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What might the future bring? At a glance

In considering the key priorities for water and waste water services in Scotland, we need to understand the future opportunities and challenges we may face in the next 25 years. We have involved our stakeholders and our employees in developing potential future scenarios. This has identified the critical issues that we believe are most significant to the future of your water and waste water services in Scotland.

Scottish Water

Climate change

Demographics

A changing climate could impact on water and waste water services in a variety of ways. We must be able to adapt to potential changes if we are to continue to meet customers’ expectations for reliable services. Possible climate impacts include changing quality of water sources, availability of water resources, increased rainfall in our sewers and restrictions to discharging waste water back to the environment.

By 2035, Scotland’s population is expected to grow by 10% overall and the number of households by 21%, as well as some movement in the population from the west to the east of Scotland. Scotland’s population is continuing to age, with a 50% increase in over 60s projected by 2035. We are currently seeing a reduction in business users’ water demand and expect this to continue in the short to medium term.

Legislation

Resource availability

A number of pieces of both European and Scottish legislation – such as the Water Framework Directive and Water Resources (Scotland) Bill – mean that continued investment will be required to meet new standards. The Scottish Government has ambitious plans to develop Scotland as a Hydro Nation. This has the potential to further use Scotland’s valuable water resources to support economic growth.

Frequent rainfall means Scotland generally has enjoyed a significant supply of water, which is stored in natural lochs, rivers and man-made reservoirs then treated to remove impurities and supplied for drinking. Given the potential effects of climate and population change we need to consider whether we will have enough capacity to store water in the future to provide continuous treated drinking water for Scotland’s homes and businesses.

Political, economic and regulatory environment

Science and technology

There will always be a requirement for essential water and waste water services in Scotland. With pressures on public spending likely to remain for several years to come, the level of borrowing available from the Scottish Government for future water and waste water services could be lower. We expect regulation to continue to evolve assuring customers of the quality of Scottish Water’s service and performance.

Significant advances in science and technology in recent years have had a positive impact on the quality and efficiency of water and waste water services in Scotland. Science and technology will continue to provide opportunities to improve services and reduce costs.


Providing continuous high quality drinking water

Introduction Chief Executive’s statement

Protecting and enhancing the environment

Supporting Scotland’s economy and communities

Investing in future water services

09

About Scottish Water What might the future bring? Listening to our customers Our strategy

Climate change

From this we expect that:

Our understanding of climate change and how it may impact on us has improved significantly over the last two decades but uncertainties remain. Projections (UK 2012 Climate Change Risk Assessment) indicate that rainfall patterns will change and that temperatures are likely to rise in both summer and winter. Sea levels are also projected to rise around the Scottish coastline. How might climate change affect your services? Our assessment of the impact of climate change demonstrates that a number of our assets and services may be affected as shown in the picture below.

Climate change will create greater variability of weather patterns which could impact on the reliability of our services; and We need to adapt our assets and operations to ensure that our services can always be delivered, irrespective of the effect of a changing climate.

Climate change impacts

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Water treatment and pumping station

Reservoir

Ground water infiltration Waste water treatment works 3 5 Drain

8 4

Treated outlet

Storm outlet

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1. Changing rainfall patterns may affect the available quantity of raw water supplies. 2. Changing raw water quality (algae, colour) may affect ability of existing assets to treat to the required drinking water quality standards.

3. Potential flooding of assets, or landslides that affect access to operate assets, or in some locations coastal erosion.

4. Lower river flows in dry periods may reduce our ability to abstract water and the ability of the environment to accept our waste water discharges. Additional treatment may be required.

5. Increased rainfall frequency and intensity results in more property flooding from sewers. 6. Periods of dry weather result in siltation leading to blockages in sewers or increased sewer cleaning activities.

7. Increased rainfall frequency and intensity may result in more storm water spills to the environment. 8. Increased run-off from agricultural land may lead to greater pollution of rivers.

Strategic Projections


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Demographics

The key points in the projections of significance to Scottish Water are:

Changes in the size and structure of the population will have important implications for economic growth in Scotland and the demand for our services.

