research and Training, Environmental, KTN Victor Aguileira, Water quality, Defra Conrad Bishop, Water quality, Defra Anthony Williams, Director, Biwater Gerald Jones, Founder, Corinium Innovation Stephen Hill, Manager, Energy and Carbon Management, Severn Trent Keith Simons, innovation consultant Mike Keil, Head of Climate Change Policy, Ofwat
