Thoughts on Water: September 2019

Wednesday 18 September 2019

How water companies operate - environmental responsibilities

I was recently asked to present on how water companies operate in terms of their environmental responsibilities (in England). A complex regulatory environment exists in relation to environmental management and water companies. This blog post provides a high level overview on managing responsibilities in relation to planning, monitoring and reporting and future challenges faced by water companies.

Planning

There are many challenges for sustainable water management. The figure below from Anglian Water provides a useful summary. There are increasing challenges from Ofwat in terms of markets and innovation that are pushing for efficiencies and resilience (though there is tension between these two elements in the draft determinations for PR19).

We face a very complicated regulatory landscape in the water sector (see figure below). This has driven investment to improve environmental and public health outcomes and regulations have more recently evolved to support this through outcome based approaches, TOTEX and greater voluntary reporting. This complex regulatory landscape for the environment includes the Environment Agency, Natural England, Ofwat, Defra, DWI, CCWater, the Committee on Climate Change and the National Infrastructure Commission. Tensions arise in meeting the objectives of all stakeholders as they aren't always aligned or being delivered on the same timescale.

Resilience planning is an increasing requirement linked to environmental responsibilities. This is wider than climate change impacts on long term water resources and quality as we increasingly need to account for heatwaves and peak demand as well as freeze/thaw events (both seen in 2018). Managing flood risk impacts on infrastructure, IT and networks as well as potential issues from Brexit also need to be considered for resilience.

The Government's 25 Year Environment Plan sets out a range of actions that impact on water company environmental responsibilities. Actions on Environmental Net Gain and requiring developers to consider the needs of the environment in terms of water for new properties will also impact on water management, in addition to requirements to demonstrate improvements to natural capital by water companies.

The three elements that inform the environmental responsibilities that need to be met by water company plans are outlined below (EA 2017).

WISER - Water Industry Strategic Environmental Requirements

The WISER document provides details across a range of environmental areas (see image below), including the Water Framework Directive, bathing waters, biodiversity, urban wastewater, invasive species, chemicals, resilience and compliance with Environmental Permitting Regulations. For each the document sets out legislation and duties, expectations, and good practice approaches.

WINEP - Water Industry National Environment Programme

The Water Industry National Environment Programme (WINEP) 3 sets out the actions needed by water companies to meet their environmental obligations. The number of obligations by water company is set out below. I'll use Anglian Water as an example as they have the highest number of obligations, driven by topography of the region, with intensive agriculture and slow moving rivers. Through their digital engagement programme, Anglian Water found that 74% of customers voted for high investment in protecting the environment. The Ofwat draft PR19 determination sets out £729m for Anglian Water to deliver this programme, however this is after pushing through many efficiencies in the process, which may be hard to implement.

Government strategy

The Government’s 25 Year Env Plan pushes the need to consider natural capital approaches and net environmental gain. These will be pushed forward in the forthcoming Environment Bill. Water companies have been looking into natural capital approaches for some time (Anglian Water example below). This includes moving beyond natural capital accounting to actively using it and the concept of net gain within planning. Concepts such as the Urban Greening Factor (now applied across London but also Southampton) might be useful for LDPs in other regions to help drive green infrastructure and manage water quality and sewer capacity issues. This area is evolving quickly with developments such as Natural England’s Biodiversity Metric (linked to Biodiversity Net Gain) and tools such as BEST from CIRIA (new version being released that accounts for the 6 capitals).

Water recycling long term plan and Drainage and Wastewater Management Plans

Anglian Water released a Long Term Water Recycling Plan in February 2019. This sets out their approach to strategically planning for wastewater capacity but also delivering against environmental obligations. Water UK's 21st Century Drainage Project has led to the development of guidance for Drainage and Wastewater Management Plans. These are being taken forward to meet requirements for the 2024 Periodic Review. As I outlined in my previous blog post, there are many changes occurring in water resources planning and it makes sense to join up with DWMPs to take an integrated water management approach to better enable resilience.

PR19 Performance Commitments

In additional to the regulatory and planning approaches to water companies delivering their environmental responsibilities, Ofwat will also be monitoring and incentivising these through performance commitments. Examples of these are provided below for Anglian Water and include commitments in common with other companies (C) and bespoke (B).

Monitoring and reporting

Environmental Performance Assessment

As set out in the WISER document, a key monitoring and reporting mechanism is the Environment Agency's Environmental Performance Assessment. The most recent assessment is below and this found many issues in 2018 and that they are continuing into 2019, which may lead to tougher regulatory approaches. Recent large fines handed down to Southern Water, Thames Water and others may also impact on the regulatory approach being applied (this could impact voluntary monitoring and reporting against EPR).

