Water companies in the UK are privately owned organisations, responsible for abstracting and treating water, transporting water to its point of use, wastewater collection, and wastewater treatment.
Water companies are formally overseen by both Ofwat, for economic regulation, and the Environment Agency (EA) in relation to their environmental impact. This regulatory-driven arena encompasses mandatory requirements for each Asset Management Period (AMP), whilst the non-regulatory segment intends to proactively understand sewer capacity and avoid escapes from the system that directly flood residential housing, or detrimentally impact the environment.
As the UK water sector approaches the next regulatory asset management period (AMP8) in 2025, water and sewage companies (WASCs) face significant challenges – particularly because of emerging legislation and the drive for net zero.
Barkers Procurement claims that “The AMP8 programme is set to be up to 3-4 times bigger than any previous AMP period and is anticipated to transform the water industry’s commitment towards climate change, service, society, and the environment.”
This insight piece will explore some challenges faced by water companies and their potential implications.
Legislative Requirements
Ofwat released their annual Water Company Performance Report in December 2022, in which they determined that the levels of pollution incidents are still too high, and that levels of property flooding across the sector are largely failing to meet desired targets.
A Defra (Department for Environment, Food & Rural Affairs) spokesperson said in response, “water companies must be held to account for poor performance. That’s why we are making it easier for regulators to enforce fines and hold them to account.”
Storm Overflow Discharge Reduction Plan
Storm overflows operate as ‘safety valves’ across the UK’s sewerage infrastructure. When the sewer system is strained due to heavy rainfall, it can release excess diluted sewage and rainwater into rivers, lakes, and the sea, which reduces the potential of flooding and / or sewage backups into people’s properties. However, elevated levels of sewage discharges via storm overflows are problematic because they can cause environmental damage.
The UK Government, through Defra, is advocating the reduction of storm overflow operation and has set out legally binding targets for all WASCs. Most notably:
By 2035, water companies must improve all overflows discharging into, or near, areas of designated bathing water; and improve 75% of overflows discharging to ‘high priority’ sites.
By 2050, no storm overflows will be permitted to operate outside of unusually heavily rainfall, or to cause any adverse ecological harm.
Environment Act 2021 and Event Duration Monitoring (EDM) Data
Under Section 81 / 82 of the Environment Act 2021, there is a requirement on all WASCs to measure the quality of rivers upstream and downstream of any discharge to river and report findings in near real-time updates.
In March 2023, the EA released their annual data on storm overflow spills. This data revealed that:
13,323 (more than 91%) of England’s 14,850 storm overflows now have event duration monitors, and water companies are expected to achieve 100% coverage by the end of December 2023.
There was a 19% reduction in the number of spills compared to 2021 – from 372,533 to 301,091 (however, this was largely due to dry weather conditions rather than water company improvements).
The total duration (hours) of monitored spill events in 2022 was 1,754,921 – a reduction of 34% compared to the 2,667,452 hours operation in 2021.
3% of storm overflows spilled more than 100 times in 2022.
From this, the EA concluded that “the number of spills they [WASCs] are allowing on the sewerage network is far too high and totally unacceptable. We are considering whether any action is required under our Enforcement and Sanctions Policy.”
Implications for Water Companies
Regulators (Ofwat / EA) delivered financial penalties totalling around £102 million in 2021 due to WASC sewage regulatory performance levels.
In recent months, the Secretary of State encouraged WASCs to prioritise storm overflows that are spilling multiple times a year, and those spilling into bathing waters and high-priority nature sites. Additionally, they announced that water companies will face higher penalties if they fail to comply.
For example, Thames Water has recently been fined £3.3m after it discharged millions of litres of undiluted sewage into two rivers, killing over 1,000 fish.
Consequently, WASCs need to accurately monitor their storm overflow data to better understand their performance and reduce spillages to fulfil legislative requirements.
Turner & Townsend have summarised this challenge: “due to the changing landscape and challenging headwinds, a new approach will be required for AMP8 to further increase efficiency, reduce waste, deliver water company business plans within budget and avoid the risk of incurring significant performance commitment penalties.”
