Scotland the Hydro Nation: prospectus and proposals for legislation consultation

SECTION 1

Strategic Vision

Developing as a Hydro Nation is a huge opportunity for Scotland. This prospectus outlines the first steps that have been identified which will contribute to the realisation of this strategic vision.

• Scotland's expertise in governance of water resources will be recognised internationally and we will have partnered other nations in developing their water governance framework.
• Scotland's water industry will be known for its transformation in performance and for low carbon sustainable approaches.
• Scotland's research community will participate in international research programmes contributing solutions to key issues.
• The value of our water resource to the economy will be increasingly realised through the development and marketing of technologies and services and the attraction of water intensive activities from areas of water stress.

Success will require concerted efforts from all those engaged in the sector. Progress will be dependent on a large number of small steps.

Scotland: Creating A Hydro Nation

Scotland has abundant water resources and as a Hydro Nation those resources will be harnessed more fully to boost the Scottish economy. In Scotland we can use the skills and experience we have in our water sector to raise our international profile. We can capitalise on global economic opportunities and support the good stewardship of water resources in an increasingly water stressed world.

Water is central to our national identity, from our lochs and reservoirs to the very origins of our industries, and the food and drink on our tables. Managing our water resource imaginatively, creating a Hydro Nation, is crucial to our future success and a key component of the transition to a low carbon economy.

Scotland has a dynamic water sector. There are significant European and North American water companies and some very large multinational companies that operate in the sector, but Scotland has expertise and a performance record that can compete on the world stage, and take advantage of the US $300 billion worldwide market in water products and services.

Water has always been central to Scotland's prosperity, and as we face new environmental and economic challenges it still has a vital role to play. When the Glasgow Corporation Water Works system brought water down to Glasgow from Loch Katrine in 1860, it was admired internationally as an engineering marvel. It raised hygiene and living standards, and was indispensable to the growth of Glasgow's industry. Scotland has built on this legacy - we have a thriving food and drinks industry, a strong tourism sector with fishing, sailing and other water sports worth over £200 million to the economy each year, and a high performing water industry delivering excellent quality water to our homes and businesses, supporting economic growth and protecting our health and our environment.

We can build on Scotland's water success story and make Scotland into a Hydro Nation.

A Hydro Nation will:

• Deliver Economic Gain to Scotland. Utilising Scottish expertise to maximise the economic benefit of our abundant water resources within a sound ecological context. Exploiting our expertise in governance, advocacy and water management and building on the transformation and excellent performance record of Scottish Water, our publicly owned water utility.
• Help Tackle Climate Change. Delivering high quality clean water and removing and treating waste water are energy intensive so a Hydro Nation must work towards being a low carbon water nation by using renewable energy and improving efficiency.
• Raise Scotland's International Profile. Being a Hydro Nation will raise our profile through recognition of Scotland as an international leader on water management and governance. We will work to gain international recognition of the Hydro Nation concept because water management is a global issue and tackling water scarcity is something we can and should play a role in.
• Share Knowledge on Water Issues. Developing a Water Centre of Expertise and Research with international reach that can help people around the world improve their water management and increase the numbers of people who want to live, work, learn and remain in Scotland. Establish a Hydro Nation Forum as a focus for international debate, knowledge exchange and policy development on water issues.

Scotland's Water Resource: The Facts

• Scotland is a water rich country, has the wettest climate in the United Kingdom ( UK) with the Western Highlands of Scotland being one of the wettest places in Europe. Over 1.9% of land surface in Scotland is covered by freshwater, with around 70% of the area and 90% of the volume of all the UK's inland surface water found in Scotland. The water contained in Loch Ness is nearly twice the amount found in all the standing waters of England and Wales combined.
• Scotland's water quality is amongst the best in the world. River Basin Management Plans ( RBMPs) published in 2009 set out the Scottish Government's long-term vision for the continued improvement of Scotland's water environment. The RBMPs show how a high proportion of water bodies in Scotland are already meeting the standards required under the European Water Framework Directive and set out how the remainder will be brought up to this standard. Scotland is recognised across Europe as one of the leading nations in the achievement of these standards.
• The Environmental and Clean Technology ( ECT) partnership consisting of Scottish Enterprise, Highlands and Islands Enterprise, Scottish Environment Protection Agency, the Scottish Funding Council and the Scottish Government are working together to support the innovation opportunities in environmental and low carbon emergent markets that present the greatest economic, environmental and social benefits to Scotland.

