Originally published on the Alliance for Water Efficiency Financing Sustainable Water Blog (2/6/2015)
If businesses could
choose their water provider what would this mean for water efficiency? This question has been tested in the UK through
development of retail competition for non-household water and sewerage
providers in Scotland since 2008 and is soon to be extended to England in April
2017. In the five years to 2013 Business Stream in Scotland helped customers
save 16 billion litres of water and more than 28,000 tonnes of CO2.
Retail competition
Through retail
competition for water customers are free to change from their existing monopoly
water company to another water supplier. The current arrangements are really
about the “customer-facing” services including billing customers, handling
payments, reading meters, and taking calls from customers about network related
issues. It doesn’t include water resources management, water and sewerage treatment,
or management of water or sewerage networks. These are referred to as upstream
competition in the figure below and the implications for water efficiency will
be the subject of a future blog.
Figure: Overview of
value chain and difference between upstream and retail competition
Although only 5% of
businesses have switched suppliers in Scotland, 45,000 customers (50%)
renegotiated terms of their supply and received benefits such as water
efficiency. This has been much more successful than the four customers who have
been able to switch for their water supply in England, which is currently
limited to those who consume over 5 megalitres of water per year. Scottish
Water is publicly owned but now has a business supplier arm named Business
Stream, which competes with a range of other private businesses. In England,
water companies were privatised in 1989 with each having between 1.2 and 8.5
million customers.
Why and how does this
lead to water efficiency?
Traditionally water
companies have a limited relationship with their customers, focussing on
billing only or repairs when something goes wrong. There have been limited
water efficiency services supplied in terms of online audit checklists or
audits for large/ key customer groups only. Retail competition has driven the
need for service differentiation in Scotland and water efficiency has been a
major element in this. Competition is supported by over two thirds of small and
medium sized business in England with water efficiency seen as a key service.
Billing and metering represent the first step to water savings in
Scotland. By driving economic efficiencies in the billing process a range of
discounts have been provided to customers. The implementation of smart metering
technology and more sophisticated billing for large multi-site organisations is
another benefit. This enables both the organisation and the retail supplier to
identify trends and opportunities for water savings. One example was a company
who previously received over 4,000 paper bills per year who could save £80-200k
(~US$118-297k) per year in administration costs. Automated metering can also
alert customers to high consumption or leaks.
Water audits and water
efficiency measures are the second step to savings for business. Water efficiency
measures range from tap aerators and water saving devices for toilet cisterns
for organisations with low water use to larger scale measures such process
changes or advanced leak detection. In 2014 Business Stream in Scotland report
saving £43m (~US$64m), 20 billion litres of water and 34,000 tonnes of carbon
dioxide emissions since 2008. The public sector in particular in Scotland is
projected to save £36m (~US$53m) over four years.
Alternative water
sources can
be another benefit to large water users such as rainwater harvesting,
wastewater reuse, or new groundwater supplies. An example in Scotland was a
caravan park that reduced consumption by 20% through installing rainwater
harvesting. Services on the wastewater side can also lead to improved
environmental outcomes. For example, one company in Scotland worked with a
salmon farm to implement a new biological treatment technology so their
wastewater quality complied with environmental requirements. There may also be
opportunities to provide services to manage stormwater through green
infrastructure and reduce sewage charges with combined sewer systems.
Opportunities for
England and implications for the US
Based on the experience
in Scotland there is a good potential for water efficiency gains in the
non-household retail competition sector in England when this begins in April 2017.
A benefit of competition in Scotland has been the change in perception over the
value of water services compared with energy services and carbon emission
reduction. Better informing customers on the value of water can also help
implement the hierarchy of water quality and prevent potable water being used
on activities that don’t require this level of quality (e.g. toilet flushing).
As competition is rolled out in England we will begin to see if the water
efficiency benefits continue and how resilient this model is to floods,
droughts and economic pressures. A broad range of regulatory, voluntary and
economic policy tools are needed to address water efficiency and this case
study may provide insight for future approaches in the US.
For more information
- Competition in the Scottish Water Industry
- Water BIll: Reform of the Water industry: Retail Competition
- Scottish Businesses Save £100m on their Water Bills
- The Benefits of Competition
- Scottish Businesses Save £100 Million with Business Stream
- Competition in the Australian Urban Water Sector