The Scottish population is expected to grow by 10% by 2035, primarily due to net inward migration from other areas of Europe;

The Office for National Statistics (ONS), on behalf of the Registrars General, prepares population projections which indicate that there will be continuing overall growth in the Scottish population and relatively greater growth in the east of Scotland, suggesting a general migration from west to east as shown in the chart below.

There will be a general shift in the population from west to east of Scotland; The number of households is expected to grow by 21% by 2035 as the average household occupancy rate reduces from 2.18 to 1.93;

Unless water consumption or industrial demand reduces and/or further action is taken by Scottish Water, this projected population growth could affect the availability of the water supply in some areas due to current capacity limits, which could also be further affected by climate change.

Scotland’s population is continuing to age, with a 50% increase in over 60s projected by 2033 which could have consequences for the affordability of water charges; and

In the current economic climate it is difficult to obtain reliable forecasts for demand for water and waste water services in the business sector. In recent years we have seen a reduction in the demand for water as businesses drive to reduce their costs and become more efficient in their use of water; we expect this to continue for the next few years. Given the many uncertainties facing business customers and the opportunities that Hydro Nation – using Scotland’s water resources to boost economic growth – may bring, we have assumed that overall demand will remain stable in the longer term.

We expect to see some further reduction in business demand over the next few years and little growth in demand for water and waste water services in the longer term.

Projected demographic change (2010-based), by Council area, 2010-2035 40

Western councils Central councils

Percentage changed

30

Eastern councils © Crown copyright

20 10 0

Scottish Water

East Lothian

Perth & Kinross

Aberdeen City

Edinburgh, City of

Aberdeenshire

Stirling

West Lothian

Highland

Midlothian

Clackmannanshire

Glasgow City

Scottish Borders

Falkirk

SCOTLAND

Fife

Moray

Dundee City

Orkney Islands

Angus

South Lanarkshire

East Ayrshire

North Lanarkshire

Shetland Islands

Renfrewshire

East Renfrewshire

South Ayrshire

North Ayrshire

Dumfries & Galloway

Argyll & Bute

West Dunbartonshire

East Dunbartonshire

Inverclyde

-20

Eilean Siar

-10


Introduction Chief Executive’s statement

Providing continuous high quality drinking water

Protecting and enhancing the environment

Supporting Scotland’s economy and communities

Investing in future water services

11

About Scottish Water What might the future bring? Listening to our customers Our strategy

Legislation Extensive legislation governs the quality of the products that we supply and the impact of our activities on the environment. We have invested over £2 billion in the past 10 years on new treatment works and infrastructure to meet the standards set out in drinking water quality and environmental legislation. As we look to the future, legislative obligations will continue to have implications for the way we provide our services as summarised below. European legislation Urban Wastewater Treatment regulations These regulations aim to protect the environment from the adverse effect of waste water discharges by regulating the collection and treatment of waste water from our homes and from industry. Bathing Waters Directive The revised Directive sets more stringent bathing water quality standards and puts a stronger emphasis on beach management and the provision of information to the public. Our waste water treatment works and networks have the potential to impact on 70 of the 83 designated bathing waters in Scotland. Water Framework Directive This is a wide ranging Directive that establishes a framework for action to protect and enhance the water environment through river basin planning which brings together all of the activities that impact on the water environment.

Birds and Habitats Directives The Birds and Habitats Directives establish requirements for the designation and protection of ‘special areas of conservation’ and specified protected species. This can place requirements on Scottish Water’s discharges and abstractions to and from the water environment. Blueprint for water The blueprint will integrate the implementation of action to deliver EU water policy objectives and is likely to focus on better land management, economic cost signals to influence behaviours, efficient use of water resources and further the improvement of the knowledge base for water policy making. European Union drinking water standards We do not expect that any further standards for drinking water will be introduced, but we continue to actively monitor any developments.

Our understanding: We expect to continue to invest in and improve our activities to meet environmental standards laid down, or being developed, by the European Union and the Scottish Government; and Hydro Nation could create additional demands for services and opportunities for Scottish Water.

