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Environment (Deep End)

Thames Water are planning to a dig a hole. Not the sort of hole that utilities like to dig in the middle of the road (shortly after it’s been dug up and filled in again by another utility). No, this hole is a very big hole. In fact it’s 25 kilometers long and will cost more than £4 billion.

Furthermore, this is a hole with a purpose – as reported in the pages of the indispensable Water Briefing:

“London operates a 19th century sewer system which frequently overflows during heavy rains and puts the UK in breach of the EU Urban Wastewater Treatment Directive. Thames Water, the capital’s water utility, is currently seeking final consent for a 25km long storage tunnel that would collect these overflows.”

As well as being able to handle large amounts of water, the London super-sewer (or the Thames Tideway Tunnel to give its official name) also has the capacity to swallow large amounts of money:

“In a White Paper released today, Bloomberg New Energy Finance’s modelling demonstrates that increasing wastewater charges of £70 to £80 per year, as proposed by Thames Water, to pay for the new £4.1bn tunnel might result in post-tax returns to equity investors of between 15% and 24%, considerably higher than the estimated 7% post-tax cost of equity for existing water utilities.”

Of course, we can hardly go back to the days of the Great Stink. If London needs extra sewerage capacity then London has no option but to pay for it. Except that the super-sewer might not be the only solution. According to the BNEF white paper there are alternatives:

“The research… suggests that an Integrated Water Management approach – based on a range of measures to capture, slow down, absorb, divert and intelligently manage stormwater – looks like offering better economics and performance than a purely tunnel-based solution, as well as benefits in terms of air quality and green spaces. Thames Water’s tunnel-only solution is highly unlikely to reflect best-practice in urban infrastructure by the time it is constructed in the mid-2020s.”

There’s a parallel here to HS2. Instead of one great big transport link, the economic competitiveness of our northern cities could be enhanced through a coordinated programme of smaller-scale infrastucture upgrades across the region – as well as through the deployment of advanced communication technologies.

And then there’s energy policy. Instead of blowing £16 billion on a lumbering dinosaur like Hinkley Point C nuclear power station, we could meet our future energy needs more cheaply and quickly through energy efficiency improvements, clean-burning gas-fired plant and sensitively-sited renewables.

A Conservative infrastructure policy should actively favour modesty of scale, diversity of supply and locality of action – not just because it appeals to our sensibilities, but also because it makes sound commercial sense. The bite-sized, modular approach maximises competition by lowering  barriers to market entry and allows underperforming projects to be re-thought without disrupting the overall investment programme.

All-or-nothing mega-projects, by way of contrast, are freighted with risk – and therefore require consumers to pay through the nose in order to provide the necessary returns on investment. If the Government is serious about reducing our household bills, then it must defy the lobbyists and rethink infrastructure policy from the bottom-up.

15 comments for: Before we flush our money down London’s super-sewer, let’s consider our options

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