Unlocking resilience through integrated asset health management

With the PR24 lens focusing regulatory attention on social value, stormwater overflows and greenhouse gas emissions and these priorities increasingly echoed by shareholders and customers, water companies must consider how to balance budgets against the need to be adaptive, ambitious and resilient. Binnies director of asset management Chris Steele and director of design build/delivery services Steven Swift believe asset health will be a key component to achieving three of Ofwat’s strategic priorities - protect and enhance the environment; deliver a resilient water sector and serve and protect customers.

Binnies director of asset management Chris Steele

If the PR24 consultation timeline was not enough of a driving factor for water companies, the challenges presented by summer 2022 have only emphasised the need to focus on asset health and resilience. Drought conditions, and the corresponding hosepipe bans, have led to the renewed and entirely appropriate focus on climate change and greenhouse gas emissions. The scarcity of this precious resource this year has also seen increasing attention on leakage reduction programmes. And then, when it did rain, storm overflows brought a keen focus on pollution and environmental impact with a public and political requirement for the Government, the regulator and water companies to do better.

But how can improved asset health management advance efforts to meet regulatory requirements, while maximising infrastructure investment in the kind of meaningful way which will address the public demand for action?

An integrated system and lifecycle costs

Asset health when applied in an integrated way across our entire water and wastewater system is premised on the lifecycle of our infrastructure. Integration is essential since all the individual elements of our water system do not exist in isolation and safeguarding our assets cannot be achieved without big picture thinking.

A vital partner to resilience, asset health is defined as the ability to achieve and withstand impacts to a required level of service. Crucially, delivering that level of service in a sustainable way doesn’t rely on a single decision or business function – it encompasses the entire lifecycle of the asset over multiple time horizons. To create resilience, there needs to be an understanding of the short, medium and long-term health of the integrated system.

What this means for water companies (or any asset-intensive industry) is that proactively managing asset health must be an integrated series of proactive decisions based on service level risk. We’ve had totex (capital expenditure and operational expenditure) thinking for some time – ensuring we consider lifecycle costs when investing, but now water companies need to consider balancing cost, risk and performance against strategic changes to their level of service requirements.

Asset failure and impact on service

Binnies director of design build/delivery services Steven Swift

The most practical way to understand asset health in practice is to look at the decisions that impact it over the lifecycle. Managing asset health for the long term requires integrated thinking, which, when we consider an end-to-end treatment process made up of a series of systems, requires us first to look at the level of service or outcomes it is required to achieve.

Once understood then we need to look at the organisational processes, enterprise systems and resources to deliver the service in a sustainably way. These include a common means to assess cost, risk and performance of the system, planning and scheduling capability and having the right skills and competency to operate and maintain the system.

With these foundations in place, an organisation can gain the necessary insight into their asset base, such as identifying which systems within the treatment process are critical. For the assets within the system, what static and dynamic data needs to be captured in order to make operational and investment decisions to create a risk-based maintenance programme, or define the requirements to proactively monitor asset condition and performance.

Now we can enable the optimal management of the assets by putting in place the correct operational resource, mobilisation of lower cost and carbon engineering and support services via the supply chain and implementation of monitoring points for critical assets.

Finally, completing the operating model is the need to operate and maintain the assets as integrated systems. Which, with respect to asset health, means creating proactive maintenance delivery models, planning for reactive response and operational process optimisation to deliver service level requirements.

Asset management maturity

Ofwat’s PR24 guidance recognises the shift in budgetary and investment planning from the price review timeline to an asset management timeline – from the regulatory period of five years to a timeframe more representative of the asset lifecycle, generally considered to be around 25 years. It advises that, outside the price review, it has undertaken an asset management maturity assessment. This, it points out, has created a shared understanding of the range of asset management maturity in the sector, including monitoring and managing asset health and operational resilience.

The exercise has led to a proposed PR24 outcomes regime with key asset health performance commitments, such as mains repairs, unplanned outages and sewer collapses. Ofwat adds the following advice: “Financial incentives on performance commitments will encourage companies to improve service levels and asset health”. The message is clear, water companies will be focusing on asset health at the direction of Ofwat with the regulator’s clear focus on long-term expenditure modelling.

In its 2021-22 Operational Resilience discussion paper, Ofwat lists stage one (2022-23) asset resilience measures as PR24 asset health performance commitments (sewer collapses, unplanned outage and mains repairs), asset condition, unplanned maintenance, equipment failures on the sewerage network, reactive mains repairs and sewer blockages. Within this period, system resilience measures include drought resilience and sewer flooding in a storm.  These measures, including service performance, are further developed across stage two (2022-25) and three (2026 onwards).

It’s worth noting that many utilities are already on the journey to sustainably improving asset health by maturing the components described. The step change for PR24 and beyond is bringing these together in an integrated way across the asset lifecycle, which, by design, then requires more strategic thinking that is now actively incentivised by Ofwat. In addition, Ofwat has recently encouraged voluntary data requests to inform the expansion of common KPIs that will dynamically monitor asset health in a consistent way which again targets more strategic decision-making and sharing of information across the water utility sector.