Reducing nutrients through innovative trading platform
South West England, England
Wessex Water is a water company supplying drinking water to 1.3 million people in the South West of England. About 80 percent of the supplied water comes from groundwater sources in Wiltshire and Dorset. The remaining 20 percent comes from surface reservoirs filled by rainfall and runoff from the surrounding catchment. To respond to elevated nitrate concentration in its reservoirs, the company adopted a source water protection approach in 2005 that consisted of promoting changes in agricultural practice in the catchment area, implementing a natural aquifer recharge system, and planning constructed wetlands. The company also supported the development of a trading platform, EnTrade, which enables farmers to bid to receive support for adopting improved agricultural practices that can reduce nutrients. This platform, which later spun off as an independent entity, is exploring applications for various interventions to improve water quality.
Mustafa Binol/TNC Photo Contest 2023
Challenges
Before implementation of a catchment approach, more than 20 percent of Wessex Water’s water supply sources were affected by elevated nitrate concentrations. The company had built four treatment plants to remove nitrates, and 11 sites had carbon filters to remove pesticides. The company estimated that building more treatment plants would not benefit the environment and that the cost burden would fall on its customers. In 2005, it adopted a catchment-based approach, with a focus on engaging farmers to protect water sources from excessive nutrients.
Financing:
The efforts led by Wessex Water to identify nature-based solutions that bring both environmental and cost benefits have already brought the company £100 million of savings, which have been incorporated into the new investment plan. The Wessex Water business plan for 2020-2025 establishes a £1.4 billion capital investment programme that incorporates its largest programme of environmental improvements to date (32 percent of total investment). Ofwat draft determinations on the plans, published in July 2019, allowed Wessex Water to invest £463 million to service resilience and the environment. In this allowance are included £372 million to improve the environment by efficiently delivering its obligations as set out in the Water Industry National Environment Programme (WINEP) and £10m million to address the impacts of deteriorating raw water quality. In December 2019, Ofwat will publish its final determinations setting price limits and allowed investment plans for water companies in England and Wales, which will provide the basis for Wessex Water’s investments in nature-based solutions for 2020-2025.
Actions & Impacts
Wessex Water assembled a team of scientists and catchment advisers trained to offer agronomic advice to farmers within the catchment areas of public water supply boreholes and reservoirs. The catchment approach targets 21 catchments at risk across the region: 15 groundwater sources at risk from nitrate, one groundwater source threatened by pesticides, and five reservoirs at risk from a combination of pesticides and nutrients. Wessex Water catchment advisers make direct and personal contact with all the landowners and farmers within their catchments and discuss the issues and raise awareness. The response is usually positive, as owners and farmers are generally concerned with the impact of their practices and are keen to reduce pollution. While pollution issues differ depending on the catchment, all cases involve monitoring to define and understand what specific actions are needed. The advisers then assist with agronomic advice and with the development of agricultural management plans (for soil, manure, fertiliser, and crop protection). More specifically, solutions include assisting farmers with agri-environment schemes, fertiliser spreader and pesticide sprayer calibration, and provision of locally derived data to improve management plans and agricultural practices. These plans allow local farmers and landowners to safeguard the quality of ground and surface waters, by aiming to stabilise and then reduce the levels of contaminant (nitrate or pesticides) at each source so that no additional treatment is required. The company calculated that the cost of this approach is one sixth the cost of a conventional treatment alternative. Furthermore, it found that catchment management has a significantly lower carbon footprint than building and operating treatment plants.
For example, in Eagle Lodge, water from the boreholes failed the nitrate standard several times between 1999 and 2001. Initially, Wessex Water planned and designed a nitrate removal plant in 2004. However, the high costs associated with the project led the company to opt for a source water protection approach instead between 2005 and 2008. The catchment adviser made contact with farmers in the catchment, explained the nitrate problem, and identified specific issues and a course of action: improved nutrient and manure management, calibration of fertiliser spreaders, altered drilling dates of autumn-sown crops, use of winter cover crops, and the adoption of resource protection measures under environmental stewardship. The farmers took up the plan, with funding from a European project, Water Resources Management in Cooperation with Agriculture (WAgriCo). Since 2006, nitrates levels have been consistently lower than the drinking water standard limits.
Wessex Water also supported the creation of EnTrade, a trading tool that creates online auctions to deliver environmental improvements, such as reducing the nutrient load in catchments. Through the online trading platform, farmers can bid for payments via a reverse auction mechanism to carry out measures that reduce the amount of nitrogen that leaches from the soil into groundwater and runs off into surface water. Measures they can bid for include planting cover crops or arable reversion, whereby arable land is reverted to grassland to reduce nutrients and increase the variety of habitat.
In 2015, Wessex Water negotiated with the Environment Agency and Natural England to offset 40 tonnes of nitrogen from entering Poole Harbour by working with farmers in the catchment, instead of building a nitrogen removal plant at Dorchester sewage treatment works. The company decided to use the EnTrade platform to implement the scheme. The first auction was run in June 2016 with the objective of removing 20 tonnes of nitrogen. The EnTrade platform estimates the savings for the buyer (Wessex Water in this case) associated with measures that sellers (farmers and landowners) choose to bid for. Sellers can enter their own costs from which they can see the resulting pound per unit of saving on which their bids will be judged. Sellers can adjust their bids at any point; once the auction closes, the buyer of the offsets can calculate the most cost-effective combination of bids to meet its target. EnTrade received 147 bids from 19 farmers, to make nitrogen savings of 47.5 tonnes through cover crops. The auction saved the company 30 percent on costs related to nitrogen reduction, compared to previous methods of working with farmers demonstrating that such a market-driven approach can bring efficiency gains.
Following the pilot auction’s success, two further auctions were run in February 2017, followed by another two in January and June 2018. These cover crop auctions received bids for a further 125 tonnes of nitrogen savings against a target of 70 tonnes, at a lower price than the previous auction. Further auctions for arable reversion received bids for 24 tonnes of savings over three years across 270 hectares. Overall, as of mid-2019, Wessex Water had received 557 bids from 63 farmers and achieved 153 tonnes of nitrogen savings across 2,993 hectares of land. The EnTrade platform operates now as a separate entity. Initially used only for nitrogen reduction, it is now looking for applications beyond nutrient trading, such as phosphorous and biodiversity offsetting.
References
Wessex Water. (2015). Catchment Management: managing water – managing land.
Water Briefing. (2019). Wessex Water gets planning go-ahead for Durleigh wetlands scheme.
Wessex Water. (2019). Business Plan 2020-2025.
Ofwat. (2019). PR19 Draft determinations: Wessex Water Draft Determination.
Stuart Palley
