March 1, 2012 / 1:21 PM / 6 years ago

UK water shortage could lift electricity prices-S&P

* RWE npower faces 51 million pound water scarcity costs

* East England water shortage is very severe

* SSE Scottish hydro production highest since 1930s

LONDON, March 1 (Reuters) - Water shortages in the east of England could raise industrial power prices by 5.7 percent as utilities pass on higher costs for procuring water needed to cool power plants, ratings agency Standard & Poor’s (S&P) said in a report on Thursday.

“If all of the plants (in east England) were to internalize water scarcity costs and pass them through in higher power prices, median industrial electricity prices could increase by 5.7 percent from 2011 levels,” analysts said.

RWE npower and EDF Energy, whose two power plants generate 94 percent of electricity in east England, face combined costs of nearly 53 million pounds per year if the region’s water scarcity issue is not addressed.

RWE npower’s Tilbury power plant, which earlier this week shut down after a fire on its new biomass units, faces the highest water scarcity costs of 51 million pounds annually as running a biomass plant requires higher water usage.

EDF Energy’s Sizewell B nuclear plant would have to pay 1.7 million pounds per year to procure water.

S&P said water shortages in the east of England were very severe, with groundwater levels lower than in 1976, a year commonly associated with the most severe drought in the UK.

At the same time, population in the region is set to grow 0.5-0.9 percent per year and currently stands at 5.77 million.

On the other hand, wet weather conditions in Scotland have helped power production from plants using water in the region reach a new record high.

Power output from SSE’s Scottish hydro electric plants in the 2011/12 financial year, which ends on March 31, has already reached the highest level since the 1930s at 3,890 gigawatt-hours, the company said on Thursday.

“This all time record for hydro electricity production is the result of our continued investment in refurbishment of our hydro schemes in the North of Scotland coupled with a particularly high amount of rainfall and snowmelt in each hydro catchment,” said Paul Smith, SSE managing director for generation.

SSE operates more than 50 hydro plants in Scotland with a combined capacity of 1,150 MW.

Its Glendoe hydro plant is expected to restart this summer. (Reporting by Karolin Schaps)

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