Water companies which make better use of bioresources activities – transporting, treating, recycling and disposing wastewater sludge to develop low carbon energy, could provide real benefits to customers, society and the environment.
Ofwat has required companies to publish information to facilitate the market since 2018 and at its most recent price review (PR19), it changed the way it regulates, for example, by creating a separate price control for bioresources activities.
David Black, Senior Director at Ofwat, commented: “The challenges posed by climate change and population growth mean bolder, more creative and innovative action is needed to ensure everyone has reliable access to resilient, affordable water and wastewater services, both now and in the future.
“We have introduced a number of reforms in recent years to promote the bioresources market.
“I am concerned that our monitoring of the market has revealed that the trading of sludge for treatment is very low and falling and that companies report a number of barriers to competition.
“We now intend to review the market for bioresources. Our review will inform how we regulate in future, including our approach at PR24.”
Ofwat’s aim is to drive more commercial arrangements for how their different activities interact with each other for the benefit of customers.
To track the development of the market, Ofwat has produced a monitoring report from information received from companies’ on bioresources activities. It identified that:
- Third party use to deliver haulage and disposal services is significant. On average water and sewerage companies held eleven of these types of contracts with third parties in 2019/20
- There is a reasonable degree of competition in the market for sludge transport and disposal – with third parties providing for 43% and 45% respectively
- Competition relating to sludge treatment is low and falling – 0.8% of sludge was treated by other water and sewerage companies or third parties, down from 2% in 2017/18
- Companies see a range of barriers to greater use of trading sludge, most notably environmental regulation, but there is also concern around how to appropriately charge for treating sludge from another water and sewerage company
Ofwat wants to build on its previous reforms where appropriate to inform how it regulates in the future.
Following this report it intends to look more closely at the bioresources market and publish a review in Spring 2021.