The industry gathered in Birmingham for the biggest utility exhibition and conference of the year – and here’s what they talked about.

Thousands of people descended on Birmingham’s National Exhibition Centre for Utility Week Live 2016. This year’s exhibition and conference addressed the overarching theme of innovation across the utilities, and how the sector is preparing for the future.

Keynote speakers, including regulators Ofwat and Ofgem, set out their vision for the coming decades (see p10), including the adoption of competitive markets, while company speakers, including those from Nissan and McLaren, talked about the innovation methodology utilities should adopt in order to acquire pace and focus in transformation.

Across the seminars in the main theatres, as well as in the Pumping Station – a new addition for 2016 – representatives from the energy and water sector, alongside other experts in those industries, set out how they see utilities, how the development of competitive markets is changing the way they operate, how new technologies are being developed and shifting working practices, how a flexible mentality is essential for companies to thrive, and how all of this comes together to serve the customer.

That final point was made time and time again. Whatever happens in the industry in relation to policy, technology, and operational structures, everything should be aimed at providing a better service for consumers.

With Utility Week Live 2016 addressing these topics in detail, the next few pages will run over the key themes and discussion points from the show.

Let market forces rule

The regulators differ a lot in their tone ­ ­towards their respective sectors, but both see the market as the solution.

As the bosses of both Ofgem and Ofwat spoke at the Utility Week Live keynote conference there was a notable difference in the tone of their respective messages, but a united conclusion.

Despite repeatedly saying he didn’t want to fight the energy sector, Ofgem chief executive Dermot Nolan made clear that he would if necessary. “I can say as the regulator to the industry, we at Ofgem want to take up the baton from the [Competition and Markets Authority] and work with the industry to make these remedies work. I don’t want to work against the industry. I will if I have to.”

Nolan said the provisional remedies put forward by the CMA in March “need the industry’s backing to be fully effective” and warned that if it didn’t get with the programme “plans to regulate electricity and gas prices more widely may go back on the table”.

Nolan said “with a hint of menace” (his words) that the rollout of smart meters means the CMA’s remedies have a limited shelf-life, and that therefore there is “a relatively narrow window of opportunity” for the energy sector to demonstrate its co-operation.

By contrast, Ofwat chief executive Cathryn Ross spoke in a much more positive manner, as she described the regulator’s transformation towards a “fundamentally more pro-market” model. She said the new model could not be delivered by the regulator alone and would rely on those in the sector “stepping up”.

Ross said it was “great to see this is happening”, adding “you can see [those] changes in the sector already”. She continued: “We really saw companies embracing the transformation we started back in PR14”.

With regards to introduction of a competitive market for non-household water, she said it had been “really great to see some companies making some big strategic choices about whether and how they want to play this space”.

Despite the difference in tone, both regulators focused firmly on market-led solutions.

Ross said Ofwat was moving away from a regulatory model that was “rather administrative, very much one size fits all, rather intrusive” and towards one which was “more framework based, more proportionate and targeted, and fundamentally more pro-market”.

She argued that markets would be “absolutely critical in informing, enabling and incentivising” the “transformational efficiency that the sector needs”, saying they “create options” and “enable choices”, which could reveal important information about “what companies should make, buy, and how they should do this”.

She said they could also reveal information to those outside the industry, “about the value they can add and the opportunities they can realise”.

Nolan said Ofgem had been forced to enact “a number of enforcement measures” in the past few years, which were in his view “necessary”, but said he ultimately wanted to be as hands-off as possible. “I think the regulator, like the industry, actually hopes we don’t have to resort to more regulation, that we don’t have to resort to more intervention in the market,” he said.

Asked whether he thought competition could eventually lead regulation to wither on the vine, he responded: “Frankly, I hope so.” he added: “The idea of the regulator that’s interminably there is not something I see as desirable.” TG

What we learnt about totex

Total expenditure was introduced into the water sector in the last price review – giving water companies a single pot of money to spend from, rather than one each for capital projects and operational expenditure.

In the Utility Week Live Wipro Water Theatre, this cropped up as the topic when the regulatory shift from outputs to outcomes – another shift for AMP6 – was debated.

The panel, featuring Ofwat principal for analytics Ynon Gablinger, United Utilities supply chain and commercial director Martin Gee, and Arcadis head of asset management Luke Dirou, all agreed that totex, in combination with the shift to outcomes, has given the water companies greater freedom and flexibility to innovate and operate their systems – but also greater responsibility for the service they deliver to customers.

Gee told delegates that the excuse some water companies had previously used – “we want to but Ofwat won’t let us” – has now gone. “Totex gives us flexibility and the ability to take ownership or our delivery plans,” he said.

The panel agreed that there has been a shift in attitude from the companies, who are all beginning to adopt a different way of working. Gee said that United Utilities is embracing the totex regime by working with its partners to come up with solutions, rather than providing them with designs for capital projects to execute.

This view contrasted, however, with opinion expressed in the keynote conference where speakers said water companies held a “capex equals good, opex equals bad” mentality.

Back in the Wipro Water Theatre, Dirou said that the use of totex as a driver for research and innovation  “is an area for improvement” within the sector. “I’m an advocate of utilising small data to provide big solutions,” he added.