Annual reporting against the business plan

Water companies are required to report annually against their business plan, which includes performance commitments linked to the environment (example from Anglian Water below). Elements of this are included in company environmental and sustainability reports as well as dashboards that may be updated more frequently. In the future water companies will also report against their public interest commitment - this element of the hydro-social contract in Australia has led to more integrated water management.

The future

Research and innovation

There is a clear need for greater innovation and research to meet the environmental responsibilities of the water sector. Ofwat are consulting on proposals that could allow the sector to raise up to £200m and on new structures to support greater collaboration.

The UKWIR Big Questions include wastewater collection and recycling as ways to driver environmental improvements. This builds on the work that Water UK has been leading to support collaboration on 21st Century Drainage and moving to DWMPs.

At an individual water company level, several companies have been pushing forward their own innovation platforms. Anglian Water has been promoting their Innovation Shop Window in Newmarket. The aims of the shop window are below and include zero pollution and flooding and becoming carbon neutral.

Catchment based approaches

The Catchment Based Approach will increasingly lead to more efficient approaches to dealing with diffuse pollution issues. This includes water companies working with rivers trusts and other local organisations. Rather then relying on end-of-pipe engineering based solutions this approach can be more cost effective and deliver wider benefits through community engagement. A catchment based approach will also be key delivering natural capital approaches. The figure below highlights the benefits of this approach in 2017/18.

Transitions for resilience

There is also a need for a wider transition towards resilience that will also help meet environmental responsibilities of the water sector. This transition approach was mapped for the UK in a 2013 report by CIRIA (image below). Although we know this isn't always a linear transition across all elements of water management this approach can help visualise the line of sight towards a water cycle city and water sensitive city for the UK.

Based on the experience in Australia, there are also a range of transition factors and those identified for the UK in the 2013 CIRIA report (many are still yet to be delivered) include:

Presence of a co-ordinating body - the question remains around "who is responsible" for many aspects of water management within fragmented regulatory and operational elements of the water sector in the UK.
Evidence base, guidance and training - some provided at a national level by SuSDrain or local levels such as in London.
Presence of Water Sensitive Urban Design champions - SuSDrain is aiming to drive SuDS champions, however we need champions for wider elements of integrated water management also.
Supportive planning and design process and legislation - this is complicated by elements of the Flood and Water Management Act 2010 not having been enacted.
Reliable science and research - this area is a focus for many universities however Ofwat's proposed approach to research and innovation or greater focus on academic and industry partnerships through Innovate UK may help this to influence policy and practice.
Fostering environmental expectations - with climate and ecological emergencies being declared and pressure on government in relation to the 25 Year Environment Plan, there is an opportunity for this transition to get greater political support.
Strategic funding and incentives - DWMPs may enable a more strategic funding approach with partners. This could link up with innovations such as the Greater Manchester Combined Authority's Natural Capital Investment Plan.

Conclusions

Overall water companies operate within a complicated regulatory regime to deliver environmental obligations. There is a need to balance costs, risk, customer and regulatory expectations. Monitoring and reporting are key and potential changes to EA regulation may arise due to recent poor performance. In the future this will be supported by DWMPs, building on catchment-based approaches and transitioning to integrated water management.

Join the conversation at the IWA World Water Congress 2020 in Copenhagen

The call for papers and workshop proposals is open until 30 October 2019. Theme 6 is calling for papers on water resources and large scale water management, including delivering against environmental responsibilities relating to:

Groundwater

Groundwater mapping, monitoring and modelling
Protection of groundwater quality and quantity
Soil contamination and groundwater remediation
Governance, management and institutional arrangements

Surface Water

Surface water monitoring systems and models
Protection of surface water quality and quantity
Source-to-sea pollution management
Pollution from point sources – agriculture, industry, urban
Diffuse pollution – sources and mitigation
Water-related ecosystems and environmental flows

Integrated Water Resources Management

Water stress, droughts and floods, including impact of climate change
Catchment management and ecosystem services on different scales
Large-scale nature-based solutions and biodiversity
Water rights, trading and partnerships

Holistic Assessments

Life cycle assessment, water efficiency, water footprint, virtual water, etc.
Planetary boundaries and science of sustainability
Water resource management towards Sustainable Development Goals (SDGs)

Find out more at: https://worldwatercongress.org/

Tuesday 10 September 2019

Current and future challenges for water resources management

I was recently asked to present on the current and future challenges for a water resources manager to address. We have seen a great deal of change and progress in how we plan for water resources in England over the last decade. This blog post summarises some of the key challenges I highlighted in my presentation.

Join the discussion as part of Theme 6 on Water Resources and Large Scale Water Management at the IWA World Water Congress in Copenhagen (October 2020 - see call for papers here).

