Policy paper

7. Taking action on water for energy: National Framework for Water Resources 2025

Published 17 June 2025

Applies to England and Wales

Water is vital for use in the production of energy, and energy is vital to support sustainable growth and economic security. The energy sector is forecast to have significant and increasing demand for water in the future. Water demand for the energy sector had been reducing as coal fired power stations, largely with non-consumptive abstractions from inland rivers, have been decommissioned, with the final coal power station in England being closed at the end of September 2024.  

The government has committed to a clean power system by 2030 with at least 95% of electricity generated from low carbon sources in 2030. The Department for Energy Security and Net Zero has identified that an increase of 40-60% in the demand for electricity is predicted by 2035. Alongside the Prime Minister’s commitment at COP29 to a Nationally Determined Contribution, to reduce greenhouse gas emissions by 81% by 2035, and the government’s legal requirements to meet its five yearly Carbon Budgets on the path to net zero emissions by 2050, we expect to see demand for low carbon energy generation increase significantly from all sectors over the coming decades with an associated increased demand for water.  

The energy sector has started to develop technology to ensure it meets the net zero target.  The production of hydrogen as a power source and the use of carbon capture and storage (CCS) is likely to be fundamental in achieving the goals, as is the use of Small Modular Reactors (SMRs) and the use of biofuels. A significant amount of our energy is likely to be produced by nuclear power (gigawatt scale and SMRs) by 2050. These technologies will require reliable access to water and significant investment in water supply infrastructure. Work carried out for the Environment Agency estimates that the water needs for CCS and hydrogen production alone may amount to 767 megalitres per day by 2050. 

The National Energy System Operator (NESO) is planning for the use of hydrogen as an energy source, on behalf of the government. Hydrogen is likely to provide 19% of the energy requirements for industry, aviation and shipping by 2050. Hydrogen production and the implementation of carbon capture and storage (CCS) requires significant volumes of water. Green hydrogen production has a water intensity of 30 litres of consumptive water demand per kilogram of hydrogen produced. This future demand is currently not well planned for. Given the links between energy, industry and growth the energy sector must work more closely with regional water resources groups to better plan for the increased demand for water and to ensure that appropriate options are developed and joined up solutions are explored.  

We have also been working with the energy sector to gain a better understanding of its water needs with the drive to meet Net Zero.  

Engagement with the sector has demonstrated that there is a need for a better understanding of where water is available so that it is not a barrier to progression. The water industry and regulators need to work more closely with the sector to ensure there is a common understanding of the definition of ‘water availability’ that reflects the needs of the water environment and the need to protect existing licensed water rights. This will help the sector to work more closely with regional water resources groups to more effectively plan for future use and the options for securing water supplies, whether obtained from water company supplies, abstracted directly from the environment or taken from more novel sources of supply such as recycled water.

Recommendations for the energy sector

• Continue to engage with regional water resources planning groups and water companies on the sector’s water needs to ensure that forecast water demands within the energy sector are appropriately planned for.
• Identify and evaluate suitable options to meet future water needs such as water recycling and desalination.
• Where relevant, develop joint proposals for additional water resources in conjunction with other sectors, particularly the water industry. It should explore innovative joined up solutions, working with the regional water resource groups, such as building hydrogen production plants at sites already selected for public water supply production through desalination and co-funding and sharing the available water. The combined heat and power from SMRs and gigawatt scale reactors could provide power and heated water for co-located hydrogen production. There is potential to develop multi-utility options going forward which would benefit both energy and water sectors and customers if costs are shared.
• Improve its long-term planning for expected future water needs as new technologies are likely to require larger volumes of water.
• Take account of water needs and availability in the design and siting of plants. Understanding where development may be sited, the technologies that will be used in production and the water resource needs of individual schemes will be important within strategic water resource planning. This will allow the energy sector to work with regional groups to develop a strategy to reduce the risks of water companies and energy companies competing for the same water and to allow for joint projects and water to be shared effectively. The siting of any new plants needs to be carefully selected to avoid direct competition for water if water cannot be shared effectively.
• Continue to improve its water efficiency in production methods for example reusing water or using non potable water for cooling, and to invest in process technology to optimise its use. The water needs for electricity generation vary greatly based on the potential cooling methods and process water efficiency at the sites so this should be considered in the design and siting of plants.

