It’s over four years since the Cave Report challenged the water industry to be more innovative to meet the challenges it faced. Do the latest PR14 business plans provide any evidence that innovation is being taken seriously?
At this summer’s Sustainable Water conference, the audience readily agreed there was a need for significant innovation if the water sector was to address the huge challenges of climate and demographic change in a manner that was both affordable and sustainable. There was far less agreement about when we might see evidence of significant innovation, with only a handful of delegates confident that there would be evidence within the current price review process (PR14). It was also unclear whether companies might be prepared to innovate in areas that were well outside their comfort zones, rather than sticking to the low-risk route of incrementally improving processes and technologies which were already familiar.
This concept of radical versus incremental innovation is one that challenges us all and it may well benefit from the following illustration. Mogden sewage treatment works, in west London, was originally the headquarters of the West Middlesex Main Drainage Board. In what was formerly the boardroom at the works was a framed ten shilling note, with an explanation that this was the stake in a wager between the designer, Sir William Halcrow, and the board’s chief engineer. Halcrow had bet that the works would be completely powered by energy captured from the new anaerobic digestion process. He won his bet. The date? 1937. Fast forward 76 years and we see from Thames Water’s latest published summary that it identifies “generating more renewable energy from sewage sludge” as one of two examples of innovation in its business plan. The less charitable among us might conclude that this is not so much innovation as the incredibly slow take-up of a technology that has been proven for over three-quarters of a century.
Those same critical observers might also note that anaerobic digestion concerns itself only with the residues of a century-old sewage treatment process (activated sludge), which expends large amounts of energy to turn almost 50 per cent of the potential fuel value of sewage directly to CO2. Is it not the case that our continuing reliance on such an ancient and unsustainable process provides compelling evidence of the need for radical innovation in the water industry?
So how are water companies responding to the challenge of innovation? Now that the companies’ business plans have been submitted to Ofwat, we can see the public versions and perhaps get an understanding of the role played by innovation in those plans. Before going further, I should point out that the published detail varies considerably from company to company, and so the analysis that follows will lack the rigour necessary to be truly reliable. In the time available, I have also limited myself to looking at the larger water and sewerage companies, including Scottish Water. What these findings will do, I hope, is create a debate that helps prevent innovation being dismissed as something for the indeterminate future. If we are to succeed we must start changing today if we are not to leave our children with even bigger problems. I will be more than happy to produce a retraction if any company feels unjustifiably hard done by in what follows and is willing to share evidence of its commitment to innovation.
The results of this, admittedly crude, analysis suggests we have no more than four companies, Scottish Water, Anglian, Wessex and Yorkshire, prepared to show what steps they are taking to change their cultures to ones that foster greater innovation. Of these four, I have studied Scottish Water in some detail and can confirm that there is a genuine willingness to challenge the organisation and its delivery partners to be more innovative, and a confidence that enables it to expose that progress to independent scrutiny.
This is only the start of the journey and some of the challenges faced are likely to take all those involved into areas that are well outside their personal or corporate comfort zones, including the problems of rural water supply and sanitation, where conventional solutions are unsustainably expensive.
Solutions to problems of this nature are likely to be radical but, if successful, may prove to be world beaters. With the risk of truly radical innovation comes the potential for great reward. Wics has recognised the risk element and I understand that its pricing determination will include mechanisms that encourage greater innovation. Ofwat is also talking in similar terms. What then of the companies’ appetite for innovation? My analysis suggests that only a minority of companies are really seeking to embrace innovation and I suggest that, even for these, the journey has only just started. For the others, I have not been able to find convincing evidence of the cultural changes that innovation requires. Perhaps that is a failure of my analysis. If so, I look forward to receiving the evidence that will allow us to celebrate the true champions of water innovation and look forward to a time when UK water companies can take their places as leaders in the international water market.