Overcoming Energy and Carbon Challenges in Water Management

Hello, Champions of Net Zero!

As we navigate the evolving landscape of sustainability, the water and wastewater sectors in England and Wales are gearing up for a significant transformation. With the commencement of the next regulatory Asset Management Period, running until 2030, the imperative to reduce carbon emissions from both assets and operations is coming to the forefront. This shift is particularly crucial in light of rising energy costs and the increasing demand for energy resilience.

The water industry regulator, Ofwat, has introduced new performance commitments on operational carbon emissions as part of the 2024 price review. These commitments are designed to align with the UK’s ambitious target of achieving net zero emissions by 2050. The consequences of these commitments—both rewards and penalties—will incentivise water companies to embrace innovative approaches in their operations.

In my capacity as a project director for energy transformation at Mott MacDonald, I have been engaging with energy and carbon managers across the water sector. These professionals have shared various challenges they face as they strive to significantly reduce emissions over the next five years, navigating a complex landscape of technical, commercial, regulatory, and management issues.

Embracing Technological Advancements

A primary technical challenge lies in the integration of new technologies and monitoring systems into existing infrastructures. The suitability of on-site renewable energy sources, such as solar panels, and energy storage solutions can often be hindered by the specific characteristics of a site and potential planning objections. Moreover, effectively integrating water and wastewater systems with digital tools to optimise energy demand and flexibility is a complex task that requires careful consideration.

Furthermore, the availability of essential technologies and the necessary expertise within the supply chain pose additional barriers. As companies plan their timelines for implementation, they must also account for any new grid capacity that may be required. This could potentially extend the timeframe for realising carbon savings, pushing them to the next regulatory cycle.

Establishing robust digital energy and carbon monitoring tools is crucial to this process. Ofwat mandates that any data submitted must undergo rigorous assurance, and companies must ensure the accuracy and reliability of their performance data—particularly when engaging in demand side response and energy arbitrage activities.

Capitalising on Commercial Opportunities

The shift towards on-site generation and energy storage presents a compelling opportunity for water companies to lower operational energy costs and reduce exposure to volatile wholesale markets. By decreasing reliance on grid electricity, these initiatives also contribute to a reduction in scope 2 emissions. Therefore, exploring behind-the-meter and private wire solutions should be a priority for these companies.

However, the regulated and cost-sensitive environment in which water companies operate can complicate access to finance and limit their willingness to take risks. Energy managers must meticulously construct business cases that outline the comprehensive benefits of these initiatives, considering both the regulated and non-regulated aspects of their operations.

Beyond the evident cost savings, it is essential to factor in the regulatory payments or penalties associated with performance commitments. Additional advantages may include revenues from ancillary services, avoided costs from reduced maintenance, greater price certainty, diminished vulnerability to rising wholesale costs, and qualitative benefits such as enhanced reputation.

Navigating Regulatory Complexity

Energy and sustainability managers within water companies are increasingly required to navigate a complex web of regulations, both within their own sector and across the energy markets. This dual challenge can make the execution of their roles particularly demanding, especially given that they often work in relatively small teams and cover a broad array of topics.

As we embark on this new regulatory period, it is vital for Ofwat to provide clear guidance and support to water companies as they progress in their energy transformation and decarbonisation efforts. A deeper understanding of energy markets and carbon regulations will become an increasingly critical aspect of the regulator’s remit.

Importance of Stakeholder Management

As the water sector evolves, leaders and senior managers must integrate energy and carbon considerations into their broader corporate vision. Decision-makers need to possess the capability to understand and engage in discussions surrounding these crucial issues.

Energy availability and costs can significantly influence various organisational goals related to modernisation, efficiency, and capital programmes. Therefore, having senior champions who are well-versed in energy and sustainability will become increasingly essential within the water sector.

Effective stakeholder management will be pivotal in establishing successful energy and carbon reduction programmes. Water companies must foster partnerships with energy solutions providers, engage with the wider supply chain, and potentially collaborate with community energy groups. Building networks that extend beyond the traditional confines of the sector will be invaluable for driving progress.

A Call to Action

In conclusion, it is in the best interests of both customers and the environment for water companies to take proactive measures in reducing energy costs and carbon emissions. The sector has already made commendable strides, and the performance commitments set for the next five years should serve as further motivation to intensify these efforts. While technical, commercial, regulatory, and management challenges exist, none are insurmountable.

Energy and sustainability managers, most of whom are doing exceptional work, require robust support from their management and the regulator to tackle these complex issues. Together, we can work towards a more sustainable future for the water sector and contribute meaningfully to the UK’s net zero ambitions.

For further insights and developments in energy transformation, be sure to visit Mott MacDonald.

This rewritten article presents the information in an engaging and structured manner while adhering to UK British English standards. It is designed to resonate with the readers of the ‘Net Zero News Network’.