Strategic Projections


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Scottish legislation Reservoirs (Scotland) Act 2011 The Act represents a significant change in the way reservoirs will be regulated and includes measures to increase protection of the public from the risk of flooding from reservoirs. This will result in some smaller reservoirs being brought under the regulatory regime. Flood Risk Management (Scotland) Act 2009 The Flood Risk Management (Scotland) Act 2009 aims to reduce the risk of adverse consequences of flooding. The illustration below shows how managing the risk of flooding sustainably means considering all sources of flooding and the integrated actions that can be taken to reduce the impact of flooding.

Water Resources (Scotland) Act 2013 The Scottish Government has ambitious plans to develop Scotland as a Hydro Nation. In the competitive global markets, Scotland’s valuable water resources have the capacity to position Scotland well to support the success of many water dependent sectors and play a part in attracting new businesses to Scotland. This Act brings greater focus on good stewardship of our valuable water resources in Scotland, modernises the law in relation to the management of shortages in the public supply, and allows for more proactive and collaborative approaches to prevent substances entering the network that can be harmful or costly to remove.

Climate Change (Scotland) Act 2009 The Act introduced a statutory target to reduce Scotland’s greenhouse gas emissions by at least 80% by 2050 (and at least 42% by 2020). Scottish Water is expected to deliver a continuing decrease in energy usage and reduction in carbon footprint in support of the Scottish Government’s objective.

Flood Risk Management

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4 3 5

Groundwater

1. Land management and restoration of natural habitats, such as wetlands and woodlands can create more space for water and help reduce the flow of flood water to areas downstream.

Scottish Water

2. Where flood defence structures are necessary, they play a critical role in protecting communities and infrastructure from floods.

3. Good planning policies will ensure that homes and businesses are located away from high flood risk areas.

4. Sustainable urban drainage systems will reduce pressure on drainage and sewer systems. Flood warnings help communities to respond to flood risks.

5. Using the natural capacity of our coastal areas and restoring saltmarsh will improve the protection of coastal areas.


Introduction Chief Executive’s statement

Providing continuous high quality drinking water

Protecting and enhancing the environment

Supporting Scotland’s economy and communities

Investing in future water services

13

About Scottish Water What might the future bring? Listening to our customers Our strategy

Resource availability Scotland’s rainfall provides significant potential natural raw water supplies. It is our responsibility to meet the needs of today’s customers through storing and taking water from the environment without compromising our ability to satisfy the requirements of future generations. In this way we are responsible for very valuable resources which could provide a key future economic advantage for Scotland. Global position “There is an intrinsic link between the challenge the world faces to ensure food security through the 21st century and other global issues, most notably climate change, population growth and the need to sustainably manage the world’s rapidly growing demand for energy and water.”

Scotland’s opportunity Scottish Water currently uses a small percentage of Scotland’s natural water resources to provide drinking water for the majority of Scotland’s homes and business premises. Scotland uses more of the world’s water through importing water intensive goods such as food and clothing, than Scottish Water provides for customers’ daily use. With growing pressure on water resources in many other nations, it is conceivable that new industries may be attracted to locate in Scotland to take advantage of the significant natural raw water resources, creating a major economic opportunity.

Increased demand 50% by 2030 (IEA)

Energy

Climate change Food

Water

Increased demand 50% by 2030 (FAO)

Increased demand 30% by 2030 (IFPRI)

© Food, Energy, Water and the Climate: A Perfect Storm of Global Events? – John Beddington CMG FRS Chief Scientific Adviser to HM Government 2009

Strategic Projections


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Political, economic and regulatory environment Political While the political environment and issues such as taxation or constitutional changes may require business adjustments, these are likely to represent a low risk to Scottish Water as a provider of essential services. We will remain alert to how political change affects our business. Economic The Scottish Government’s Chief Economic Adviser’s assessment of the medium to long term outlook for public expenditure in Scotland suggests that there will be significant pressures on the availability of government borrowing for the next 10-15 years. The Scottish Government has advised us that lower borrowing, which is used to finance part of our investment programme, will be available in 2015 to 2021 compared to the 2010 to 2015 period. Regulatory The UK regulatory landscape is changing to encourage water companies to take greater accountability for their performance and governance with a move to more risk-based regulatory approaches that encourage innovation. The UK Government has announced plans in its Water Bill for an extension of competition in the non-domestic market for water services in England. It is important that the existing Scottish market, created in 2008, and the emerging English market are able to co-operate as this will achieve the Bill’s aim of increasing choice and bringing added benefits for business customers.

