Response to the Cave Review - Innovation and competition in water markets: a call for evidence
The Environment Agency welcomes the opportunity to provide evidence to this review of competition and innovation in water markets.
This submission provides evidence on innovation. It follows our earlier submission on competition.
More innovation is needed to address climate change, water scarcity and meeting public expectations for the environment and flood risk reduction.
The water industry does not invest significantly in research and development.
Nevertheless it could use more new technologies and approaches, many of which it could get from its suppliers or from the water sector in other countries.
- New tariff structures and incentives for customers to become more water efficient, and use more sustainable drainage
- Promoting use of recycled domestic grey water for toilet flushing instead of potable water
- New technologies to improve performance (e.g. better management of flows in pipes, reducing leakage in supply pipes or flood risk in waste pipes, which can also be used to generate electricity through in-pipe turbines, treatment technologies that provide a higher standard of treatment for a lower carbon impact)
- Greater co-operation within the industry, and between the water industry and other sectors, to address problems in an integrated approach (e.g. sharing resources or working with farmers to reduce diffuse pollution)
- With Ofwat, the Environment Agency can further facilitate innovation by encouraging and incentivising the water industry to innovate and try out novel techniques. Our regulatory regime is not a barrier to innovation.
We need greater innovation whatever the structure of the industry.
Competition may bring new entrants, with new ideas, or allow companies to merge their operations, making better use of resources that sit on different sides of company boundaries.
Innovation can lead to better quality products e.g. taste or quality of water and reduced costs for customers.
The current structure of the industry may not be the best model for encouraging innovation across all business function areas, i.e. resource provision, distribution, sales, and finance, however a strategic view is needed on areas that have the greatest potential for delivering innovation gains.
Read our full response