From an Ofwat viewpoint, Gablinger stated the shift will help drive the rate of efficiencies that can be found – something that had been getting progressively harder in previous price controls – by giving companies the ability to use the most appropriate and favoured solutions. “Totex allows companies to focus on the whole-life cost of an asset – leading to improved thinking and improved solutions,” he said. MB

Sleepless nights ahead

“I’m sure most CIO’s have sleepless nights, worrying about how to protect their organisations,” said Paul Jenkinson, IT security and technical architecture manager at UK Power Networks as he spoke about the potential of cyber threats to paralyse energy network innovation efforts at Utility Week Live. Along with fellow presenters, Jenkinson was clear that such threats are common, increasing and serious in nature – but can be managed.

Utility Week Live’s cyber security debate was hosted by Network magazine, the new sister title to Utility Week, and posed the question: what does cyber-resilience look like in an age of intelligent infrastructure?

Key points to emerge from the session, which highlighted new kinds of cyber-attack such as “worms”, as well as the role of regulation and the relationship between cyber security and innovation, were:

* Integration of IT with operational technologies increases the likelihood and potential impact of cyber-attacks on energy networks.

* More collaboration and jargon-busting is needed to promote shared understanding of security risks between IT and operations technology leaders.

* Fear of security issues and commercial loss is leading to a lock-down of data in the heat sector – this is a barrier to innovation, operational improvement and market growth.

* Cyber-resilience requires regulatory attention, but solutions must not impose tick-box compliance measures, said Jenkinson

A detailed write up of this debate and wider cyber-resilience issues for UK energy networks will appear in the June issue of Network. Find out more at: networks.online

Putting a price on failure

The increasing unpredictability of the weather makes it impossible to assess the likelihood of an asset failing, and therefore to measure risk.

The threat of climate change and more extreme weather events has thrown a spotlight on the extent to which the water sector can maintain and restore service in the face of unexpected challenges.

Here’s what Utility Week Live taught us about resilience in the sector.

Increasing resilience is not simply about reducing risk. While minimising the risk of failure is an important aspect of designing water and wastewater systems, resilience should also be about response and recovery when failure occurs. It can be thought of as “bouncebackability” or making systems “safe to fail”, according to David Butler, professor of water engineering at Exeter University.

Resilience as a property of a system needs therefore to be distinguished from the performance of that system, he said.

Cost-benefit analyses may not be reliable with resilience projects. While everybody agrees that more resilient networks and systems are a good thing, the real difficulty is establishing the level of protection that needs to be invested in – and basing a cost-benefit calculation on a 1-in-50-year drought or a 1-in-100-year storm is problematic because these climatic events are becoming much more frequent.

“Because we can no longer rely on a stable climate, we can’t rely on return periods to establish the value of an investment,” Trevor Bishop, deputy director of water resources at the Environment Agency, said. “We don’t know how climate change will affect these probabilities – we only have the direction of travel.”

For this reason, if failure of a particular asset would represent a catastrophe, then a much higher level of protection may be justified. For example, the Dutch have determined that some key assets must be protected against a 1-in-10,000-year storm, an almost unimaginable event.

Catastrophic scenarios might be very low probability but they are very high cost. For example, it was estimated that the cost of a total failure of water supply to London would be £7-10 billion a week.

Non-household retail competition may help promote resilience, Ofwat believes. Director Nicci Russell said the example of Scotland had showed that businesses changed supplier on the basis that retailers could help them manage their water demand, reducing bills but also boosting system resilience.

Finally, the behaviour and response of customers could be the missing ingredient in creating a more resilient water network, according to Jacob Tompkins, managing director of Waterwise. He said that “social infrastructure” was just as important as hard assets, and that customer awareness could make the key difference in reducing water use and in protecting sewerage. Rainwater harvesting was also given as an example of how individuals or communities could make water supplies in their immediate area more resilient.

James Brockett is the editor of WWT

Headlining in the Innovation Zone

Innovation was the headline theme of the exhibition, and a dedicated section of the hall was put aside for companies wanting to showcase their latest product developments to utilities.

Innovation was the headline theme of Utility Week Live 2016, and delegates had the opportunity to look into the future in the Innovation Zone, hosted by the Energy Innovation Centre. Two sessions of technology pitches by exhibitors on day one revealed the breadth of innovation being undertaken to improve every aspect of asset production, management and maintenance. Innovations ranged from new network poles, to personalised videos to explain billing and analytics software. Here are three of our favourites:

OptoSci. The company’s Optomole system is an optical methane sensing system designed to allow gas networks to rapidly locate mains gas ingress points, without the need to dig. It is an inherently safe sensor, rapidly deployable, that provides instant gas data. Trials have revealed a 30-60 per cent cost saving on repairs.

Pollywood. This company is developing a replacement for the creosote pole because the current exemption from the creosote ban will end soon. Its poles promise a wealth of environmental benefits, and are strong and lightweight enough to be deployed without heavy lifting equipment.

