Inform, Innovate, Influence

Posted on by Paul Horton

Paul Horton from the Future Water Association

Paul Horton, Chief Executive Officer of Future Water Association, explores what the water industry can learn from the corporate world.

As corporate water stewardship moves ever higher up the agenda and new initiatives such as water scoring (the joint CDP/South Pole Group project) come to the fore – can the utilities part of the water sector learn from the corporate world?

In a nutshell yes – the corporate world has been recognising for a number of years the value of water to business and this has led to innovative strategies to reduce, re-use and mitigate the water risks.

From a supply chain perspective, it is crucial to lead the way in transforming how the water sector grows and develops both in the UK and further afield. Shaping the future of water will be achieved through collaboration, innovation and education alongside a creative supply chain.

These are bold statements but what do they mean?

• Informing the regulators about challenges among the supply chain and informing Government about policy direction required to underpin a vibrant, active supply chain;

• Innovating through Water Dragons, innovation showcases, initiatives such as the TAG forum and ensuring that creativity has a route to market;

• Influencing and inspiring the supply chain to develop innovative solutions and new ways of thinking to help shape the future of the water sector – in other words making space for innovation!
The utilities part of the water sector has for decades been driven by capital expenditure and whilst this has been necessary, it has led to a cyclical business plan model, reviewed and renewed every five years. With the need to demonstrate a return on innovation being defined by the five year AMP (Asset Management Plan) periods, this has led to a lack of incentives.

AMP 6 represents a period of change with a focus on smoothing the cyclical nature of the water company investment cycle in England & Wales, and the introduction of the TOTEX based approach – total expenditure – which brings back life-cycle assessment linked to costs. In addition there is 2017, the year when retail and wholesale competition arrives and this will for the ‘corporate sector’ open up the options to choose different suppliers, potentially bringing in new market entrants across England & Wales. But will these changes create the more radical approach that the sector needs? Will it lead to the emergence of a more corporate based business model?

What are the options?

  1. Follow the lead of the gas sector and develop longer term AMP periods (8 years) with explicit innovation incentives through the RIIO model;
  2. Abandon AMP period regulation altogether – OFWAT remains a regulator but its remit changes and the water companies begin to operate more like the corporate world, which leads to more innovation, efficiency and creative thinking.

There is no right answer but innovation is not just about new products and services and now is a good time to thinking about how innovative and radical we can be in terms of regulation.

Water is fundamental to all aspects of the economy and the focus must be on being as innovative and creative as possible across the water landscape.

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