Scottish Water - Investment Planning and Prioritisation Working Group: interventions progress report - quarter four 2022-2023

4. Progress of the development of interventions with Level 1 and 2 appraisals

The purpose of this section is to provide:

• An overview of the progress of interventions in Q3 that are subject to Level 1 and 2 appraisals¹
• Highlights from significant Level 1 or 2 project investment appraisals completed in the last quarter
• A review of lessons learnt from the delivery of PIA forecast in the last quarter and a look ahead to the next quarter.
• The full list of interventions with Level 1 and 2 appraisals, with an indication of the anticipated timing, is shown in Appendix C, which is an additional document to this paper.

Quarterly review of progress of appraisals

Strong progress has been made in project level decision making within Q4:

• 25 project investment appraisals stages were completed within the quarter. This includes the additions to the forecast (8 or 19% of the initial demand).
• These projects had a value of c.£316m.
• Project investment appraisal documents continue to be shared with all stakeholders at Stage 3a and 4.
• A positive end of year progress session was held with Professor Bryan Adey, both in terms of business-as-usual delivery of PIA, but also the continual improvement and increased capability within Scottish Water.

Highlights from project investment appraisals completed within the quarter are included in Table 2.

Project Investment Appraisal Highlights

Loch Katrine carbon capture

Stage 4 Jan-23

The 9,500 hectare (Ha) Loch Katrine estate is Scottish Water’s largest single land holding and as such is our biggest opportunity for carbon capture to address our residual emissions to deliver our Net Zero ambition. Loch Katrine is the main water supply for Glasgow and in developing the Land Management Plan Forestry and Land Scotland have ensured that the woodland creation activities do not put water yield or water quality at risk.

There has been significant community and stakeholder engagement in developing the plan, with the Loch Lomond and Trossachs National Park being very supportive of this opportunity to transform the landscape.

Over the 10 year duration of the Land Management Plan, over 4,600Ha of new woodland area will be developed and poor condition peatland restored. The work is forecast to store nearly a million tonnes of carbon over the next 60 years. The proposed changes will see more than 40% increase in biodiversity across the estate, delivering a 15-20% increase across all Scottish Water landholdings, representing a major contribution to our statutory biodiversity duties. The PIA has been shared with stakeholders.

Dunside non-operational reservoir

Stage 4 Mar-23

Dunside non-operational reservoir is a good example of expansive thinking, and a project with the potential to contribute towards the net-zero ambition. It is a non-operational reservoir that has investment needs for matters in the interests of safety to be compliant with the Reservoir (Scotland) Act 2011 (The Act). Resilience requirements due to the impact of climate change were investigated and an assessment of customer and community use of the asset was completed (and none was found).

The preferred option taken into delivery is to breach the reservoir and plant trees in the land space available. This removes an asset which would have ongoing liabilities and maintenance requirements, and turns it into a carbon sequestration opportunity, returning the land to its natural state and contributing to our net zero target.

A review of lessons learnt from the delivery of PIA forecast in the last quarter

An overview of the appraisals at Stage 2/3a/b/4 that were forecast to be delivered during Q4 2022/23 and the appraisals delivered is shown in Table 3.

The purpose of Table 3 is to provide internal visibility to enable forward planning for Level 1 and 2 needs and to ensure enough work is being appraised to support the investment programme. It is not intended to be a fixed set of dates and the dates presented are the earliest that those will be achieved. A target of c.50% of milestones to be achieved is set due to the dynamic nature of the programme. 25 PIA Stages or 49% of the initial forecast were completed up from 31% (9) in the previous quarter. There are two main themes driving the missed forecasts:

• Repriorisation due to workload. This affected 20% (10) of the forecast projects which had forecasts adjusted to the following quarters in line with the dynamic programme. As an example, projects affected included Boardhouse and Kirbister WTW.
• Further investigation required to allow robust evidence for decision making. This affected 26% (13) of the initial projects. This included for example, investigation to ascertain scope and options (including survey requirements) at Peatville Terrace, Edinburgh (IFOS). In a demonstration of the PIA approach driving the best value decision, cost escalations for the preferred option have driven costing of alternative options (Eela Water WTW Stage 3b), and some further work required for the Bertha Park W/WW Growth projects.

Work to minimise the time associated with these activities in the last quarter has included:

• Capacity and capability support offered by the PIA team into early 23/24 to support change of people/capacity within water and wastewater teams.
• Acceleration of projects into Q4 for project investment decisions
• A review of project forecasts for April-23.

Projects reforecast by 12 months

In line with the dynamic programme a small number of projects have been reforecast by >12 months since the baseline forecast in April 2022. These are listed in Table 4 with the known consequences explained.

Table 4: Projects reforecast by >12 months

Consequence

Additional customer interviews, surveys undertaken to establish At Risk Register (ARR) risk and reworking of the preferred solution required including additional modelling.

Consequence

Short to medium term growth is being accommodated by optimisations at Plean and temporary treatment at Cowie – delivered under a sub project.

Costs are being re-assessed to understand when is the right time to invest in a centralised WwTW vs. continual refurbishment of existing assets.

Forecast for 23/24

The forecast for 23/24 is shown below (Table 5).