Environment, Food and Rural Affairs CommitteeWritten evidence submitted by SSE plc

1. SSE plc (formerly Scottish and Southern Energy) is one of the UK’s largest energy companies. It is the UK’s second largest generation business with an ownership interest in over 100 thermal and renewable power stations, with a total capacity of just over 11,300 MW.

In terms of the issues raised and discussed in the Government’s Water White Paper, SSE’s generation business is most concerned with the proposals to reform of the water abstraction regime. It is this area of the White Paper which this response considers.

2. SSE welcomes the White Paper’s recognition of the importance of water for energy generation and the commitment to work with relevant stakeholders to guide the process of abstraction reform. The electricity generation industry is a major abstractor of water resources, primarily as a result of the role of water in cooling circuits in thermal power stations (coal, gas, oil and biomass) but also for hydro generation purposes. When compared to other cooling forms that are available (eg air cooled condensers), the use of water for cooling is more efficient, maximising useful energy output from a given fuel use whilst minimising production of “waste” and the use of raw materials. Any proposals for reform should acknowledge the importance of optimisation and responsible use of water, not just water use minimisation. It is therefore vital that the power generation sector is represented on the proposed National Stakeholder Group.

3. Nevertheless, it is important to understand the distinction between water abstraction and water use by the generation sector. That is, the concept of water “borrowing”. SSE therefore also welcomes the recognition within the White Paper accompanying documents that a significant proportion of water abstracted by the energy generation sector is returned back to the aquatic environment near to its point of abstraction.

4. SSE realises that climate change and increased demand may place additional pressure on water resources in future. However, any revision to the existing allocation methods must be holistic and recognise the significant contribution that energy, and hence security of supply, plays in society. That is, reform of the abstraction regime must not be conducted in isolation and without consideration being given to the large range of pressures on the energy sector arising from various policy initiatives from the EU and UK governments. Security of energy supply being particularly critical.

5. The White Paper’s recognition that continued access to water supplies and the importance of ensuring that the new regime does not create barriers to investment is, therefore, welcome. Proposals for abstraction reform come at a time of critical power station investment decisions. Indeed, over the next decade it is estimated that some £200 billion of investment will be needed to replace/refit ageing power stations and transform the energy system in the move towards a low carbon sector. It is therefore important that the programme of reform delivers sufficient confidence to investors in water-dependent power stations of access to water appropriate to the asset life and economic use of the power station and at the right location (which is likely to be at existing generation sites due to the importance of grid connections and infrastructure, fuel routes, waste handling facilities all of which need to be taken into consideration when developing new generation sites).

6. Furthermore, it is important to ensure that the transition arrangements do not undermine previous investment decisions in this sector. SSE therefore takes comfort that the Government has given assurance that the new regime will take account of current licences and the actual volumes used and that the transitional regime will not be used to change licensed volumes. SSE looks forward to working with Defra/Environment Agency to expand upon the principles of the transitional arrangements.

7. A key aspect of the proposed reform must be, therefore, to ensure that suitable volumes and reliability of water supply to the energy sector are sufficient to the current and the next generation of power stations. A key part of this will be to ensure that robust and “recognised” forecast energy scenarios are utilised.

20 January 2012

Prepared 4th July 2012