• In 2008/09 the global water supply and waste water treatment sub-sector was worth £242bn and the UK market was worth £8bn. By 2014/15 the UK market is forecast to be worth £9bn. ^[1]
• There are over 300 companies in Scotland in this sector. Scotland's research-intensive Small and Medium-sized Enterprises ( SME) have developed world leading technology for water treatment.
• Analysis carried out for the Scottish Government and ECT Partnership reports that the water supply and waste water subsector had a market value in Scotland of £709m and employed 6,200 people in 2008/09.
• Scotland's water exports in 2008/09, primarily bottled spring and mineral water, had a market value of £94m (13.3% of total market value). The main export destinations are Portugal, Indonesia and Thailand, and emerging economies such as India, China, Eastern Europe and Brazil.
• Scottish Water has made dramatic efficiencies in how it runs its business. Through enhanced asset management, intelligent investment and by deploying new technology it has delivered savings of more than £2.5 billion since it was established in 2002. As a result of making these savings Scottish Water's operating costs are now 35% lower than they were in 2002, a transformation unprecedented in the UK water industry.
• £2.5 billion is being invested by Scottish Water during the period 2010-15, contributing significantly to economic growth, and supporting an estimated 5,000 jobs directly in the civil engineering, construction and design sectors - roughly 20% of the market in these sectors in Scotland.
• We have introduced retail competition for non-domestic customers - a world first. A choice of retailer gives Scottish businesses a competitive edge and supports Ministers' strategic objectives for Scotland - in particular our overall purpose of increasing sustainable economic growth.

Scotland and Water: Hydro Nation an International Response

The Scottish Government is determined to play a leading role within the international community in tackling global water issues. Creating a Hydro Nation can make a huge contribution to that agenda and sits proudly as an element of our wider international framework.

As a Hydro Nation, Scotland will support talented people engaged in all aspects of the international water community to live, learn, visit, work and remain here in Scotland. The water industry in its widest definition, from research to services and life science technologies, can provide a sharp economic focus to the promotion of Scotland abroad. Creating Scotland as a Hydro Nation would support Scotland's reputation as an independent minded and responsible nation at home and abroad, confident of its place in the world.

Scotland is already part of a dynamic and competitive water technology and services market, but we see more potential in Scotland yet to be unleashed. We have unique strengths in our academic institutions, the technologies our companies of all sizes are developing, and in the management and governance of our water industry. We will take a collaborative approach linking essential agencies and companies to make our case as a leader on water management, advocacy and services.

As a priority, we will look to strengthen further our already productive relationship with China. As one of the world's largest economies, China is looking for international expertise on all aspects of water management and Scotland stands ready to provide that service.

We recognise our good fortune in having abundant water and excellent sanitation but other nations are not so fortunate. In the future perhaps bulk export of water will be a practical solution for Scotland to offer. Until then we will play our part in tackling this global inequality by working with developing nations as part of our international aid effort to deliver practical solutions to water scarcity, water quality and sanitation challenges.

Water Centre of Expertise and Hydro Nation Forum

Water is the focus of much international debate and concern with international water related organisations, trade events, Water Days and Weeks that seek to share knowledge and raise important water related issues up the political agenda. As we become a Hydro Nation, Scotland will take its place in the vanguard of this activity.

We will host our own Hydro Nation Forum focusing on our strengths in governance and efficiency and in bespoke consultancy solutions. Scotland may be the first to aspire to be a Hydro Nation but we want others to join us and ensure that excellence in water management is a global legacy that Scotland can be proud to have played a key role in delivering.

The Scottish Government has commissioned a Centre of Expertise on Water ( CREW). This virtual Centre will bring together the best available expertise in Scotland, to provide advice and information on the management of water. The Centre is led by the James Hutton Institute in partnership with a wide range of Scotland's research organisations and universities. Scotland has a strong research base in water related topics exemplified by CREW and the University of Dundee UNESCO Centre for Water Law, Policy & Science. As a Hydro Nation, Scotland will seek to expand and internationalise this capacity.

We will work with NESTA (the National Endowment for Science, Technology and the Arts) and others to take this forward.

Action: We will bring forward a programme of action under the Hydro Nation banner. Here are the first steps:

Economic Development

• Deliver a three year action plan with the Enterprise Agencies to secure economic benefits from the sector including the potential expansion of sector exports and what is required to support this activity.
• Identify of any barriers to innovation and commercialisation in Scotland including a feasibility study of an Innovation Park to test new products, facilitate proof of concept, EU accreditation and climate change resilience.
• Create a forward vision of what a low carbon water industry would look like in 10 and 20 years' time and develop a strategic plan to reach that point.
• Undertake a supply chain analysis of the water supply and wastewater treatment sector to identify where Scotland is under-represented and how this might best be improved
• Establish the size of the opportunity and prioritise potential to attract inward investment as a result of Scotland being a water rich country (for example through promotion of Scotland to water intensive users in water stressed locations across UK or Europe).
• Identify key innovation opportunities with Scottish Water working with research institutes and Scottish universities that require wider dissemination to business, including: new technologies requiring solutions for leakage detection; chemical-free water; grey water use; developing an optimum green fleet (especially in Highlands and Islands); and nutrient recovery.