Scottish Water

Our understanding: In any political environment we provide essential water and waste water services that will always be required by the people of Scotland; Borrowing availability from the Scottish Government will be lower than in the past; Uncertain economic growth prospects could have consequences for the longer term affordability of water charges; The extension of the retail water market to England may encourage greater innovation in the water industry; and Regulation will continue to move to a more risk-based approach, placing greater accountability on Scottish Water.


Introduction Chief Executive’s statement

Providing continuous high quality drinking water

Protecting and enhancing the environment

Supporting Scotland’s economy and communities

Investing in future water services

15

About Scottish Water What might the future bring? Listening to our customers Our strategy

Science and technology There have been significant changes in the way water and waste water services are delivered thanks to technological advancements: • Internet and mobile communications have revolutionised how businesses can operate and engage with customers. • Water treatment technology has moved on significantly providing a much higher quality of water. • In waste water treatment we have seen significant improvements in technology and the introduction of enhanced sludge treatment and disposal. • Computing technology has enabled automation and control systems and sophisticated hydraulic modelling of sewer and water networks as well as the real-time capture of data about our asset performance. • The introduction of no-dig pipe repair and replacement techniques has significantly reduced costs and disruption to our customers. So what might the future bring? • What new treatment processes will be developed that reduce the costs of service provision and carbon emissions? • Could developments in nanotechnology (engineering involving tiny particles) enable water pipes to repair themselves which will help to reduce interruptions to supply, water losses and long term maintenance costs? • Will global shortages of water see significant advances in low cost desalination technology (to remove salt from water)? • How far can we go towards zero waste, extracting value from recycling, heat recovery from sewers, as well as energy and minerals extraction from waste water sludge?

• How might future computing and telecommunications technology influence the development of control and monitoring systems allowing real-time management of smart water and waste water grids? • How could changes in the way water is used in the home assist in meeting future demand challenges? For example, having specific water supplies for uses such as drinking and washing; greater local storage and recycling of grey water (waste water from laundry or dishwashing or surface water from roofs) for toilet flushing use and possibly treatment at point of use. • Will advances in hydrogen fuel cell development change demand for water? The diagram on page 16 shows a possible model of the future where we view the urban water cycle as a resource and look at ways of driving towards recycling and value realisation from the raw materials at our disposal.

Our understanding: Technology will continue to advance across all areas of our lives. We will identify the opportunities that this presents and will use these where appropriate for the benefit of our customers; Environmental science continues to develop and our understanding will continue to evolve regarding our impacts on the environment and mankind; and We will lead research and development that supports the achievement of our strategic aims.

• How will scientific knowledge influence the introduction of risk-based decision making that balances legislative objectives against carbon emissions resulting in a whole new approach to managing waste water discharges? • What might the home of the future look like and how will that impact on the services that we provide?

Strategic Projections


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Potential opportunities for reuse and value capture

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Road drain Soakaway or community suds pond 8

Sewer

1. Bath and shower Water efficient shower heads and taps use less water. 2. Combined toilet and sink Combined unit reuses waste water from the sink for toilet flushing.

Scottish Water

3. Grey water storage tank Waste water from baths, showers and washing machines, stored, heat extracted and waste water used for toilet flushing.

4. Water efficient washing machine Uses beads combined with a small amount of water to clean clothes. 5. Customer engagement Providing advice to customers on water, energy efficiency and waste disposal.

6. Rainwater butt Captures water from roof and reused for garden watering, car cleaning and toilet flushing – reduces drinking water demand and volume of waste water in the network.

7. Permeable driveway or road surface Reduces flow to sewers and drains to soakaway/ suds pond. 8. Waste water treatment works Minerals extracted and recycled, waste water sludge converted to energy.


What might the future bring?  

Scottish Water Strategic Projections