Ofwat’s consultation response on Scoping the Water Efficiency Fund: High Level

We strongly support the objectives of the Fund and the arguments given for why we must see a step change in our approach to water efficiency in relation to household and non-household customers’ water use.

We have been a strong voice on the need for greater action on water efficiency and for the establishment of an overarching body to drive this forward through our proposed concept for Accelerating Reductions in Demand (ARID).

ARID is designed to address the need for greater oversight, co-ordination and evidence building if the scale of required water demand reduction identified by the National Framework for Water is to be achieved and, more specifically, if the water companies are to achieve the ambitious targets set for them in the Plan for Water. We have been actively promoting the ARID concept with stakeholders within the water sector, including Ofwat. A copy of our ARID proposal is included as an Appendix to this submission.

There needs to be a greater level of funding for the Fund to deliver the step change required. The challenge of meeting the supply/demand balance gap is huge, and will require significant ongoing investment. There is a danger that without appropriate funding, oversight, coordination and leadership the sector will continue to do more of the same, which will not bring about the step change in attitudes and behaviours required.

We need that leadership and oversight to allow proven water efficiency programmes to be taken forward at pace and scale. We want to ensure that there is a commitment to doing more to inform the public so they too understand why saving water is so important and the part they are expected to play. We therefore need a step change in approach and to see successful projects taken forward at pace and scaled up quickly after piloting.

Some good work has already been done but we now need to support interventions not only targeting awareness raising and behavioural change leading to more efficient water use habits, but to also explore the potential for more direct and technical interventions.

There is a need for strong overarching leadership and the ability to build the evidence base so that successful projects can be scaled up across England and Wales, once they have been tested.

The Fund will need to support interventions that may be new or untried in the UK. Decisions on what to support will require the establishment of a bid assessment process that draws on a different mix of skills and experience drawn from appropriate disciplines.

In our view it would make sense for ARID and the Fund to converge. The consultation acknowledges the need for oversight and monitoring for the Fund but this should go wider. It is also important that there is thorough and consistent evaluation of what has been delivered by any funded projects so we know with some confidence what works and what doesn’t.

All this learning will contribute to the evidence base and ensure the future delivery of the proven and most successful approaches to water efficiency.

The Fund will need to encourage wide participation and collaboration with a focus on both household demand and non-household. It should go much wider than the water sector.

An additional objective might also be added – namely that ‘the projects it supports helps progress delivery of one or more of the 10 objectives in the UK Water Efficiency Strategy’.

The Strategy has widespread support for the priorities for action and delivery. The existing UK Water Efficiency Collaborative Fund already has this link embedded in the scoring criteria for bids into it.

The three segments suggested (Behaviour change, targeted interventions based on better understanding of water use, and technological interventions) seem appropriate.

While a well-resourced, collaborative, sustained and wide-scale behaviour change campaign, to encourage people to value water and use it efficiently should be developed as part of this work.

The potential costs involved with such a campaign mean that first there needs to be a few different proposed approaches trialled first, so we know what really resonates with the public. That campaign can then be taken forward at scale and at pace.

The increase in household metering (and smart metering in particular during 2025-30) has the potential to provide better data on usage and play a part in helping to reduce demand, provided that customers can be helped to understand how they can reduce their consumption and their bills and why this is important to do.

People will need more useable information to allow them to adapt their behaviours – applying behavioural science principles can help customers make a change. However, it should be acknowledged that meters are not well received by all customers with some raising affordability concerns. A better understanding of water use, as a result of the smart metering roll-out, may in turn help with, and facilitate future tariff design.

Those water companies already using smart meters have identified significant levels of wasted water through internal plumbing issues like “leaky loos”, as well as leakage from customers’ pipes which shows up as continuous flow. This applies to both household and non-household customers. This would potentially be a good starting point.

We are also very conscious that the huge peaks in demand that we saw in 2022 and 2023 in response to rising temperatures which put tremendous pressure on the companies’ distribution networks, and again smart metering confirms were largely driven by external garden use and leisure activities. Ways of influencing attitudes and behaviours and particularly external water use would be interesting to explore and whether adoption of alternative behaviours is possible.

