Alison Fergusson 28 January 2020 Trust in water 1 Outline What - - PowerPoint PPT Presentation

Trust in water 1

New ways of thinking about bioresources in AMP7 Alison Fergusson 28 January 2020

Trust in water 2

Outline What is different in AMP7? How should the industry be preparing to get the most from bioresources in 2020-25? What are the opportunities for wider market engagement?

Trust in water 3

Independent economic regulator of the water and sewerage sectors in England and Wales Our main statutory duties are:

• to protect consumers;
• enable efficient, well-run companies to finance their

functions; and

• ensure long-term resilience

We take a long-term approach to our functions, contributing to sustainable development. We work within the framework of published Government (UK and Welsh) policy, including any specific guidance We are funded through the licence fees that the water companies pay each year (about £25 million a year) Who we are

Trust in water 4

Key elements of bioresources in the 2019 price review which is setting the way forward for the next five years:

• Separate price control;
• We have set each company’s allowed revenues on tonnes dry solids generated by wastewater

treatment (£/TDS). Based on forecast amounts of sludge for 2020-2025;

• We have set a forecasting incentive to promote better understanding, measurement and

forecasting of the volume of sludge companies produce;

• We reviewed companies’ bioresources strategies and approaches to the bioresources market

as part of our initial assessment of business plans. What is different in AMP7?

Trust in water 5

What does the bioresources price control cover?

Co-located WwTWs Raw Sewage Raw sludge dewatering liquors Products for recycling/disposal CHP Engines or biomethane production Used to power sludge treatment centre Raw Sewage Used to power co- located WwTW Export to power grid Wastewater treatment works Raw sludge dewatering hubs Sludge treatment centres Return Liquors

Sludge transport, treatment, recycling and disposal

• 1. Separate price control – means

management focus, revealing information on costs/revenues and no cross-subsidy between sewage treatment and sludge management.

• 2. Companies will measure sludge

production (TDS) through instrumentation as far as possible

• 3. Any imported sludge, or other
• rganic waste is outside the price

control.

Trust in water 6

Is the industry prepared? As part of the early assessment of plans companies submitted to us in September 2018, we asked the following question: To what extent does the company have a well evidenced long-term strategy for delivering bioresources services, integrating an assessment of the value from the delivery of bioresources services by third parties for the 2020-25 period and over the longer term? We assessed companies’ business plans across two broad areas:

• 1. the robustness of their data to ensure that we could set the bioresources price control

appropriately; and

• 2. how well companies had explored trading and other market approaches in developing

their strategy for bioresources services. We graded companies highly where they addressed both of these broad areas well. Many companies fell short of providing high quality plans with robust data and an integrated strategy for using third party delivery of treatment and transport of sludge. Some companies provided robust forecast information and supporting evidence, but provided insufficient evidence of engagement with third parties or opportunities for trades. Other companies performed better in providing a robust sludge strategy but fell short of providing robust and well evidenced data.

Trust in water 7

Initial assessment of company plans

Yorkshire Water Anglian Water Northumbrian Water Southern Water Severn Trent Water South West Water Thames Water United Utilities Welsh Water Wessex Water Assessment Grade B C C C C C C C C C

Common Themes

• 1. Many companies are considering the use of third parties for high-value services.
• 2. Some clear plans to use markets with projects up to 4% of total sludge production.
• 3. Some plans describe significant volumes being traded, but the forecast numbers do not match the description.
• 4. Level of trading is variable across companies, with short term resilience trades more common and longer term

trades still at early stages of exploration.

• 5. The level of detail on approaches to third party engagement was limited in most cases.
• 6. How profits from using appointed assets for non-appointed business will be shared with customers was

missing from nearly all companies.

• 7. General lack of consideration of risks of using appointed assets for non-appointed business or risks from use
• f third party services.
• 8. Approaches put forward to achieve efficiencies were mostly those you would expect of a well functioning asset

management company.

• 9. Mixed evidence regarding forecast sludge production. Evidence on how to improve its measurement was poor

for most companies. 10.Poor evidence on the split of fixed and variable costs. 11.Some companies took a business as usual approach to their strategy.

Trust in water 8

How should the industry prepare?

• Be prepared for disruptive market activity! Expect something other than business as

usual;

• Collect good quality data on all interactions between bioresources and wastewater to

demonstrate no cross subsidy;

• Try innovative approaches to transporting, treating and recycling bioresources;
• Seek out market opportunities.

Trust in water 9

What are the opportunities for wider market engagement? ADBA’s site map

• In our final determination we have made cost

allowances to two companies who will soon need additional treatment capacity, not to build their own facilities but to explore and engage with the wider bioresources market.

• 100% of sludge produced by sewage works

serving >2000 people that are not already sludge treatment sites is within 45km of a commercial, industrial, integrated waste management or farm AD plant.

• Environmental regulation means co-treatment

needs EPR permits for treatment and recycling to land, but this may still be cost effective.

• What about co-location? Shared facilities could

yield efficiencies of scale.

• Innovative approaches? Innovative technology?

Trust in water 10

Companies are publishing information about the location, quantity and quality of the sludge they produce, as well as basic information about their sludge treatment centres. Information

Trust in water 11

Summary Bioresources is a fast-moving and exciting area, with opportunities for wider organic waste sector to get involved, and innovation to bring real benefits to water companies and their customers. Water companies are publishing information to help interested parties identify market

• pportunities.

Our 2019 price review seeks to promote the bioresources market. Our approach could speed the uptake of great innovation to get the most out of bioresources for customers and the environment.