Analysis: Irish Water plans less than half of investment needed to upgrade infrastructure

The business plan for Irish Water for the period to 2021 envisages less than half of the capital investment it estimates is required to bring the Republic's infrastructure up to modern standards.

After years, if not decades, of underinvestment, the infrastructure formerly run by 34 different local authorities is “unacceptable”, according to Michael McNicholas, chief execuive of Ervia, the government body that owns Gas Networks Ireland and Irish Water.

The water pipes and sewers are, on average, twice as old as the average for Europe, the infrastructure for the water supplied to south Dublin is inadequate and in risk of failure, and raw sewage is being pumped directly into water systems in 44 locations, including the Lower Harbour in Cork. The latter, daily phenomenon, McNicholas says, is “unbelieveable”.

Approximately half of all the clean water produced is lost through leakage, while the average for the UK is 23 per cent.

Having taken charge of the system in 2014 and worked hard at compiling the first-ever comprehensive picture of an infrastruture that is vital not just to the State’s economy, but to the wellbeing and health of its citizens, Irish Water has now produced the first-ever national plan on how to operate and fix Ireland’s clean water and sewage services.

Unrealistic

Its analysis has led to the conclusion that investment of “at least” €13 billion is needed to bring the system up to best-in-class modern standards. That is the equivalent to three to four times the State’s annual capital spend over recent years. Such a level of investment is not realistic and is not going to happen.

Instead, the utility is planning on a total capital spend of €5.5 billion over the period, enough, it feels, to move the Irish network from “unacceptable” to “acceptable”. Over the period it plans on its income rising by no more than inflation.

The utility plans to introduce savings, or increased efficiencies in its operating costs, equivalent to €1.1 billion, or a 7 per cent per annum reduction in operating costs. Included in that is €370 million in savings in payroll, and the reduction of the numbers working on the system of 1,500 below 2014 levels.

Jerry Grant, head of asset management at Irish Water, estimates that the system requires about €250 million annually to be spent on maintenance, and that there have been years, especially since the beginning of the financial crisis, when the amount spent could have been as low as €40 million or €50 million.

One of the key problems that was faced under the old system was that so little was known centrally about where the infrastructure was and the condition it was in, that it was impossible to know where to focus maintenance spending.

Overall, he says, what is happening is a change from the old method of not maintaining infrastructure and then fixing it when it failed, to the more efficient system of installing, monitoring and maintaining.

Over the period to 2021, the utility plans to see borrowing, which currently stands at €800 million, rise to €3 billion, while government will provide equity of between €1.5 billion and €2 billion. Inflation aside, annual income (from water charges and government subvention) is expected to be static at about €1 billion.

Eight sub-regions

The national network that was focused on local authority boundaries will be reconfigured, so that there will be eight sub-regions overall, in each of which there will be a regional centre. “It’s not logical to stop a pipe at a county boundary,” says John Tierney, managing director of Irish Water.

Morale in the company is high, he says, and a huge amount of progress has already been made. Asked about the animosity encountered by the contracted installers of water meters, he points out that despite the high amount of provocation, there was not a single incident of retaliation by any of the workers involved. Some 780,000 of the one million planned meters, have been installed.

By 2021, McNicholas says,the numbers at risk from the threat of water contamination will have dropped from 940,000 to close to zero, the number of people on boil-water notices will drop from 23,297 at the start of this year, to zero, and the number of locations where raw sewage is being discharged, will drop from 44 to zero. Network leakage will drop to less than 38 per cent, with 10 per cent being the international norm.