Utility Week

UTILITY WEEK | OCTOBER 2021 | 25 Policy & Regulation Ofwat holds the purse strings The urgency of installing equipment to measure and monitor levels of greenhouse gases at wastewater treatment plants across the country before improvements can be made will require significant investment. At the next price review in 2024, provisions are anticipated for investing in the net zero com- mitment. At present there are no formal regula- tory drivers for such investment, with limits on nitrous emissions self-imposed by the industry. Green believes a set regulatory target may not be the answer but says it will require Ofwat to agree it is necessary to invest in this kind of technology. "It depends on what steer we get from Ofwat to include in the business plan," he says. "Not including it would mean that it wouldn't get funded until a„er 2029, which means another five years will have gone by without any concerted action." Driving down carbon in capital projects, for both Northumbrian and Anglian, simultane- ously lowered costs for the companies as they had to find novel ways of approaching projects. Peter Simpson, Anglian chief executive and co-champion of the 2030 net zero public interest commitment, tells Utility Week that focusing on carbon has led to a new way of thinking across the business. "Driving cost and carbon out means we can't do things in the traditional ways we have in the past," Simpson says. "We need to be more efficient and think differently to hit our targets, which has led to new approaches and methods we wouldn't have seen otherwise." In its capital projects, Anglian found its own carbon agenda drove innovation in the supply chain, which led to suppliers finding and offering lower carbon alternatives to tra- ditional products and materials. Where these were simpler and more efficient the costs fell along with the carbon. Anglian saw an opportunity for financing green investments by issuing sustainability- linked bonds. Riley explains the sector-wide commitment to net zero by 2030 demon- strates how serious it collectively is to decar- bonisation. He says: "It sends a very strong signal to finance partners that the water companies have committed to delivering net zero carbon by 2030; the sector came together to launch a routemap to net zero last year – it's an incred- ible commitment from a sector." Riley believes that working in silos would not bring the same strength of narrative and credibility as a shared ambition. "When we ask the market and supply chain to jointly find solutions to our chal- lenges as a whole sector it's a significant market share open to those supply chains. It means they're more likely to then invest in the solutions we need." Looking beyond this decade, the industry has plans to invest billions of pounds in water resource and resilience plans, which Manidaki stresses will require joined-up thinking to ensure investment is made with carbon targets in mind. "For the water sector, we are talking about the net zero commitment for operational emissions by 2030 but also as an industry we are planning for billions of investment in water resource plans. So, it's so important to have conversations between Ofwat and the companies about capital carbon. Alignment is essential between regulators, companies, BEIS [the Business, Energy and Industrial Strategy department], and Defra [the Depart- ment for Environment, Food and Rural Affairs] to align on future plans to 2050," he says. Early indicators from Ofwat suggest decar- bonisation will be a central consideration of PR24. While customer support has always been strong for investing in enhancing and protecting the environment, questions were raised at PR19 about whether the regulator had found the right balance between keeping water affordable for all and allowing sufficient spending to future-proof supplies. At PR24 Northumbrian's chief executive and co-champion of the net zero commitment, Heidi Mottram, believes there would need to be more balance. "That's our view and our customers are very supportive that things should be done for the long term. Part of our frustration was that areas with very strong customer support were not being brought through," she says. Northumbrian is one of six companies with a bespoke outcome delivery incentive (ODI) related to greenhouse gases. Mottram explains the company put itself forward for such a target because it believes it is the right thing to do and has set a template for upcom- ing business plans. "Government is signalling it wants that kind of thing so I would be amazed if Ofwat doesn't have something in its common ODIs around that, which has got to be a good thing," she says. monitored. This will show the effect of small changes and how that impacts on energy use at the plant – there could be different elec- tricity needs for pumping oxygen versus the nitrous oxide emissions. "Some companies have been really get- ting to grips with prioritising investment, especially those expanding or building new treatment works that need investment any- way to consider technologies that would result to lower nitrous oxide," she says. "Monitoring is a challenge we have to understand now in order to take the mitigat- ing action in 2027 and 2030," Browne adds. Anglian is installing nitrous oxide and methane monitors at treatment plants across four of its sites to collect data and provide a more informed understanding of how emis- sions compare with the projections. "This will also highlight the variability tank by tank, site by site, to share with the rest of the sector and create an informed data set for where those emissions are," Riley explains. In parallel the company is trialling treat- ment methods that will reduce – but not eliminate – emissions from treatments, and it is carrying out a pathfinder project to retro- fit technology on tanks. Riley says this would reduce emissions "quite significantly" but is costly to do. Nitrous oxide Wessex Water's head of sustainability and innovation, Dan Green, tells Utility Week: "PR24 is a key moment for process emis- sions, particularly for nitrous oxide emis- sions from sewage. We won't necessarily know which solution we are going to go with – there could be a family of solutions that need to be worked into the business plan." The firm's routemap to net zero said diffi- cult-to-decarbonise emissions from processes and the supply chain must not be shied away from. These would, however, require "chal- lenging assumptions about the best ways to carry out investment for customers, commu- nities, and the water environment". The year 2030 may seem alarmingly soon for such transformational change, but Manidaki says the ambitious date has galva- nised action. "The importance of having the roadmap work early is it opened up this conversation and is accelerating action," she says. "If we had said the sector had to be net zero by 2050 like all other sectors then maybe that action wouldn't start now. There's an acknowledge- ment by all companies that process emis- sions won't be zero." Ruth Williams, water correspondent

• Cover