A new report released today by Atkins which examines four possible future scenarios to determine how drivers such as climate change and population growth could affect the UK water industry over the next 40 years has raised key issues about the direction the sector is likely to take.

Future Proofing the UK Water Sector is a timely contribution to the wider debate about the growing challenges faced both at both domestic and global level -  the World Economic Forum’s Global Risks 2013 report identified ‘water supply crisis’ as the second highest risk facing the world in terms of impact.

As part of the report’s launch, Atkins and World Cities Network hosted a high-level round table in the City yesterday with representatives from government, insurers, the private sector, regulators and the water industry to discuss the scenarios outlined in the report.

The scenarios are constructed around two important and highly uncertain drivers of change for the water industry – the cost and availability of energy, and the value customers place on natural resources. Other key drivers are considered including population and urbanisation, climate change, finance, workforce and regulation.

Atkins’ Water & Environment Director Mike Woolgar said:

“Like the scenarios, we want to think broadly, long-term and in an integrated way about the future of water for London. This report stretches our thinking and can help all of us to test whether short-term decisions are aligned with long-term pathways we may wish to adopt.“

“We want to better understand how the drivers of change may affect water companies and utilities, customers, regulators and the wider infrastructure sector in the UK.”

The four scenarios for 2050, which were developed by Atkins with consultants Decision Strategies International (DSI), are named the Graphene Era, the Wood Economy, the Steel Squeeze and the Concrete Jungle. As scenarios, they are not forecasts, but rather narratives on how the UK landscape could unfold and when decisions may need to be made to meet future needs. Although designed for the water industry, the four scenarios have broader applicability.

The Graphene Era scenario imagines a future where the UK has adapted effectively to the severe effects of climate change and the economy is buoyant, high-tech and green, while the Wood Economy explores a society where foreign sourced energy costs are high, water is scarce and customers prefer to turn to local or DIY solutions.

In contrast, the Steel Squeeze scenario looks at a world where people are squeezed by a high cost of living and little concern for the environment, leading to an expectation that government should fully regulate water quality and cost.

Lastly, the Concrete Jungle is a future dominated by the resurgence of traditional UK manufacturing, where consumer consumption is high and society trusts that we will invent our way out of any future climate or environmental problems.

The Report raises some interesting questions about issues the UK water sector needs to address, including:

• has the UK taken sufficient action to ensure our water and wastewater systems are resilient to the combined challenges of a " perfect storm" of inter-related environmental, social and economic risks?
• How likely are customers to reduce consumption to 130l/d or lower given that per capita consumption has been increasing by 1% every year since 1930?
• What are the key levers that may be required to achieve a reduction in consumption and what can the water companies proactively do today to bring about this behaviour change?
• What assets, if any, could the industry invest in that would make a target of 130l/d unnecessary?
• What is the balance of hard infrastructure and smart systems that should be implemented?
• What will ownership (operation and maintenance) of assets look like in future?
• What further innovation is required to allow water companies to generate more of their own energy, and reduce their consumption?
• How can the water industry balance performance, cost and carbon emissions of wastewater treatment?
• What value will customers put on ecosystem services and what will they be willing to pay for them?

On finance, the report raises some particulartly pertinent questions in the run-up in to PR14 and AMP6. Atkins says that while the water utilities have generally been seen as safe investments, in recent years, the low return on assets in the water industry has become less appealing to investors.

Referring to Severn Trent Water's own estimate that the sector may need to raise an additional £96 billion to fund additional investment by 2030, the report says that the source of this future investment is uncertain and asks where the significant investment needed from 2030 to 2050 will come from - including whether new business models are required to help unlock new sources of funding.

Click here to access the full report.