Pressures on water resources

We face increasing pressures on water resources from climate change, population growth and the need to protect the environment. The latest summary of these pressures has been provided by the National Infrastructure Commission's 2018 report Preparing for a drier future: England’s water infrastructure needs. This sets out a 1 in 4 chance of serious drought between now and 2050 and that emergency options to address this could cost £40 billion vs £21 billion by taking a strategic approach. The Water UK Long Term Water Resource Planning Framework also highlights that there is an increasing risk of more frequent and intense droughts across England and Wales, not just in the South East.

Current challenges

Regulatory complexity and planning

We face a complicated policy and regulatory landscape when it comes to management of water resources. This is summarised by the figure below from Ofwat's Water 2020 report and since its publications there are further government policies linked to the 25 Year Environment Plan (e.g. biodiversity net gain) and new plans such as Drainage and Wastewater Management Plans that will have implications going forward for water resources management. Water companies face many tensions around meeting the objectives of Defra, Ofwat, the Environment Agency, CCWater and other government bodies. Additionally, the timeframes for planning are still not aligned.

In the latest planning period there has been greater consideration of the links between drought planning and long-term water resources management plans (WRMPs). An increasing level of complexity has been introduced into the water resources planning process. This is set out in the 2016 UWKIR report WRMP 2019 Methods - Decision Making Process: Guidance. Taking a risk based approach enables selection of the most appropriate methods for individual water companies. However, many of the more advanced processes may be less transparent and can be hard to communicate to customers and wider stakeholders. We need to keep sight of outputs and visualisations as decision making tools for planners and stakeholders to engage with, not as the ultimate output themselves. This was an issue I commented on in a blog post in 2016 when the WRMP guidance was published.

Resilience

Resilience to climate change and drought is a major factor in water resources planning. However, increasingly we are seeing the need for wider resilience to be addressed around changes to peak demand linked to hot weather. June 2018 was the driest June since 1925, with a rainfall total for England of only 15 mm. In England, United Utilities applied for a hosepipe ban, then called it off. In Northern Ireland a hosepipe ban was implemented for three weeks. In Scotland, the sustained dry weather and heatwave conditions in 2018 resulted in less water availability and an increase in customer demand. In some areas this was an additional 30% of demand and led to Scottish Water producing an additional 140Ml/d (Water Efficiency Strategy for the UK Year 1 Report).

The freeze-thaw incident of March 2018 resulted in more than 20,000 homes in London being without water due to pipe bursts and the wider impacts across the network of this increase in water demand. Many of the issues faced in terms of planning and customer engagement were similar to those that have been experience during times of drought. I wrote about this in a blog post for the WATEF network. What this incident highlighted was that many of the customer engagement lessons and recommendations from the 2012 drought had still not been implemented.

Competition and markets

In May 2019 Ofwat wrote to incumbent water companies and highlighted their desire to see development of more effective markets. These include developer services (e.g. self-lay networks), upstream water resources options and working with water retail companies who now supply non-household customers. Although water companies have released detailed information on their water resources requirements with their WRMPs there has been very little uptake by third party providers. Ofwat recently consulted on this "bilateral market" for water resources. Although we have had new appointments and variations for some time now, where an alternative water company to the incumbent can supply to a new development, this hasn't been as successful as in New South Wales in Australia where a similar regulatory regime has enabled new semi-autonomous water schemes within Sydney (see previous blog post).

One of the benefits of moving to retail competition for non-household customers identified in the Cave Review (2009) and the Water Act 2014 was greater levels of water efficiency. Research (link to report) early in the first year of market opening observed a limited range of services being offered. Ofwat's report on year 2 of the market highlights that "water efficiency measures has been slow to
develop":

Around 0.3% of customers who switched since market opening report leakage control services as a benefit of switching
Only 4% of customers who had renegotiated since market opening report water efficiency services as a benefit of renegotiating
"on the basis of customer interest and in view of a number of possible barriers to take up, that there remains untapped potential for continued development in the offer and take up of water efficiency services"

The ongoing challenge for water resources management will be working with retailers to enable demand forecasting as well as cost-effective options for delivering demand management in partnership (Water Efficiency Strategy for the UK Year 1 Report).

Regional water resources planning

In the lead up to WRMP24 a National Water Resources Framework group and further regional water planning bodies have evolved. Their aim is to (link to WRSE newsletter):

Develop strategic plans that set out each region’s contribution to the national need
Deliver ‘nationwide’ resilience – and greater ambition on metering, leakage, and options to lower demand and new transfers flagged as necessary by the National Infrastructure Commission (NIC)
Enable greater collaboration through more consistent planning approaches and by identifying and removing existing barriers.