International Action

• To introduce Saltire Water Fellowships and Scholarships.
• To establish a Hydro Nation Forum to act as a focus for knowledge exchange between nations and to stimulate innovation in water management.
• To further develop our co-operation with China and others on water management.
• To further develop the focus on water related aid in our work with developing nations.

Research Excellence

• To utilise and build upon the existing research capacity in all our higher education institutes, in particular the newly formed James Hutton Institute and the Dundee UNESCO centre.
• Realise Scotland's marketable international governance capacity with a view to being the helpdesk to the world on water governance.
• To identify opportunities for UK/ EU funding and consider the best approach to secure this funding for research and development in the water sector

Scotland and Water: The Opportunities

Water plays a prominent role in the success of many sectors of the economy, some of which are strategically important to Scotland's economy (for example tourism, food and drink manufacturing and renewable energy generation). Scotland's expertise and abundant water resources provide significant economic opportunities. The water industry also has a vital role to play in safeguarding public health and improving the environment, and the Hydro Nation programme will build on our current performance.

In Scotland our unique management model based on regulated public ownership has led to Scottish Water achieving efficiencies equivalent to £3m per week. We have stable water charges and a consistent capital investment programme that is delivering modern infrastructure and rapidly improving service standards. There is still further improvement that can be made, and Scottish Water aims to be in the top three water companies in the UK for customer service, by 2013/14.

We have introduced retail competition ( i.e. billing, collection and customer contact services) for all non-domestic water customers - the first country in the world to do so. This has been a success. Over 60% of customers now have lower bills as a result, 40% are on e-billing and over £28m of discounts are available to customers each year. Over £19m has been saved through water efficiency advice and measures.

Other countries are learning from our experience. The UK Government has recently announced that it intends to introduce a similar regime in England and to work in partnership with us so that common arrangements operate across the two countries. There is the opportunity for Scotland to sell the expertise it has developed in this field to other countries.

Business Stream, a subsidiary of Scottish Water and the largest water retailer in Scotland, has been at the forefront of driving innovation and delivering tailored products and services to customers. The opening up of the English market will provide it with a significant business opportunity to expand and win English customers. This could be just the beginning. As the world's first large scale entity entirely focused on retail services to non-domestic water and sewerage customers, there is huge potential for it to enter international markets, either by working in partnership with the incumbent water and sewerage entities or delivering the retail service for them.

We have a strong academic base, we have innovative SMEs and a water industry that compares well, in performance terms, with any other across the globe. On that platform we can look to develop the potential of Scotland's water resource at home and internationally.

Energy from Water

Hydro power is a commercial technology, long established in Scotland, which accounts for a significant proportion of existing renewable output. It contributes around 10% to Scotland's total current energy generation. Most output is produced by large scale hydro schemes. There are, however, an increasing number of proposals for small river hydro projects and these projects, together with the continuing refurbishment of the large hydro schemes will ensure that hydro will continue to play its part in Scotland's renewable energy mix. Scottish Water has been delivering and operating Hydro Power schemes over many years and is now building capacity and delivering new schemes.

Scottish Water is one of the largest purchasers of electricity in Scotland, using 450 gigawatt hours per year. This equates to over 1% of Scotland's electricity demand. It is committed to reducing its carbon footprint through a number of measures including greater use of renewable energy generated from its assets, where it is cost effective to do so. Indeed renewable energy installations already in existence provide some 5% of Scottish Water's electricity needs . Scottish Water's growth plan, approved by Ministers last year, forecasts £55m of investment over the next three years in waste recycling and renewable energy facilities. When combined with investment from partners, this will enable assets on its land to generate more renewable energy than Scottish Water consumes.

There is an abundance of water in Scotland, but water is a natural resource and should be used efficiently. Saving water is to everyone's benefit. Households can reduce their water (and therefore energy) use by, for instance, taking shorter showers, only using a washing machine when there is a full load and harvesting rainwater. Scottish Water is taking action and since 2006 over 400 million litres of water a day have been saved through leakage measures - enough to supply half of Scotland's households. More action is planned to reduce expensive chemical usage, remove more lead pipes, continue to fix leaks and explore more natural water management techniques.

The Scottish Energy and Resource Efficiency Service ( SERES) partnership offers guidance on energy and resource efficiency, including advice on water usage. The establishment of a new integrated business resource and energy efficiency service in 2013 will take this further by maximising support to business, and will include water efficiency along with supporting uptake of new technologies within its remit.

To ensure that we maximise the potential to the economy and continue to protect the environment and public health, we can and should do more with Scotland's water. This prospectus has set out the vision and the first steps to develop the economic potential of water in Scotland and to play a leading global role on water governance by creating a Hydro Nation.

Action: We will legislate to create a framework which will ensure that Ministers and others work together to develop Scotland as a Hydro Nation.