Economic Insight develops cost-benefit assessments tool for Severn Trent Water
5 Dec 2022
Earlier this year, Economic Insight was commissioned by Severn Trent Water to develop a cost-benefit assessments tool to help with project proposal appraisal.
This tool is capable of calculating the monetary value for a number of benefits that may arise as a result of planned projects including, but not limited to: (i) benefits relating to improved biodiversity, water and air quality, and water purification, that can arise where projects result in a change in habitat; (ii) benefits relating to improved water supply and catchment resilience, where projects result in the abstraction of water; and (iii) the wide range of health benefits that result from the removal of lead from pipes.
These benefits are evaluated relative to the associated costs of implementing the project, including financial costs, risks and also carbon costs, to produce a range of social metrics, such as the social benefit-cost ratio (BCR), social return on investment (SROI), and net present social value (NPSV) over periods of 25 and 30 years.
Importantly, this tool has been developed in line with relevant guidance produced by the Environment Agency (regarding the Water Industry National Environment Programme (WINEP)), Ofwat (regarding its PR24 methodology) and the government (via the Greenbook) and, as a result, is currently being used by Severn Trent to feed directly into its PR24 Business Plan submissions.