Water use has always been highly seasonal with greater use in hot dry summers, when the supply of water is at a minimum. As a result, some assume that water conservation is unimportant during colder, wetter weather. However, as we explored in a previous blog post , managing water resources requires a longer-term view with the possibility of consecutive dry years and the financial and environmental marginal cost of water after treatment and pumping will remain high.
Water use has traditionally been seen as “inelastic”, with demand changing very little in response to prices. However, Artesia’s recent project exploring the impacts of shock events on PCC found that the cost-of-living crisis led to a reduction in demand. Furthermore, some companies effectively communicated the financial benefits of reducing hot water use to improve the level of demand reduction. There were two key factors that were identified:
- Migration from household to non-household settings. This was driven by a desire to save on heating costs and spend fewer hours in the home, and the relocation of hot water use such as showering to gyms and workplaces. Whilst decreasing household demand this did result in a rise in non-household demand.
- Changes to personal hygiene and laundry practices.
Whilst these reductions were primarily the reaction of customers to a short-term economic shock and are not expected to persist, it demonstrates that financial motivations can influence water use. In AMP8 the expansion of metering combined with higher bills will mean a much greater financial incentive to save water in the interests of reducing water bills.
This will present a renewed opportunity to incentivise demand reduction and reduce leakage. For many companies, particularly across the southeast, metering expanded during a time where Ofwat focussed principally on lower bills for customers. During AMP8 this will not be the case with greater awareness of water bills potentially presenting an increased saving if companies find appropriate ways of communicating with customers. Critical to exploiting these opportunities will be the trial and adoption of novel and innovative tariffs, exploitation of smart metering data to reduce plumbing losses and supply pipe leakage and communication of financial savings.
The success of novel tariffs will be particularly interesting to observe in the next few years, and companies should consider the importance of accurately measuring and evaluating these savings. Ofwat published its own summary in January and has been supportive of companies’ proposals in their business plans. The tariffs being trialled most widely are:
- Seasonal and peak demand charges: These can involve discouraging discretionary use during peak demand, better charging properties not occupied year round and improving surface water drainage charges.
- Rising block tariffs: This means that water efficient customers will on average pay less per cubic meter than customers with excessive use.
The decision on the acceptable level of bill increases and the scale of metering expansion will ultimately be based on what level of investment is required compared to customer’s short time willingness and ability to pay. However, this has a huge impact on demand reduction in itself, and addresses one of the most fundamental challenges of water efficiency.
If you are interested to explore water tariffs and the impact they have on water efficiency with us, get in contact today.
