Expert analysis for a changing water industry
October 2021 edition
This website includes excerpts from the latest edition of THE WATER REPORT.
PUBLISHED BY
KEW PLACE
Full coverage is available only in the print and digital editions of the magazine
Standard and deliver
Ahead of COP26, are the water sector’s net zero delivery prospects flying as high as its ambition?
Individual agendas are being followed. Being the first water
There is no doubting the leadership and commitment shown by the UK water industry to the net zero agenda. It was the first whole sector, globally, to commit to decarbonise its operations – and 20 years ahead of
the rest of the country. Water UK continues to promote the agenda as an official partner of Race
to Zero, a UN-backed global campaign. A number of UK water companies have joined the
Race, most recently Wessex Water and SES Water, and in the run up to the COP26
climate conference at the end of the month, Water UK is hosting a series of events
to promote the role water is playing, and can play, in decarbonising and
avoiding environmental catastrophe.
Individual companies too are enthusiastically participating. Anglian Water is co-hosting the water theme in the Resilience Hub at COP26 (see p9), and a number of water sector leaders were signatories to a recent letter organised by the UK Business Group Alliance for Net Zero calling on prime minister Boris Johnson to lay out a coherent, integrated and Treasury-supported net zero strategy in the countdown to COP.
company to go net zero would be a massive feather in their cap with the potential for greater ODI reward.”
Growing numbers of those people calling for improvements in our freshwater environment are looking for a holistic, government-led, national response.
Water companies have been in eye of the storm overflows issue since public awareness of them has surged. The government, meanwhile, has been positioning itself as a river champion with a raft of actions to address the dire situation where only 14% of England’s rivers are in good ecological health, and every single one fails to meet chemical standards.
Last month, water minister, Rebecca Pow, gave a strong performance in front of the Environmental Audit Committee during its Water quality in rivers inquiry (unlike her housing counterpart, who was chided for not coming in person). Pow opened by listing successes of recent years, and declared water quality improvement as “one of my top priorities”.
Rivers are not islands
Pow went on to say “I believe we need a much more holistic approach,” where water quality, supply, demand, abstraction, development, and flood risk are all considered. “That is the direction we’re driving in,” she added, pointing here to Defra’s new Strategic Policy Statement (SPS) for Ofwat.
That sentiment may well soon be tested.
For as public awareness of freshwater quality problems grows, along with interest in restoring rivers to health, so it seems does understanding of what it might take for England's waterways once more to thrive. And while there will always be easy targets to take a pop at on isolated issues, those in the know are increasingly calling on the government to act more systematically
and holistically, if we are to regenerate our rivers.
Net zero: routemap or compass? INDUSTRY COMMENT
Where are we and how do we get to net zero? Curzon Consulting cautions water companies are starting from further back than they think.
In 2019, water companies in England made a pledge to reach carbon net-zero from operational emissions by 2030. A year later, Water UK launched the Net Zero 2030 Routemap setting out the overall direction, pathways, and interventions to reach net zero. Several UK water companies have also launched their individual routemaps, leveraging that of Water UK and showcasing their strategies and plans to reach this ambitious target.
Despite the headway made, there are uncertainties about the path ahead because current baseline emissions are potentially understated. And reducing emissions from certain sources to manageable levels before using nature-based solutions is not feasible. This begs the question whether the UK water industry is on track to achieve this challenging net zero target by 2030.
The emissions profile of some companies is understated and true comparison across the industry is almost impossible.” Curzon Consulting
The drench connection
Roach: "everything is connected."
Niki Roach reflects on a year as CIWEM president spent expounding the virtues of seeing everything in water and the environment as connected.
Niki Roach has just bid farewell to a year as president of the Chartered Institution of Water and Environmental Management (CIWEM).
Roach reflects that while there are duties that come with the job of president – as well, she jokes, as a “fabulous necklace” in the form of the chains of office – there is actually broad scope to shape the role as you see fit. “That was a bit daunting, but really liberating and exciting,” she recalls.
She chose to base her activities as president around a theme. “I picked ‘everything is connected’,” she says, explaining systems thinking is a personal passion and has resonance for both CIWEM as an organisation and the professional concerns of its members.
“We know everything is connected, we’re taught it at primary school,” she begins. “But it is why our professional institution has a purpose in a digital age.” Roach explains one thing that sets CIWEM apart from other professional associations is its breadth. “Our breadth is massive,” she says, reeling off that people as diverse as social scientists, engineers geographers and ecologists can all “absolutely feel at home” in CIWEM.
Roach believes a key role of the organisation is to enable its members domestically and around the world to connect, network and learn together; “to funnel those connections and find the links”.
Water companies historically sent out Hippo bags and relatively unattractive shower heads and hoped for the best.”
South East Water is part way through the co-creation with stakeholders of an environmental strategy, in the form of a 25 Year Plan. Head of environment, Emma Goddard, says the company wants to ensure it has a framework within which in can enhance the environmental resilience of its supply area “over the long term and at the right pace”.
This follows work on its PR19 business plan, where the company wrote a chapter on environmental resilience and publication of Defra’s 25 Year Environment Plan (25YEP). South East Water borrowed the 25 year timeframe and is pursuing a strategy that aligns with Government ambitions there and in the Environmental Bill.