Roadmender Asphalt. Using a seven-minute heat mix cycle on site, these ready-mixed bags of asphalt and bitumen allow workers to make the quantity needed on site, with no waste, and at the correct temperature. Many clients waste between 20-40 per cent of what they collect from the plant, and only have between four and five hours to use the asphalt, limiting production. LD

What we learnt about data and analytics

Data is vitally important in both the energy and water sectors and, as networks and systems in the utilities sector become smarter and the needs and expectations of the customer change, its importance is rapidly growing.

“Smart networks need smart data,” said WRc senior consultant Andy Godley, speaking in the Wipro Water Theatre at this year’s Utility Week Live. But what is smart data, and how can it be used effectively? The answer is to think SMART.

S is for specific

What do utilities want? Specific data is important, as it can help both water and energy companies identify and fix a problem.

M is for measured

Information that is coming from a sensor or a meter in the water or energy network can be used to measure the amount of energy or water being used by a customer. This should make it easier to incentivise customers to reduce their energy and water use, as resources become more constrained.

A is for acceptable

Smart meters “appeal to the pocket of customers,” says Godley, but data privacy is important. Customers must have the right to choose which companies can see their data, and how much of it they can see.

R is for realistic

Utilities need to understand the limits of the technology, and be realistic about the extent to which data can aid them. Poor quality data is likely to hinder rather than help.

T is for time

Data collected efficiently will allow a utility company to identify and fix a problem – such as a leak for a water company or a problem at a substation for an electricity distribution company – quickly. LV

A step closer to business as usual?

There will come a time when networks will no longer be paid to innovate.

In this period of transformation in the energy sector, network operators are acutely aware of the need to innovate to remain relevant and capable of servicing the evolving energy market.

One of the big points of debate between stakeholders in the industry is how long networks should be incentivised to innovate before they are left to their own devices.

Seminars revealed just how far network operators have come with this support, arguably to the point where it is now business as usual. But they also revealed just how much further there is to go, and offered a glimpse of the future if this funding remains in place.

Ofgem currently supports networks to innovate through several funding mechanisms such as the Network Innovation Allowance (NIA) and Network Innovation Competition (NIC). Both the NIC and its predecessor the Low Carbon Networks Fund (LCNF) have come under scrutiny in recent months as Ofgem determines if, and in what form, this support should continue. The general consensus is that both have been a force for good, but Ofgem has reiterated in recent months its intention to remove support when innovation becomes business as usual practise.

Findings presented at Utility Week Live from LCNF projects nearing completion show the money spent is reaping rewards. Electricity North West’s Smart Street project has been trialling voltage control techniques to optimise network voltage and minimise the impact of low-carbon technologies while maintaining voltage levels. The project cost £11.5 million and has identified £350 of reinforcement savings over 25 years for each household. Multiplied up, savings for the whole of the UK reach £8.6 billion over the 25-year period.

Results are not just monetary savings. UK Power Networks’ storage project at Leighton Buzzard, again funded through the LCNF, has allowed it a position of influence on the ongoing discussions on the future of energy storage. It expects to publish the business case for distribution network operators using energy storage next month.

This type of innovation supported by the NIC was heralded by Maxine Frerk, formally the head of networks at Ofgem, as the real success of the move to the RIIO price control model.

So are networks there? Has innovation received enough special treatment and is this now an area where funding can be cut? UK Power Networks’ director of safety, strategy and support services Suleman Alli told delegates: “Technology is not our barrier, it’s our ambition.” LD

Handing on the baton

There is a looming skills crisis, both in the number of new recruits and companies’ ability to pass on expertise.

In the Streetworks theatre, the skills challenge – and the looming skills crisis – was the hot topic. The fact that half of the current workforce within the utility sector will leave in the next decade, either by retiring or by going elsewhere, is an issue companies cannot afford to ignore.

It is being addressed in two ways:

Attracting new talent

Utilities and their contractors need to “tap into the PS4 generation”, according to Glen Tymon, group training manager for Morrison Utility Services.

He told delegates: “There is no longer just a toolbox of spanners, shovels and picks. The new generation need to be able to pilot drones and have the dexterity to be able to handle high and technically skilled tasks – and even to be able to use things that have not yet been invented.”

Tymon added that to attract these new types of people, the sector needs an image refresh.

Jan Atkinson, talent and organisation development director at Kier, agreed that an image overhaul is required to “tap into the millennial generation”.

She added that companies and contractors should offer “inclusive pathways” to encourage women to join the workforce, as well as ex-offenders, NEETS, and younger people from disadvantaged backgrounds.

Retaining existing talent

Atkinson said companies must ensure there are obvious, clear and achievable career pathways, “matching aspirations and enabling employees to continue on their learning journey”.

Selling the sector as a learning pathway, with transferable skills, is vital. This will ensure staff – both new and old – are prepared for new technologies the sector will adopt. This “learning agility” enables staff to transfer within the secator to different areas, keeping them in the sector.

Atkinson told delegates Kier runs a development academy, whereby senior staff mentor younger employees, passing on essential skills and knowledge.

Tymon agreed that those “in their later years” should be used as coaches. Aside from benefitting the younger staff, he said, senior staff are being enthused and “re-energised” by this approach, which is encouraging them to stay on in the sector. mb