Technological Innovation
The EA claimed that “we expected to see more pace and innovation in storm overflow maintenance and investment by now. We need to see water companies undertake urgent action, including through inspections of those storm overflows with the highest spills, and extensive maintenance programmes of their sewerage networks.”
To tackle this challenge, some water companies have teamed up with technology providers. For example, Galliford Try have teamed up with Siemens, a tech provider, for flow and level measurement.
Potentially, other water companies will follow suit, with an Affinity Water spokesperson claiming that “we will again be looking for partners in the Smart Metering Programme in order to commence our journey [toward sustainable solutions]” (quoted in New Civil Engineer article, 2023).
Similarly, Market Infra recently supported one of our clients to invest in a company that supplies sensing technology within the water sector, as well as previously working on water engineering and SUDS (Sustainable Urban Drainage Systems) projects.
Better Understanding of Asset Base Capabilities
Water companies need to better understand their asset capabilities, particularly under different operating conditions, This includes examining why their sewer systems are overflowing and why the system is blocked. Given operational challenges, water companies are trialling more radical, innovative solutions to better understand and manage their asset base capabilities. This includes a plethora of technologies to identify leakage, including satellites, microwaves, acoustic sensors, and thermal imaging.
Capital investment, solutions (i.e., the acquisition of physical assets to further long-term business objectives) will depend on a thorough understanding of existing system capacity and future predicted needs.
This requirement to understand how existing systems are operating, assess how existing capacities can be maximised, and design the least size storage interventions, will mean flow and level measurement of existing assets will become critical and essential.
Ofwat Senior Director, John Russell, claimed that “substantial investment” would be needed “all the way through the next few AMPs… There is no way around this.” He also added “What the sector is looking to achieve, and at the pace we need, will need two to three times more investment” (quoted in New Civil Engineering article, 2023).
The Drive for Net Zero
The government is pushing for the UK to achieve net zero by 2050. Water companies are very energy intensive – they require energy to transport water, treat (physically and biologically) wastewater and to pump it from one place to another.
As such, the challenge is for water companies to manage their environmental impact and reduce their carbon emissions, within the restrictions of costs and supply chain pressures. This is difficult because, as Turner & Townsend claim, “stakeholders [are] beginning to ask where the expected further efficiencies are going to be found in a supply chain that is already under pressure.”
Implications for Water Companies
Water companies need to adopt more low energy solutions for treating water and wastewater, to keep up with the government’s drive for net zero. Some potential considerations are:
- Urban drainage systems
- Natural flood management
- Urban planning
- Partnerships with local authorities
- Bioswales
- Wetland treatment systems for wastewater
Conclusion
As we approach AMP8, it is apparent that emerging legislation and the drive for net zero will create challenges for water companies. According to Turner Townsend, there is no silver bullet – “no one delivery model will optimally address all work which encompasses factors such as:
- An increased proportion of smaller, less complex capital maintenance projects
- An increased focus on nature based, low-carbon schemes
- The need for development of more strategic catchment / urban integrated solutions
- A baseload of conventional ‘concrete and pipe’ solutions
- A significant volume of large / ‘mega’ projects, particularly associated with addressing water supply-demand deficits.
As such, innovation is going to be key.
Lila Thompson, CEO of British Water, has said that “we will need to do things differently. We will need to accelerate a culture of collaboration and innovation across the sector to build resilience and meet climate change and population growth impacts to protect the environment for future generations. This AMP is not going to be like any other so we will need to work collectively to develop a common purpose” (quoted in New Civil Engineer article, 2023).
Market Infra can support water companies through our professional and project management services, including market analysis to delivery tangible growth or strategic change outputs, not to mention our technical project management and advisory services. With our specialist knowledge of the water sector – including deficiencies, challenges, and opportunities – we can help to develop new, innovative solutions and support organisations, grow, change or deliver complex solutions.
