Energy Costs set to rise for UK Water due to Brexit

There’s no denying that currently the only certainty with Brexit is a sustained period of uncertainty. But what could it mean for UK water companies already juggling regulatory demands and rising energy costs? Mark Hinton, Business Optimisation Director at Servelec Technologies takes a look.

Achieving relatively conservative percentage savings in energy costs through business optimisation can save utility companies millions on an annual ongoing basis. It made clear sense before Brexit but now, it seems, will have even greater significance if companies are to be insulated against the fallout from Brexit and be more energy future-proof.

In March Amber Rudd, the Energy and Climate Change Secretary of State, warned that Brexit would mean that electricity costs ‘are likely to rocket’ by half a billion pounds per year. She was referring to an assessment made on the impact of Brexit commissioned by the National Grid. The key factors at work in this scenario are resulting higher costs of investment in energy infrastructure and risks around our status in the EU Internal Energy Market such as losing out on capacity balancing given our reliance on interconnection.

As a net importer of energy a fall in the pound clearly has direct consequences on costs and this could worsen as the UK energy gap widens and our power stations reach end of life. The potential Brexit effect on foreign led investments such as Hinkley Point C nuclear power station is already being widely reported. Oil and gas prices are stabilising and perhaps set to increase as outputs and demands globally normalise. If nothing else it leads to timelines slipping and more excuses to kick the Energy Gap can down the road.

This week saw the publications of National Grid’s Future Energy Scenarios report. An interesting document in many ways: it illustrates in all scenarios our ongoing and future import dependency and the expected rise in commodity prices as we approach 2030. UK water has a notable impact on carbon as well, approaching 1% of all UK emissions from its operational activities.

Before the result of the vote for Brexit was known Ofwat’s chief Cathryn Ross was already vocal around the need for the UK Water sector to get ‘a hell of a lot more efficient’.

So what does all this mean for the UK Water sector?

There are clearly a lot of unanswered questions over the short term at the moment but it is a reality that the UK water utility companies are and will continue to be heavy users of energy. Cleary optimising energy use needs to be a high priority for our strategic leaders. A growing part of this will be collecting and making sense of large amounts of data and then most importantly making sensible decisions based upon the analysis of that data. All UK water companies spend large sums on investments in their assets and on operational costs such as pumping and water and waste treatment.

The bottom line is that achieving savings of say 5% to 10% in Capex through selecting your asset investments more intelligently or a 10% to 15% reduction in electricity and chemical costs through smart automatic network operation leads to savings of millions. Payback on investment often within 12 months at a typical return on investment rate of three and above should mean clear cut business cases for investment.

So what is stopping this investment in data and intelligent operational controls happening on a larger scale in UK water?

The good news is that it is happening already and many far-sighted companies are busy positioning themselves for the future. But the strong suspicion is that we are only beginning to scratch the surface of the efficiencies that can be realised. We need to work collaboratively as a sector to build a phased implementation business case that is robust, justified and attractive to all stakeholders.

The future will be here quickly and will involve greater connectivity of solutions end-to-end from data monitoring through to data collection, visualisation, analytics and automatic optimised control. Leakage prediction will speak to asset renewal which will speak to network management which will speak to data collection and elicit an operational response. Systems are becoming increasingly intelligent and self-learning. Smart networks in the true sense are beginning to arrive and it is an exciting prospect.

These are large companies and it can take time for change to be adopted and the benefits case to be realised. Perhaps Brexit will prove a catalyst rather than a catastrophe.

Division: Technologies