It might also be interesting to examine the potential alignment of interventions and programmes on both water and energy efficiency, as most people would prefer the minimum level of disruption for the maximum benefit. There might also be potential to extend offerings to include, for example, lead pipe replacement, as water companies often cite the challenge of engaging customers on this issue due to the perceived level of disruption and potential benefit. More holistic approaches might encourage higher levels of public engagement.

No. Given that water efficiency is difficult and uncertain (as evidenced by the sector’s lack of progress to date), it makes sense to mix up the approach to the size of the initiatives supported. For example, putting lots of money into a single behaviour change campaign could lead to a lot of money being put into achieving a null result (ie “don’t try this approach again” is the result). While null results are helpful to build the evidence base, it would be more sensible to spread the money in a series of smaller, yet still sizeable, initiatives.

One of the well-known challenges with water efficiency is to identify effective interventions, it would therefore appear at odds with this to suddenly be able to pick winners (especially ones requiring very large financial support) through this Fund. If effective interventions could be easily identified there would be no need for the Fund. This means there may be an element of risk with the initiatives supported through the Fund and a need to accept that some will fail.
However, we certainly agree with the need to see water efficiency delivered at pace and scale once proven.

Before committing to any large project there will need to be some confidence that it is likely to deliver against its objectives. A thorough assessment and evaluation process will be required which is why it will be important to have the right skills and experience on the evaluation Panel. CCW would welcome the opportunity to have a role in the oversight of the Fund.

The key elements to the proposed approach to phasing the funding seem sensible.

We agree that it is important to have a fully inclusive approach covering both England and Wales. It will therefore be important to have Natural Resources Wales and Welsh Government at the table or fully/appropriately consulted as part of the assessment process.

We would wish to see this kept as open as possible to allow for all proposals with potential to be given consideration and to allow as wide a range of applicants as possible from within and outside the sector and addressing as many different aspects of household and non-household water use as possible.

Raising awareness and interest in the Fund will be largely down to the way this is promoted and designed – existing networks will be able to disseminate information widely, but to bring in new ideas and collaborators wider outreach will also be needed. Lessons learnt from promoting the Innovation Fund can be used.

The Fund needs to adopt an approach that really encourages others from outside the sector to participate. The eligibility criteria for participants should therefore not be too restrictive. There should also be opportunities for innovation (while acknowledging the separate Innovation Fund is still open to water efficiency related bids) it would be good to retain scope for start-ups to join in so that fresh ideas can be tested.

Water companies should be encouraged to work with other sector bodies and partners from outside the water sector. Waterwise could be an important potential contributor to the Fund in both an advisory capacity and as potential participants in future collaborative projects.

CCW likewise, can also play important role in bringing the voice of the consumer into both the leadership and operation of the Fund (essentially as we proposed with ARID – see Appendix to this submission) and as possible bidders into the Fund.

Given the onus is on the water companies delivering reductions in use of the public water supply it would seem only right that they are involved. However, if a novel new approach to water saving came forward which was say appliance or fittings based, or if new influencing techniques emerged in other sectors, it would be disappointing if this was not able to be considered. For that reason we would not see water company involvement as a strict or formal requirement.

In our view the Fund should not seek to create a sense of competition as this is about furthering a common cause.

It will need appropriate governance and resources in order to work well. It will need administrative support for the Panel, and the expertise to assess, monitor and evaluate a range of projects utilising behavioural science, data management, and technical interventions.

It will also need to have a communications and engagement function – so that the Fund is adequately promoted, and progress and developments shared widely.

A merging of our ARID concept with the Fund could provide a strategic overview of all the water efficiency work that is being carried out in the sector as well as through the Water Efficiency and Innovation Funds. This would place the Fund / ARID in a stronger position to identify which proposed initiatives seek to address the wider strategic gaps in knowledge.

The Fund would be operating in a sub-optimal way if it simply supported projects in isolation without the more strategic picture in mind. Therefore the leadership and strategic overview function of the Fund / ARID is essential.

The proposal in the paper is a good governance structure if simply operating the Fund.

We would however suggest that our ARID proposal and the Fund if combined, would create a Panel of Experts with a wider scope that not only considers proposals for the Fund, but also provides leadership and a strategic oversight of the work being done on water efficiency.