Enabling collaborative planning

The Environment Agency commissioned a project on enabling collaborative planning. The project was designed to identify existing opportunities and future potential routes to join up planning to meet the water needs of the energy sector, and to provide realistic options and recommendations of how to overcome these barriers. A key output of the report was a roadmap indicating the timescales, order and owners for the proposed options and recommendations. 

In consultation with around 30 stakeholders representing the energy sector and water sector, 26 key barriers to collaboration were identified. They were categorised to show whether they related to policy and regulation, financial, organisational or technical barriers. The most critical barriers, which may potentially prevent planning and solution development were then identified. 

Policy and regulation barriers

• Lack of best value planning framework for water and energy collectively as this has been limited to the appraisal of public water supply deficits and there is no equivalent planning framework that currently interfaces with the regional or water company water resources planning process.
• Uncertainty in future abstraction licence availability and allocation mechanism due to constraints in water availability to comply with environmental objectives and legislation.
• Lack of clear role definitions and remits in government and regulators which can lead to delays, indecision and uncertainty. The energy sector and water sector, in the round, are unclear as to who should be leading on this issue.
• Lack of incentive to engage on water availability before submission on energy planning application stage and competition law restricting the ability for the energy sector to share proposals before they are in the public domain increase the difficulty in planning for water resource needs.
• Highly dynamic, evolving new energy technology areas with funding and water use uncertainty meaning that potential water needs are uncertain.

Financial barriers

• Competition prohibiting transparency of energy sector plans disincentivises energy companies from sharing potential site or regional energy development locations and limits the development of spatially specific forecasts of future energy water use.

Technical barriers

• Competing strategic water demands to reconcile which could become a more significant issue over time as demands for water increase.
• Lack of suitable locational or catchment level forecasts for energy production which does not provide the sufficient detail needed to inform water planning at a spatial scale.
• Lack of visibility of water company constraints and potential costs (options) to supply water resulting in a lack of spatial steers early in the planning process.

Organisational barriers

• Depth of cross sector engagement and shared understanding (data and communication) resulting in a lack of engagement and a shared understanding of key issues.
• Dynamic and variable nature of the energy sector resulting in piecemeal engagement and further challenges in moving from a centralised to decentralised system.

Priority recommendations

The report also highlighted 6 priority recommendations.

1. The need to consolidate and increase the visibility of water availability and water supply constraints, for example in an accessible map-based dashboard or platform.

2. Strengthening the role of government and regulators to enable cross-sector planning, to help to address issues with inconsistent planning timescales and facilitate planning.

3. Clarification from government and regulators on the role in planning water resources for the energy sector to set out clear expectations of the water and energy sector.

4. ‘No regrets’ studies for energy clusters to mitigate competition barriers and help to develop solutions.

5. Clarity on future abstraction licence allocation to assist understanding of future changes to licences.

6. Levering the strategic remit of NESO to ensure that water availability and constraints are considered when planning future energy developments.

Overall, the work identified 39 solutions to help dismantle and remove barriers to effective collaboration between the energy and water sectors. The Environment Agency is working with stakeholders to develop an action plan of prioritised solutions for implementation and a delivery plan for the years ahead. Early work involved identifying stakeholders’ top priorities and gathering information of any ongoing work that will contribute to achieving the solutions. To effectively remove these barriers we will require action, active involvement and ownership from a wide variety of sectors alongside government engagement to make rapid progress and support the delivery of Net Zero.

Next: 8. Taking action on water for food