The latest RAPID Gate 3 cost estimate for the proposed Abingdon reservoir (South East Strategic Reservoir Option, SESRO) published by Thames Water places the initial capital expenditure (Capex) at £6.6 billion in 2022–23 prices. Adjusting for construction price inflation of 7.6% from 2022/23 to 2024/25, this figure rises to approximately £7.1 billion in 2024/25 prices. However, this figure excludes the costs of the Thames to Affinity Transfer (T2AT) and Thames to Southern Transfer (T2ST), both of which are essential components of the SESRO scheme. Based on previous estimates (from Ofwat, at 2022/23 prices), T2AT is expected to cost around £400 million, and T2ST approximately £1.1 billion, bringing the total initial Capex to £8.7 billion.
It is critical to remember that the Gate 3 cost is still pre-DCO design, pre-full-scale trial embankment, pre-contract award, and pre-construction. Historical data, included in Prof Chris Binnie’s report for GARD ( GARD-independent-reports-SESRO-Dam-design), and Australian dam studies, suggest an average cost increase of 106% after construction begins, which could push SESRO’s total cost even higher, to the £13–£14 billion range.
GARD believes the time has come to call in the SESRO project and make a transparent examination of the costs and the best value for customers, taxpayers and stakeholders. We agree with the New Civil Engineer-15-08-2025/ that there could be several challenges to SESRO’s approval:
- Stronger tests of alternatives
- Independent scrutiny of cost figures
- High environmental and financial costs
- Under-prioritisation of alternatives like leakage reduction, smaller transfers, and reuse
- The need for Thames Water to justify a significantly larger bill to regulators, co-sponsors, and customers.
Regarding infrastructure alternatives, Thames Water stated as recently as October 2024 in its final WRMP, Annex G :
“The SESRO option would need to see a substantial (between £669m and £803m) cost increase for the STT to be selected instead of SESRO in a least cost plan. Given that SESRO is selected not only on the basis of cost, a further increase in cost above the ‘least cost tipping point’ would be needed to change our decision to adopt SESRO in our preferred plan.”
The problems with this stance are glaringly obvious, as the revised cost of SESRO now exceeds the WRMP estimate of £2.4 billion by £4.2 billion, dramatically more than the cited tipping point. The total cost increase now far surpasses the threshold for reconsideration.
Finally and very importantly, the initial Capex is only part of the public financial burden. Under Ofwat’s ‘ return on regulated capital model’, the cost to customers is projected by GARD to be approximately three times the initial Capex, or £21 billion in 2024–25 prices. This is due to Ofwat’s financing structure and SESRO asset classes involved – £4.9 billion of the £6.6 billion is allocated those project components, such as the embankments, with either no depreciation or depreciation over 250 years, offering disproportionate returns to investors at the expense of customers, and remains the single most relevant fact as to why Thames Water is so keen on a reservoir.
| In light of these facts, GARD strongly urges regulators and stakeholders to: – reassess SESRO’s viability against more sustainable, cost-effective alternatives; – demand full transparency and independent review of all cost assumptions; – consider the long-term financial impact on customers and the environment. |