The plan will be broad, going beyond what is provided for under
Goddard: long term and at the right pace”.
are often complex and fixing one aspect of the environment can lead to an adverse environmental impact in another area.” It will set short and long term milestones “for all integrated aspects of the environment rather than trying to fix limited aspects of the environment in a splintered and short term way.”
will keep you on top of the threats and opportunities emerging from retail and upstream competition.
It's the eye on the competition.
RISE revisited
A year on from Project RISE, Ofwat reminds wholesalers to keep up and step up support for effective markets.
In a lighter-touch follow up to its 2020 RISE report, Ofwat has told incumbent water companies to continue “and – in some cases – step up” their efforts to support effective business retail and developer services markets.
Writing to company chief executives, Ofwat’s interim chief executive David Black praised positive efforts and achievements to date and called for further action, noting that Ofwat’s 2020 conclusion that some incumbents performed better than others “remains our view”.
Business retail
Ofwat said it expected to see further support for the business retail market, “including as companies begin to prepare their business
Ofwat said it expected to see further support for the business retail market, “including as companies begin to prepare their business plans for PR24,” on better understanding business customer needs, particularly for “accurate and timely meter reads”.
The letter pointed out these “are a crucial underpinning of an effective business retail market and as owners of this essential metering infrastructure, wholesalers have a crucial role to play in facilitating more accurate and timely consumption data. This is an important enabler of business customers using water more efficiently, which should also benefit incumbent companies by saving them money and helping them to
balance their demand.”
Bilaterals launch ‘‘biggest development since market opening’’
The non-household water market achieved a major milestone on 22 September with the launch of a new, centralised system to manage its complex bilateral transactions.
The bilateral way water retailers and wholesalers communicate to deliver key market processes, such as locating or replacing water meters, has varied from company-to-company since the market opened in 2017. The resulting complexity has affected trading parties’ efficiency and costs and impacted customer service levels due to process delays or failures. So bilateral transactions have been called out as a key market friction regularly by companies, CCW and Ofwat in its annual State of the market report.
out as a key market friction regularly by companies, CCW and Ofwat in its annual State of the market report.
Following a major industry-wide push led by MOSL, the market now has a centralised ‘hub’ to manage bilateral interactions, which trading parties can access either via MOSL’s web portal or system-to-system integration. MOSL and trading parties are now working through the market’s 67 processes in order of priority, with the first eight representing the most important processes, either by volume or their potential impact on customers.
Fall forward
Autumn’s Self-Supply Users Forum from Waterscan reflected on the water market’s journey so far, and looked forward to what’s coming next.
Defra has unveiled plans to review progress on the benefits of water market opening through its post implementation review of the Retail Exit Regulations,
Speaking at September’s Self-Supply Users Forum, convened by Waterscan. head of economic regulation in Defra's water services team, Oscar Watkins, told delegates of the planned review in an update on Defra’s view of the state of the water retail market and the government’s vision for it in the future.
Sefton’s self-supply story
In July 2019, Sefton Council declared a climate emergency. It is targeting reducing its emissions to net zero by 2030, as well as dealing with inevitable impacts such as increased flooding, heatwaves, droughts, more extreme weather and rising sea-levels. Water management is a key part of the journey. Sefton’s water emissions are estimated to be 90TCO2e, 1% of its carbon footprint.
It is a low-lying coastal community with several miles of coastline; flooding and coastal erosion are already issues.
Watkins said Defra will be able to share more information on the review in the Autumn, but noted that the retail market is still in its infancy, and “it has not yet delivered against our objectives” of net benefits of £200m over 30 years. “Government always knew it would take time,” he continued, asserting: “We want a strong and vibrant retail market that works for everyone, improves performance and delivers the best value for money for customers.”
He urged everyone involved to work together to deliver government ambitions for water – which prominently feature legislative ambition for the environment through the Environment Bill –and the water market itself. Watkins pointed the self-supply community to Defra’s recent draft Strategic Policy Statement for Ofwat, to get an idea of government ambitions for the next price review as
far as the retail market is concerned.
Taming the tariffs
A new RWG group is evaluating the scope to simplify the structure and number of the 1,000+ tariffs in the market.
Inconsistency is a feature of the business retail market – and a bugbear of customers and retailers alike. There are multiple areas where wholesalers take different approaches, and while this is usually a product of history and individual circumstances, it adds cost and complexity into the market, particularly for multi-site customers and retailers who operate across multiple regions.
Trading parties have collaborated and started to address the most notorious of these inconsistencies: bilaterals. And now, a new
subgroup of the Retailer Wholesaler Group (RWG) is seeking to bring more consistency to another very challenging area: tariffs. There are over 1,000 different tariffs in the market today, running to nearer 10,000 combinations if you include fixed charge elements and other components.
This seems somewhat excessive for an industry which offers four main services: water, wastewater, drainage and trade effluent.
Head of wholesale services at Northumbrian Water, Martin Mavin, is chair of the RWG Tariffs subgroup which is pondering how to simplify this picture. “There’s plenty to have a go at,” he observes.
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