Sludge Strategy Decision Support with South West Water

The Need

After a period of consultation, the UK industry regulator (Ofwat) announced plans to introduce competition in the sludge market from 2020 onwards. All companies providing these services needed to establish approaches to optimise the planning and delivery of processes and investments to ready themselves for this market opportunity. South West Water also wished to consider this in the context of a longer-term investment strategy. A Decision Support Tool (DST) was required to consider financial, operational performance and asset resilience impacts resulting from a variety of strategic investment decisions. The key outcome was to recommend the approach that could deliver the highest Net Present Value over a 25-year period.

The Approach

South West Water provides water and sewerage services to Devon, Cornwall and parts of Dorset and Somerset. Their operational area covers 4,170 square miles and provides services to 1.7m residents and 8m visitors each year. South West Water engaged BMA to use their SludgeOps DST to develop a 25-year TOTEX model of the end-to-end sludge process. The tool balanced operational costs and constraints, regulatory frameworks, capital investments, compliance risk, and revenue generation to maximise overall value to the customer and South West Water.

The Solution

A baseline model was built using the BMA SludgeOps DST that represented the full asset base, connecting both the operational and cost data simultaneously. The model spanned the entire process from the export sewage treatment works to sludge disposal, including agriculture and land restoration. Once built, the model was validated to within 0.25% of audited financials prior to running scenarios in the context of NPV maximisation. Scenarios included:

• Optimisation of the existing assets and investment to achieve business plan targets
• Minimisation of the risk and consequence of compliance failures
• Understanding of asset resilience and financial impacts on business continuity planning
• Introduction of 3rd party market entrants

A range of variable factors were included to understand the sensitivity impact on the models including: inter-site mileage rates; energy prices; chemical costs; staff levels; recycling costs and land restoration costs.

“The sludge optimisation model has given South West Water an evidence based insight into our sludge treatment options. It is informing strategic choices that the business can take to improve efficiencies; whilst also tactically preparing for market development. The model is enabling effective decisions to be taken with confidence.”

Mark Worsfield

Director of Asset Management, South West Water

Outcomes

• Savings of £30 million were identified using a truly holistic TOTEX approach.
• The model showed South West Water how to optimise the total cost to treat (including transport) of current operations.
• It identified that investment in Advanced Anaerobic Digestion would deliver the highest NPV over 25 years.
• Further insight showed that company liming could decrease and digestion increase from 23% to 60%.
• An accurate quantification was determined of exactly how much additional energy could be generated to contribute to South West’s strategy to self-generate 20% by 2020.