Water trading spreads cost of securing irrigation supplies

The increasingly unpredictable weather in the UK has highlighted the importance of having access to sufficient water at all times of the growing season.

The obvious answer is to invest in a reservoir, but the cost of doing so, licencing restrictions and the physical requirements in terms of factors such as soil type and availability of winter rainfall mean this is simply not an option for many.

One solution may be to collaborate with neighbouring growers and share water from a single central store. For those looking to build a new reservoir, it can spread the capital cost and for those with an existing reservoir it can provide a useful source of income by selling the water.

It is also an approach the Environment Agency encourages, as water availability will come under increasing pressure with the effects of climate change and the full use of current licences, says EA head of abstraction Ian Johnson.

“Collaboration reduces the infrastructure investment farmers and growers need to make in storage and distribution, and allows water to be managed within the farming year.”

How water trading works

When it comes to trading water, growers have the choice of either trading within their existing Environment Agency licence rules – temporary or permanent – or join others in an abstractors group to pool water. Mr Johnson says either way it is best to have legally established agreements or contracts from the outset.

These agreements should factor in the water availability and demand of the business(es) now and in future years, he advises. “Having the facts on how climate change will impact on your licence is something few think about, but hotter drier summers with flashier rainfall, means many licences may yield less water in the future. It may mean investment is needed just to get the volume you already depend on.

“We are fully supportive of trading and collaboration, but check your licence conditions as you must not breach your licence by changing quantity, use, timing or volumes. You can seek a licence variation or get help with a trade from the Environment Agency.”

Details of the paperwork that needs to be in place can be found in the EA’s guide to water trading, available on its website. Alternatively, Mr Johnson advises growers to speak to their local EA officer.

Case study: George Munns, Cambridgeshire

George Munns is one of those to have spotted the opportunity that selling water provides, supplying 12 local growers from his 82m litre winter-fill reservoir on his 202ha (500-acre) county council smallholding near Chatteris.

The store was built six years ago at a total cost of £147,000, but this was 50% funded through a Rural Development grant, given on the basis that the reservoir would be used to benefit other growers too. “The county council were quite supportive of the plans, as it meets their sustainability criteria and at the end of my tenancy the reservoir will be an asset to the farm.”

The cost included a 2km underground mains that was installed to supply his own farm, and link to a neighbour. Other growers up to seven miles away can be supplied by pumping water from the reservoir into the existing network of dykes that run through this part of the Fens.

“We do grow some sugar beet, so it pays to use the water ourselves sometimes, and in 2011 we even used it on some of the wheat. But the main reason for building the reservoir was to sell water, as I could also see a big demand for it from people locally,” he says.

Mr Munns holds a winter abstraction licence for topping up the reservoir and growers have a contract to take water from him, although no amount is specified each year. Individuals are licensed by the Environment Agency to abstract water and he holds a copy of these licences. New water meters have been installed at all 12 farms he supplies and Mr Munns calibrates these every year.

Before a farmer requires irrigation water, they contact Mr Munns to raise an intent to do so and say how much is needed. Water is then either pumped via the underground main or released into the dyke network, allowing the farmer to abstract the required amount directly. Whenever the dyke network is used, Mr Munns is obliged to put in 10% more than is to be used as a “simultaneous compensatory discharge” to allow for any potential losses and ensure the dyke water level is maintained.

Growers are charged £1,000 per 4.5m gallons for the water and usage is measured using the water meters which are read weekly throughout the season. Quite a high degree of trust is required to ensure people don’t take more water than is permitted, but generally the arrangement works well, he says. However, with the increasingly variable weather and a succession of wet summers, he acknowledges payback could take some time, as demand cannot be guaranteed from one year to the next.

“You’ve got to make sure there is an established need for the water,” he advises. “Although we don’t do it, for others it may be worth considering an upfront charge, equivalent to a standing charge each year. If you’re applying for grants, make sure you think about all the costs when applying, such as extra pumps, underground mains, etc.”

Case study: Future opportunity

Fellow Cambridgeshire farmer Mark England, who runs a 182ha (450-acre) arable farm with his wife Jan, ventured into water trading for the first time last year, when 16m litres was sold to a neighbouring farmer.

“We knew the farmer and they already had an abstraction licence but needed water during the drought situation,” says Mrs England, who also runs a marketing company. “We were able to use the dyke network to transfer the water, allowing an extra 10% for the simultaneous compensatory discharge.”

The England’s built their 8m gal (36,500cu m) reservoir in 2007 at a cost of around £25,000. It has been used for irrigating their own 16ha (40 acres) of potatoes since then, but having now tried selling water they believe there may be scope to do more of this in the future and possibly even build another reservoir for that purpose.

“We’re in the fortunate position of having clay land that’s suitable for building a reservoir and there are a lot of growers nearby on lighter soil who need the water, but aren’t able to build a reservoir,” says Mrs England.

At £1,000 per 4.5m litres, it is potentially a useful income stream, but she acknowledges it is one that is difficult to guarantee due to the vagaries of the UK weather.

Water rights trading

This article focuses on the physical trading of water, but it is also possible to trade abstraction licences. This can be done on a temporary or permanent basis for either all or part of an individual licence and could be a way of acquiring access to water when it is not possible to get a licence direct from the Environment Agency.

The EA does not act as a broker for this process, but can provide a list of licensed abstractions in your area (maybe at a charge). Alternatively, visit an EA area office to see the water resources public register of licences for free.