Cost of new reservoir ‘peanuts’ compared to drought

The water sector has been warned the cost of building new reservoirs is “peanuts” compared to the potential economic loss a drought would cause.

Speaking at Water UK’s City Conference in London yesterday (1 March) John Armitt, chair of the National Infrastructure Commission (NIC) said “relying on efficiency alone will not be enough” for a resilient water system.

He told delegates the NIC’s “immediate reaction” to water companies talking about the cost of building reservoirs was “what are you waiting for?”

“In broad infrastructure terms the cost of around £1 billion to £2 billion is peanuts,” he said.

“We’re going to spend around £30 billion on Cross Rail, and we’re going to spend £40 billion plus on High Speed Two.

“For the public having no water as opposed to getting to Birmingham 20 minutes quicker, there’s no debate, there’s no discussion.

“And yet we continue to rile ourselves to death about whether the rate of return is going to be appropriate,” Armitt said.

He outlined for London alone the estimated cost of a drought is £350 million a day.

“Set that across the cost of a new reservoir and frankly the reservoir becomes peanuts compared with the potential economic loss,” he said.

The NIC has commissioned an analysis of costs of new reservoirs, water transfer systems, and implementing long term supply measures against those for emergency measures required to maintain water supplies during a drought.

“This should allow us to compare the cost of a stitch in time with costs of dealing with a crisis to determine the appropriate levels of resilience for the system,” he said.

Armitt warned the sector is “dicing with unacceptable risks in not making these choices”.

The commission’s research suggests over the next 25 years there will be an increased risk of drought, while the public is concerned flooding will be more of a problem in the future.

“Far more homes in this country are going to be at risk of drought than flooding,” he said.

But he argued the “level of ambition” being seen in draft water resource management plans from water companies “doesn’t appear to match the scale of the problem”.

“We are concerned some of the plans for new infrastructure look more likely to be pushed back rather than to be brought forward.”

Armitt said alongside “big infrastructure” there are several initiatives to help build a resilient network.

He outlined the important role water meters and smart meters can play in ensuring customers have a better understanding of resources such as water and energy.

But he questioned how “effective implementation” could be achieved without a “greater degree of obligation”.

The NIC chair said industries need to be “honest and upfront” with the public about how things are “fundamentally paid for” such as large infrastructure projects.

And he suggested the public’s negative perception of utility companies can stem from them being regulated sectors.

“The mere fact that utility companies have to be regulated creates an atmosphere in which there is a natural assumption that these are nasty people that have to be policed,” he said.

“We all have to stand up and put forward the evidence and the arguments which demonstrate we are serving an infrastructure for the public and that is our fundamental driver.

“We need to prove we’re not there simply to cream off profit and provide an inadequate service.”