The link between regional planning and WRMPs wasn't always clear in WRMP19 (something highlighted by Ofwat responses to draft WRMPs - see examples). This was the case for options such as water efficiency, where joined-up programmes at scale could be more cost-effective. A major benefit of this planning approach will be working across sectors, such as with industry and agriculture. As with WRMPs there will be a need to engage with water retail companies also to ensure that non-household demand and water efficiency options can be considered at a regional scale also.

Future Challenges

Abstraction licence changes and catchment management

Abstraction licence reform is progressing with pilot catchments and a bottom-up focus rather than the legislative changes that have been proposed previously. By 2021 the programme aims for (see presentation at CIWEM Water Resources Conference 2018):

90% of surface water bodies and 77% of groundwater bodies at the required standards

RSA programme completed
2,300 time limited licences reviewed

10 licensing strategies detail solutions for the most affected catchments (all updated by 2027)

Solutions to remaining environmental pressures
Improving access to water

A new and consistent regulatory regime and a modern service

Clearer access to vital data (such as flows and licence details)
Simpler processes

This will support water companies with licence trading, regional planning and flexible licence changes (e.g. during drought situations). Catchment management to address water resources quantity rather than just quality aspects will also be an area that may be picked up by regional planning approaches.

Demand management

Water efficiency

With common performance commitments as part of Ofwat's PR19 business planning process on water use, leakage and drought resilience there should be a greater business focus on demand management than in the past. The NIC report suggests 34% of the resilience gap can be met by demand management. However, this focusses on metering alone and there are still large savings that can be made through produce labelling, building standards and behaviour change programmes.

Defra are consulting on a range of measures including personals water consumption targets, incentives and smart metering. Water efficiency labelling combined with product standards and building regulations could reduce consumption by 30 litres per person per day within 25 years. Additionally, water companies need to engage with customers on climate change and population growth issues linked to rising consumption and to support working with them individually to help meet PCC targets. Smart metering is a key tool to provide the feedback on consumption to enable individual targets to support water company wide reduction in water consumption.

A recent experience of implementing water use percentage reduction targets can be seen in California. A report “Making Water Conservation a California Way of Life” identified that targets resulted in a 33% reduction in water use (Gallons per customer per day - equivalent to PCC).

Leakage

An average target for leakage reduction of 17% by the end of 2020-25 across all companies in England and Wales has been reported for PR19 draft determinations. This represents a significant challenge around technology and innovation to achieve this reduction, especially when the total reduction achieved in the last year was just 0.4% (Figures from WWT Databank, Vol 62, Issue 9). This is a major area of collaborative research focus in the UK via UKWIR with their strategic question "How will we achieve zero leakage by 2050 in a sustainable way?".

Transitions for resilience

A new approach will be needed to support resilience to climate change, the wider pressures of population growth and the need to protect the environment. A successful approach to this has been applied in Western Australia using a security through diversity model. CIWEM's 2018 position on planning water resources recommends "Adoption of a ‘security through diversity’ approach to managing water resources":

"CIWEM advocates a strong commitment to the twin-track approach, moving towards a more

formalised ‘security through diversity’ approach. This should assess demand management

and new resource options alongside water recycling, water transfers and trading. These

options should be assessed on a long-term economic basis, taking full account of

environmental and social cost and benefit."

The culture in water companies in relation to risk and innovation is steadily changing. However, in WRMP2019 many plans set out household and neighbourhood rainwater harvesting and SuDS options as being too risky to implement. We will need to see more examples of integrated water management in future. Smaller neighbourhood schemes can act as decentralised semi-autonomous nested supplies within our cities that can help address resilience issues and provide a transition between centralised and decentralised approaches. A good example is in North West Cambridge (link to video), however this is unique in terms of the university acting as a developer. Anglian Water and others are looking at how incentives through developer charges may support greater uptake of water reuse.

Links with business planning and customer outcomes

Increasing engagement will be required when developing plans and considering options (as has been the case across the last several price reviews). Water resources options, especially those based on demand management or integrated water management can have large impacts on CMeX and DMeX . Water companies will need to work across the business to deliver performance commitments and Water UK work on public interest.

Conclusions

I've outlined above some of the current and future pressures faced by water resources managers in England.

We are facing increasing pressures on water resources
There is increasing complexity of water resources planning and regional engagement
Transitions are required for resilient water supplies and wider sustainable water management (addressing flooding, water quality etc.)
These challenges are opportunities to improve outcomes for customers, the environment and business

Moving into PR24 there will be greater room for innovation in planning and delivering water resources as part of the wider social contract between water companies and customers. Water is a key medium through which we feel the impacts of climate change and recent declarations of a climate emergency need to take better account of this.

Join the discussion at IWA World Water Congress 2020

The call for papers, workshops, forums and training is open until the 30 October. Theme 6 is calling for papers on water resources and large scale water management, including: