AMP8 and Beyond: Navigating the Path to Net Zero

"There is no time to waste. Now is the time to get serious about water as an imperative for climate action," — a statement from the Water and Climate Leaders issued during COP27 negotiations in Egypt.

Net zero has been on the agenda for several AMP periods; however, the next AMP8 period is set to be one of the most challenging. Back in 2020, UK water companies agreed to reach net zero by 2030, making AMP8 the last AMP period before the sector's 2030 net zero goal is either achieved or missed. In the next period, water companies will be required to both improve resilience while making significant strides towards lowering carbon emissions.

In this blog, we explore the environmental impact of the water industry and what can be done in the upcoming AMP8 period to make a lasting impact.

Environmental impact of the water industry

In 2020, UK water companies agreed to reach net zero by 2030 – the world's first sector-wide commitment of its kind. Although the UK has committed to reaching net zero by 2050, it is expected that if the water industry reaches this target 20 years earlier, the UK water sector could save the emission of 10 million tonnes of greenhouse gases. However, the industry has some way to go and time is ticking. According to Ofwat’s ‘Net zero principles position paper’: 

• The UK water sector consumes 3% of the electricity the country produces.
• The sector is responsible for about 1% of UK greenhouse gas emissions (nearly a third of UK industrial and waste process emissions).
• Water companies have reduced gross operational emissions by almost 45% between 2011 and 2019. While this is largely due to the decarbonization of the electricity grid, it is important to recognize that without greater energy efficiency, renewable generation, and demand reduction actions, emissions would have increased significantly.

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What is AMP8?

An 'Asset Management Plan' is the five-year period covered by a water company's business plan that sets short and long-term objectives for the upcoming period. The purpose of AMP periods, set by industry regulator Ofwat, is to increase efficiency and service levels within the sector. Meeting or missing AMP goals carries financial rewards and penalties for performance (or underperformance) in delivering good customer engagement, affordable bills, resiliency in the water network, and innovation.

Starting on April 1, 2025, and running for five years, AMP8 will replace the current £51 billion AMP7 in the Water sector with a new set of challenges and targets. It is expected to have even more focus on net zero goals than ever before.

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How is the water industry tackling net zero challenges?

In the past AMP periods, the drive to net zero and focus on the environment has become an increasingly prevalent part of water industry targets. And since this has become a focus, the industry has made significant strides. United Utilities, for instance, has reduced its greenhouse gas emissions by an impressive 70% since 2005/6. Similarly, Anglian Water is progressing toward the goal of producing 45% of its energy from internal renewable sources by 2025.

As the industry approaches AMP8's new goals and challenges, water companies will be confronted with two key issues. On a wider scale, they must address overarching priorities like the net-zero agenda, affordability, environmental targets, and the delivery of social value within the sector. While, on the other hand, UK water companies will also need to address more practical concerns, including escalating costs, disruptions in local and global supply chains, and persistent labor shortages.

Driving improvements towards net zero is going to get tougher for the industry. In order to address these challenges, teams are going to need to embrace new approaches to help deliver efficiencies across the sector.

Charting the course to net zero: 3 essential pillars

In order to reach net zero, there are several routes that all need to be leveraged. There is no silver bullet. At Sensat, we believe there will be three key overarching themes that will help teams move in the right direction:

1. Leveraging the mindset of technology and innovation

As the water industry embarks on AMP8 in 2025, technology and innovation will be the driving forces behind a more sustainable and resilient water industry. To succeed in this next transformative phase, water companies will need to embrace technologies and foster a culture that encourages experimentation and adaptation to legacy processes and tools. Innovation in both technology, process, and equipment will all contribute to a more streamlined sector and help companies to deliver on AMP8.

2. Collaboration both internally and externally

A successful AMP period will require collaboration both within water companies as well as with local governments, Ofwat, EA, Defra, and customers. Collaboration efforts will help the sharing of knowledge, best practices, and research findings among water companies. This knowledge exchange accelerates innovation and helps all parties learn from each other's successes and failures.

3. Data-Driven Decision Making

Collecting, utilizing, and making data-driven decisions are crucial for water companies to achieve net-zero emissions. Today, we are collecting more data than ever before, but as an industry, we need to find more ways to connect data together to help teams create a holistic picture of water networks. This will provide insights into energy consumption, help to identify leakages, optimize resource allocation, and support decision confidence. Looking further into the future, by harnessing data and AI, water companies can use these data-driven insights to guide long-term strategies, enabling targeted investments in sustainable technologies and practices.

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Conclusion

As the water industry embarks on the challenging journey towards achieving net-zero emissions within the upcoming AMP8 period, there is no time to spare. While UK water companies committed to reaching net zero by 2030, two decades ahead of the UK's broader target, the industry still faces considerable hurdles. The environmental impact of the water sector is undeniable, with significant potential for emissions reduction that could save millions of tons of greenhouse gases.

The upcoming AMP8 period, commencing in 2025, carries the weighty responsibility of making substantial progress toward these net-zero goals. To surmount this challenge, water companies must embrace a multifaceted approach to deliver on time. In an era defined by climate urgency, technology, collaboration, and data are the compass guiding the water industry toward a sustainable and resilient future, where net-zero emissions are not just an aspiration but a concrete reality.

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