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Water Use Agreements UK: Hydropower & Biomass Guide

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Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
If you are developing a hydropower scheme, a biomass plant, or any project that draws meaningfully on a river, reservoir or groundwater source, a Water Use Agreement is likely to sit at the centre of your paperwork. These agreements set out who can take water, how much, when, and on what conditions. They also determine how you interact with the Environment Agency, local water companies and landowners whose interests are affected. Getting the terms right matters because the consequences of getting them wrong range from enforcement action to a project that simply cannot generate the output its business case relies on. This page walks through what a Water Use Agreement typically covers in England and Wales, the legislation behind it, and the practical points developers tend to underestimate at the early stages.

What this document is

A Water Use Agreement is a contract that sets the terms on which water can be taken, used, stored or returned as part of a project, most commonly in the energy sector. In the context of hydropower, it governs how much water a scheme can divert through its turbines and how flow is managed to protect fish, downstream users and the wider ecology of the watercourse.

For biomass projects, it typically deals with cooling water, process water and discharge back into the environment. The agreement sits alongside, and often cross-refers to, an abstraction licence granted by the Environment Agency under the Water Resources Act 1991. It is not a substitute for that licence.

Instead, it captures the commercial and operational arrangement between the parties who have an interest in the same water, setting out rights, obligations, monitoring duties and what happens if things go wrong. The specifics vary a great deal depending on catchment conditions, the scale of the scheme and whether third parties such as water companies are involved.

How to use this document

  1. Understand the regulatory position. Before drafting anything, map out which permissions the project needs. Most schemes above the de minimis threshold require an abstraction licence from the Environment Agency, and many also need a flood risk activity permit. Establishing this early tells you what the Water Use Agreement needs to support and which terms are fixed by regulation rather than negotiation.
  2. Scope the water requirement. Work out the volume, timing and flow rate your scheme actually needs across different seasons and operating modes. Over-specifying wastes capacity that may be refused, while under-specifying can leave the project short at peak demand. This technical groundwork directly shapes the commercial heart of the agreement.
  3. Identify every affected party. A Water Use Agreement rarely involves only two parties. Riparian landowners, downstream abstractors, water companies, conservation bodies and local authorities may all have a legitimate interest. Listing them early helps you anticipate objections, compensation obligations and the consultation steps the Environment Agency will expect to see evidenced.
  4. Negotiate environmental and operational conditions. Expect to agree minimum residual flows, fish passage requirements, water quality monitoring, and restrictions during drought or spawning seasons. These conditions often determine whether the project is commercially viable, so they need to be modelled against generation forecasts rather than accepted as standard boilerplate.
  5. Build in review, reporting and exit mechanisms. Water availability and regulatory expectations change over the life of a project. A well-drafted agreement sets out how performance will be monitored, how disputes are resolved, when terms can be reviewed, and what happens if a licence is varied or revoked. Skipping this creates risk that compounds over decades of operation.

Common questions

If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.

Common questions

Q Is a Water Use Agreement the same as an abstraction licence?
No, they are different instruments but they work together. An abstraction licence is a statutory permission granted by the Environment Agency under the Water Resources Act 1991, allowing you to take water from a specified source. A Water Use Agreement is a private contract between interested parties, such as a developer and a landowner or water company, that governs the commercial and operational arrangements around that use. You generally need both.
Q Who regulates water abstraction for hydropower and biomass in England?
The Environment Agency is the principal regulator for water abstraction and impoundment in England, with Natural Resources Wales performing the equivalent role in Wales. They assess licence applications, set conditions to protect ecology and other users, and enforce compliance. Other bodies may also be involved, including Ofwat where water companies are parties, and local planning authorities where planning permission interacts with the scheme.
Q What happens if the agreed flow conditions cannot be met in a dry year?
Most Water Use Agreements and abstraction licences include hands-off flow conditions, meaning abstraction must stop or reduce when river levels fall below a defined threshold. This protects ecology and other users during drought. It also means generation can fall significantly in dry periods, which is why financial models for hydropower schemes need to be stress-tested against realistic hydrological data rather than average-year assumptions.
Q Do I need consent from the landowner if I already have an abstraction licence?
Usually yes. An abstraction licence gives you regulatory permission to take water, but it does not grant you rights over someone else's land or infrastructure. If your intake, weir or pipework crosses third-party land, or if you rely on access for maintenance, you will typically need a separate agreement with the landowner covering rights of access, compensation and liability.
Q How long do Water Use Agreements typically last?
Terms vary widely. Some align with the life of the underlying abstraction licence, which the Environment Agency commonly grants on a time-limited basis. Others run for a set period tied to the financing of the project, such as fifteen or twenty-five years, with options to renew. What matters most is that the agreement term, the licence term and the project's financial model all line up coherently.
Q What are the main risks developers overlook in these agreements?
Common blind spots include assuming historic flow data will hold under a changing climate, underestimating the cost of fish passes and monitoring, failing to plan for licence variation during the project's life, and not pinning down who pays for compensation to third parties. Disputes often arise years into operation, so clear drafting around variation, review and dispute resolution is worth the effort up front.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.