Many of the key challenges facing the water sector in England and Wales are long term in nature. Over the next few decades, water companies must meet customers’ growing expectations in the face of climate change, affordability concerns, and shifts in population. In addition, they must protect our natural environment from any harm caused by their activities.
The sector, particularly in England, now has a series of long-term targets to meet, either set by governments or within the industry (see Figure 1). These ambitious targets range from delivering net zero emissions, to cutting leakage by half, to ensuring we’ll still have water even in an extremely rare drought.
Figure 1: Examples of long-term targets and commitments that affect the water sector
For PR24, we’re building a price review that can help companies overcome the challenges and meet their ambitions, while embracing the opportunities of the future. Although action needs to be taken now, none of the major challenges will be fully solved within the five-year price review cycle. This is why we’re introducing long-term delivery strategies. In these strategies, companies will explain how they’ll meet those crucial long-term challenges, including the key investments they plan to make and how they’ll deal with key uncertainties.
An important feature of these strategies is that they explicitly account for future uncertainties: as circumstances change, the investment programme will change. Companies will use adaptive planning (see Figure 2) to show how factors such as climate change, technological development and consumer demand might affect their strategies in future. This means we can be more confident that investments made now will deliver going forward, whatever the future holds.
Figure 2: How adaptive planning helps us invest for the long term
We’re pleased that companies are making the most of opportunities to ensure their investment programmes are more adaptable to change, like prioritising flexible solutions that can be easily scaled up or down in future. Investment can also be brought forward to create flexibility later, such as trialling exciting innovations that could open up new options later on – reducing costs for customers in the long run.
We want long-term delivery strategies to improve how the water sector makes decisions and make sure it achieves its ambitions. To develop high-quality strategies, companies need to focus on long-term goals, then work backwards to consider the best ways of getting there, prioritising flexibility where possible to do so. And, as we come to PR24, we think having the strategies will help our own decision-making too – so the price review maximises value for customers, communities and the environment.
For more on long-term delivery strategies and adaptive planning, the final guidance on our website.