Ofwat report identifies obstacles to growth in sludge market

Ofwat has identified perceived barriers to growth in sludge trading among a number of obstacles to realising the social and environmental benefits of a successful market in wastewater sludge.

According to the regulator, “water companies that make better use of bioresources activities – transporting, treating, recycling and disposing wastewater sludge to develop even more low carbon energy, could provide real benefits to customers, society and the environment.”

Ofwat has required companies to publish information to facilitate the market since 2018 and at its most recent price review (PR19), it changed the way it regulates – for example, by creating a separate price control for bioresources activities.

Ofwat said it aims is to bring on more commercial arrangements under which bioresorces activities interact for the benefit of customers. This, it said, was behind its requirement for water firms to publish data to propagate a market and its introduction in PR19 of separate price control for bioresources activities.

Ofwat has recently unveiled a monitoring report from information received from companies’ bioresources activities in 2019-20 that identified:

• third party use to deliver haulage and disposal services was significant with water and sewerage companies holding an average of eleven such contracts;

• there is a reasonable degree of competition in sludge transport and disposal with third parties covering 43% of the transport market and 45% of disposal;

• competition in sludge treatment was low and falling with 0.8% of sludge treated by other water and sewerage companies or third parties – down from 2% in 2017/18; and

• companies see barriers to greater use of trading sludge including, most notably, environmental regulation. There was also concern about how one water firm might charge appropriately for treating sludge from another one.

Following this report Ofwat said it intends to “look more closely at the bioresources market and publish a review in spring 2021.”

Senior director at Ofwat, David Black (pictured), said the review would “inform how we regulate in future, including our approach at PR24. “We have introduced a number of reforms in recent years to promote the bioresources market. I am concerned that our monitoring of the market has revealed that the trading of sludge for treatment is very low and falling.”