28/06/2011

Failed Italian water privatisation


Picture source: Thames Water - long term investment in 1920's
The news that Italians had rejected in a referendum a new law that would have required cost recovery pricing across the Italian water sector and allow privatisation of water operating companies was not a surprise. Turkeys don’t wont for Christmas! But it only puts off a problem that wont go away. Greece is already suffering from a lack of investment in its water infrastructure. Water shortages are becoming more common. They may get a temporary reprieve if as seems likely their economy collapses and demand for water falls. But this only postpones the inevitable need for investment.

This political stalemate over water pricing is common across the world. Close to home it’s the key issue facing Northern Ireland Water as the winter water supply failure starkly highlighted. It means that if long term solutions are so unpalatable to the politicians then crisis management will become the order of the day.  Water tankers, and bowsers will become a regular feature. It will create market opportunities for quick fixes like portable desal plants and may drive up the cost of water. But it will only lead to a more unstable world. Putting off important decisions on water investment will mean that the options open to solve the problem will be more limited and expensive and make the economic situation for Governments worse.   

13/06/2011

UK water sector drought - opportunity or threat?

The news this week that parts of the UK were suffering from drought came as no surprise to those living in the south west or east and it was closely followed by the wettest day for months! But one wet day does not change the seriousness of the long run of exceptionally dry weather.

One strand of Thames Water’s strategy to answer water shortages was to construct its  £270m desalination at Beckton. In its first year the controversial Thames Water desalination plant ran for only three days – proving trials only - as there was insufficient demand to justify running this very expensive way of producing water. This must make the water produced some of the most expensive in the world!

It does sharply question whether having highly capital intensive and expensive desalination plant on standby is really the best way to tackle the growing water shortages. Water leakage in London is still around 25% and in some areas much higher still. Investment in replacing the 100 plus year old water network has increased but still the rate of replacement assumes much of the existing old pipework will last another 100 years. Other European countries have shown that achieving leakage rates of 5% is feasible albeit it would require massive investment. Would it not be better to increase investment in pipe replacement if we are to have a sustainable solution? 

06/06/2011

Water White paper delayed further

It is disappointing to report that Defra have announced the water white paper has been delayed further. As this blog reported it was delayed to the autumn and has now gone back to December. Having raised expectations for water customers in the South West that their bills would be reduced it is not surprisingly proving difficult to find a resolution to how to have a more equitable charging system.

Black Swans in the water sector

Ever since Nassim Taleb wrote his book, “The Black Swan” the world has been aware of the need to consider low probability but high impact events. This has proved true yet again in the nuclear industry with the Fukushima disaster – a supposedly extremely low probability event and as is now becoming clear with very serious consequences.

The water industry also needs to think carefully about low probability, high impact events. The lessons from Fukushima and the Gulf of Mexico BP oil disaster are clear – it is vital to prepare for the worst. In both cases much could have been done to alleviate the impact if thought had been given in advance about what to do if these low probability events occur. Now belatedly BP and the oil industry are investing in emergency devices to cap a blow out.

With events like cryptosporidium contamination the water industry has already given much though to its emergency plans. But as a report by UKWIR has made clear much more needs to be done. Not only will this make the water industry safer it will also reduce costs as investment and effort is targeted where it makes a difference.