In addition to our own ARID proposal, we are aware that the Environment Agency has also latterly developed some options for enhanced national regulatory governance for demand management (Strategic Demand Management Alliance), this is very similar in concept to ARID. All proposals are a response to the identified gap in oversight and leadership in relation to demand management.

Given the common ground covered, and potential synergies, we think as part of Ofwat’s further thinking, consideration should be given to bringing these proposals together with the Water Efficiency Fund.

The governance process should ensure proposals are assessed and assurance is provided that appropriate customer protection is in place, a delivery plan agreed, with suitable check points or gates when progress and outputs would be reviewed, and further funding potentially agreed. If a project is not delivering it can be stopped.

The process must ensure that the outcomes/results of all projects/programmes, successful or otherwise, are evaluated on a consistent basis, and the learning captured and shared. And in doing so, provide a realistic sense of the time, budget, resources and governance it really takes to deliver successfully and sustain any reduction in demand as projects are scaled up.

There should also be a specific focus on the non-household market working with Retailers and non-household customers to incentivise water efficiency and maximise savings.

We agree that there needs to be clear separation of the projects supported through the Fund and any water efficiency related projects and programmes contained in company Water Resources Management Plans, which will be funded through the Price Review.

The successful applications to the Fund will need to have very clearly defined funding commitments and delivery expectations attached to these, with milestones for what they are expected to deliver and when.

Close monitoring of the projects and regular check-ins to confirm delivery of these agreed milestones will be necessary. This could follow something similar to the Gated process that is used for the strategic supply side projects by the Regulatory Alliance for the Progression of Infrastructure Development (RAPID).

These regular check-ins will give an opportunity to withdraw from a project if it is not delivering as expected or working in the way intended. The findings of pilots and projects must be shared openly and widely.

This should be central to the operation of the Fund. It will be really important that the fund supports projects that help build the evidence base for water efficiency in both the household and non-household sectors, and that the Panel/ARID ensures all learnings are shared openly and widely. This should allow future projects to build on this learning. In doing so it should avoid simply doing more of the same unless on a much larger scale.

We should allow for some more untried approaches, maybe looking at what has been done in other parts of the world. We are also keen to see behaviour change techniques featuring more strongly in any projects taken forward.

The Panel/ARID could provide potential applicants with clear guidance on the benchmarks being used to assess the projects. Informal initial meetings could be held to weed out early on, those unlikely to be successful.

We think one additional assessment criteria should be that any supported proposal has the potential to be delivered on a bigger scale and across multiple and varied locations.

As the National Framework and Plan for Water looks long-term, the Water Efficiency Fund should do the same.

We need a long term commitment to funding and for support for projects that are likely to extend beyond five year price controls before they deliver their full potential water savings.

Being clear there is that long term commitment to supporting work in this area. Building a strong evidence base to support future policies and practice. Identifying a portfolio of water efficiency measures that work, and can be rolled out more widely across a range of demographics and business sectors and locations, would be the most tangible legacy.

As suggested above we would like to see Ofwat give consideration to merging our ARID proposal with the Fund, the scoping study could therefore explore how the Fund and ARID could potentially work together to provide the oversight, co-ordination and leadership needed to drive water efficiency forward at the pace and scale required.

Given the degree of urgency necessary in making progress in this area, this study will also need to be done at pace in order for the funding and arrangements to be in place and ready to go at the start of 2025.

It may be useful to have a specified point in time when the operation of the fund will be reviewed. This would allow all aspects to be reviewed including the sufficiency of the funding available. For that reason it would need to be ahead of the following Price Review in 2029. We believe the Fund should be bigger.

The challenge of meeting the supply/demand balance gap is huge, and will require significant ongoing investment. While the creation of the Fund is a very positive step, the amount of money proposed is orders of magnitude smaller than the scale of the challenge, and when compared to the costs involved with creating additional water resources.

We have an opportunity to build on the broad consensus that there is a need for a body to provide oversight, co-ordination and leadership in relation to water efficiency to drive progress forward. We therefore encourage Ofwat to give serious consideration to the opportunity to merge our ARID proposal and the operation of the Fund.