Water asset management: Preparing for an uncertain future

Planning for an unknown future, within regulatory timeframes that do not align with longer-term investment needs is the complex conundrum facing the water industry's aging infrastructure. Asset health managers and strategic planners gathered at Utility Week's Water Industry Asset Management Conference to discuss the crucial - yet often overlooked - issue of how to best manage and optimise water industry assets. Here are 10 takeaways from the day.

Preparing for the great unknown

The effects of climate change mean assets in the coming decades will face more gruelling conditions which further challenge resilience. Jonathan Chappell, senior policy advisor at the National Infrastructure Commission, said threats such as prolonged drought, higher rainfall and increased vegetation growth would mean infrastructure will face more costly challenges in the future than today. “If we’re setting out a budget to 2050 or 2055 we have to bear in mind infrastructure will be more expensive to run because it will be facing challenges it doesn’t face now because of climate change.”

These increased costs are, as yet, not known.

Out of sight… out of mind?

With so many assets underground, a specific challenge for the water industry is that the owners are often unaware of their condition. Chappell said the NIC’s call for evidence on its work highlighted this concern from the water sector.

He said there are potential areas of misalignment between short and long term objectives because regulatory cycles are five years but asset management cycles are considerably longer. The NIC’s work on assets within climate and resilience will consider whether there is a maintenance backlog and whether it could be more efficiently supported by technology to monitor underground assets.

Renewal rates are “shockingly low”

Asset replacement rates and asset lives were also raised, revealing that in some cases current replacement rates are up to once in 400 years.

That was echoed by SES Water’s head of asset strategy Daniel Woodworth, who described mains pipe renewable rates for AMP7 as “shockingly low”. He said the sector currently does not measure the condition of all its assets, which makes it impossible to know the “right” rate of replacement. However, he said the current rate was clearly inadequate.

People are the most crucial asset

Although operators are the life blood of asset health and their expert knowledge often the key reason some assets continue to operate at all, there are also drawbacks. Tim Gadd, head of strategic advisory services at Binnies, noted that operators do not always know the warning signs for failure, meaning competency frameworks and interfaces should be holistic rather than focus on a single outcome. He called for greater clarity of asset health management to be escalated to senior teams within water companies.

Furthermore, he suggested those experienced people working closely with assets could add further value by joining up what asset health teams have done with overarching targets such as key performance indicators set by regulators. A sentiment echoed in other sessions during the day was that empowering all staff to see how their role may impact the wider systems and colleagues across the organisation.

Better knowledge and understanding of how roles interact would assist teams to provide one another with the most relevant data rather than risk it being considered a box-ticking exercise.

 Ofwat’s AMMA hits many of the right notes

Aspects of Ofwat’s Asset Management Maturity Assessment (AMMA) are welcomed by the sector: Matt Humphrey, head of strategic investment management at Anglian, said there needed to be more “imagination and bravery” in the sector’s approach to asset management. He welcomed thinking in the AMMA that called for greater collaboration and recognised the need for a better understanding of current and future asset health. He added the AMMA echoed thinking about prioritising best value over least cost.

Affordability should not override investment needs

Affordability considerations could eclipse the work needed to make assets resilient. Keith Waller, from the Construction and Innovation Hub, said the challenges and objectives around carbon and climate change are difficult enough without thinking about the cost of living crisis.

While pressure on household bills cannot be overlooked, waiting to invest in asset health could ultimately add to those costs for future billpayers.

PR24 needs to be transformational

Those working in asset health are acutely aware of this and are cautious that the next price review in 2024 will give the sector space and funding to prioritise asset health as required. Gordon Rogers, United Utilities’ head of long term strategy, said: “PR24 needs to be transformational or we will walk off a cliff as a society”, but felt the draft framework from Ofwat made the right noises. However, he expressed some concern that when the regulator spoke of “long term thinking”, it could mean deferring essential work.

Energy costs spurring efficiency

Matt Humphrey from Anglian raised the topical point that with power and energy bills increases, energy efficiency, including how assets are run, was under sharp scrutiny. He said the water sector’s power costs last year had almost doubled to c£900 million, which meant his company had to “throw everything it possibly can at energy efficiency”.

Time for holistic thinking at catchment scale

Nature-based solutions have a significant part to play in the future of infrastructure. Carol Cairns from Northumbrian Water said adopting holistic thinking with a nature-based solutions approach was essential for the sector to have any chance of meeting its ambitions to drive carbon emissions down. She said the industry simply could not keep using carbon intensive schemes but added regulators needed to be a part of the journey alongside companies.

Plugging the skills gap

Sarah Watson, principle engineer at Ofwat, spoke about how future generations can be protected from price hikes and aging infrastructure with asset management, of which people are a key part. Decisions about management strategies for assets are built on people’s skills and choices. However, she said self-reporting by water companies as part of the AMMA showed skills and capabilities were yet to be fully developed with future skills for asset management strategies lacking. With asset management becoming more complex, the skills gap is widening, Watson warned.